Are you unknowingly setting yourself up for a Medicare surcharge that could drain your retirement savings? It all hinges on a number you might not even remember: your income from two years ago. Medicare enrollment for 2026 begins on October 15th, and what you earned back in 2024 will determine if you'll be hit with the dreaded Income-Related Monthly Adjustment Amount, or IRMAA.
Think of IRMAA as a Medicare surcharge for higher-income earners. If your taxable income exceeds certain thresholds, you'll have to pay this additional amount on top of your standard Medicare and Medicare Advantage premiums. And it doesn’t just affect your health coverage; it also impacts your prescription drug coverage.
Now, here's where it gets controversial... Medicare premiums are already projected to rise significantly next year – some experts are even calling it a near-record jump! This increase will eat into the Social Security cost-of-living adjustment (COLA) that many older Americans rely on. IRMAA can then pile on top of this, potentially more than doubling your standard monthly premium for health coverage and almost doubling your drug premium. Ouch!
As John Jones, an investment advisor at Heritage Financial, aptly puts it, "Medicare is taken out of Social Security, so it can be very painful.” He even suggests that for some, "Social Security could do nothing but pay for Medicare.” This highlights the very real financial strain that Medicare costs, especially with IRMAA, can place on retirees.
While only about 8% of Medicare enrollees (around 5.1 million people) currently pay the Part B surcharge, this number is on the rise. Back in 2007, when the surcharge was introduced to help fund Medicare, only 1.7 million Americans were affected. According to the Medicare Trustees Report, the number of people paying IRMAA is projected to climb to a staggering 8.6 million by 2034. Similarly, nearly 4.5 million Americans are currently paying the Part D drug plan surcharge, but forecasts predict this will increase to 7.7 million by 2034. These trends underscore the growing importance of understanding and planning for IRMAA.
So, how much is IRMAA, exactly? While the income thresholds for 2026 haven't been finalized yet, the Medicare Trustees Report provides some estimates. Keep in mind that these are in addition to the standard monthly Medicare premium (expected to be around $206.50) and any premiums for your specific prescription drug plan.
Here’s a breakdown of the estimated 2026 IRMAA surcharges based on income:
- Individuals earning $109,001 to $137,000 or couples filing jointly with income of $218,001 to $274,000: Pay an additional $82.60 monthly for health coverage, plus $14.50 for drug coverage.
- Individuals earning $137,001 to $171,000 or joint filers between $274,001 and $342,000: Pay an extra $206.50 each month for health coverage, and $37.50 for prescription drug coverage.
- Individuals earning $171,001 to $205,000 or joint filers between $342,001 and $410,000: Pay an additional $334.40 monthly for health coverage, plus $60.40 for prescription drug coverage.
- Individuals earning $205,001 to $500,000 or couples filing jointly between $410,001 and $750,000: Pay $454.30 more per month for health coverage, and $78.60 for prescription drug coverage.
- Individuals earning at least $500,001, or joint filers earning at least $750,001: Pay a whopping $495.60 extra each month for health coverage, plus $85.80 for a prescription drug plan.
Those numbers can be scary, right? But don't despair! There are strategies you can use to potentially avoid or minimize these Medicare surcharges.
Michael Chuah, an attorney at Paxterra Law, points out that many Americans focused on retirement savings
