For high-income executives, the cost of Medicare in retirement is rarely what they expect. The typical surprise is the surcharge layered on top of the standard premium. It’s called IRMAA, the Income-Related Monthly Adjustment Amount, and it raises the cost of Medicare Part B and Part D for higher earners. The more income you report, the more you pay.
But it’s easy to miss an important caveat: Medicare doesn’t look at your income today, it looks back two years. The income you report at 63 determines what you pay at 65.
For an executive with a large RSU vesting event, a stock option exercise, a concentrated stock sale, or business sale proceeds, that two-year lookback can convert a single high-income year into elevated healthcare costs for both spouses, right as retirement begins.
IRMAA isn’t necessarily something to avoid entirely, but it is worth planning around. And the years leading into retirement are some of the most valuable planning years an executive has.
Where the 2026 IRMAA Cliffs Begin
Medicare uses your modified adjusted gross income (MAGI) from two years prior to set your Part B and Part D premiums. Because the brackets work as cliffs rather than gradual phase-ins, crossing a threshold by even a single dollar moves you into a higher surcharge for the entire year.
The 2026 premiums are based on your 2024 MAGI:
Note the impact of the cliff structure. A married couple sitting at $273,000 of MAGI pays one rate. At $275,000, both spouses jump a bracket for the full year. The dollars per month look modest in isolation, but compounded across two people over a 20- or 30-year retirement, they stop looking so modest.
The Two-Year IRMAA Lookback in Practice
Consider two executives, both planning to enroll in Medicare at 65.
Executive A exercises options at 63. A large incentive stock option exercise pushes joint MAGI to $760,000 in 2024. Two years later, both spouses land in the top bracket. Their combined Part B and Part D surcharges run well above the standard premium for the entire year — a direct, if delayed, cost of that single transaction.
Executive B spreads the same income. Working with a coordinated plan, the same executive exercises a portion of those options across 2023, 2024, and 2025, keeping any single year’s MAGI well below the top thresholds. The equity still gets monetized, but without spiking the Medicare lookback and keeping the premium surcharges lower for both spouses.
Same shares, same executive, a very different healthcare cost in retirement.
Where IRMAA Fits in the Bigger Picture
Executives tend to focus heavily on investment returns while underestimating the long-term drag of taxes and healthcare costs. IRMAA is a clear example of this. On its own, the surcharge looks small next to a compensation package or a portfolio balance. But it doesn’t live on its own.
The levers that manage IRMAA are the same ones that drive tax efficiency across an entire retirement. These include factors like:
- Roth conversion timing
- Capital gains harvesting
- Sequencing of equity compensation
- Charitable giving
- Order in which retirement accounts are drawn down
When those decisions are coordinated rather than made one year at a time, the IRMAA question often answers itself as a byproduct of a well-built income plan.
Good planning looks past one year’s tax bill to how today’s income decisions ripple into future retirement cash flow.
Frequently Asked Questions
What is IRMAA?
IRMAA, the Income-Related Monthly Adjustment Amount, is a surcharge added to Medicare Part B and Part D premiums for higher-income beneficiaries. It applies on top of the standard premium and is set each year using your income from two years prior.
Why does my income from two years ago matter?
Medicare determines your premiums using your modified adjusted gross income (MAGI) from the tax return two years back. Your 2024 income sets your 2026 premiums. This is why a high-income event in the years before enrollment, such as an option exercise, RSU vesting, or asset sale, can raise Medicare costs after you’ve already retired.
Can I reduce or avoid IRMAA?
Sometimes, through proactive planning. Spreading income across multiple tax years, timing Roth conversions and capital gains carefully, and coordinating equity compensation can help keep MAGI below the bracket thresholds in the years that feed the lookback. If a one-time life event (such as retirement or loss of income) caused the spike, you may also be able to request a reconsideration from the Social Security Administration using Form SSA-44.
Does IRMAA affect both spouses?
Yes. For married couples, the surcharge is generally applied to each spouse enrolled in Medicare, which is why a single high-income year can roughly double the impact.
Ready to talk about your Medicare and retirement income strategy?
At Tempo Wealth, we bring structured, coordinated thinking to the years leading into retirement, when the most valuable planning opportunities exist. If you’d like us to model how your equity, conversions, and withdrawal sequencing affect factors like your future Medicare costs, reach out for a consultation. Send us a message or call 440-568-3676 to get in touch.
