IRMAA Explained: The Medicare Surcharge That Catches Feds

1. What IRMAA is and why federal retirees keep hitting it

IRMAA — the Income-Related Monthly Adjustment Amount — is a surcharge added to Medicare Part B and Part D premiums for beneficiaries whose income exceeds certain thresholds. With IRMAA explained in plain terms: it’s a means-tested premium increase. The higher your income, the more you pay for the same Medicare coverage.

The standard 2026 Part B premium is $202.90 per month. That figure covers about 25% of the program’s actual cost — the government pays the other 75%. IRMAA changes that split for higher-income beneficiaries. Instead of covering 25% of program cost, they cover 35%, 50%, 65%, 80%, or 85%, depending on which of five income tiers they land in. The result is a monthly premium that can more than triple.

Only about 8% of Medicare beneficiaries pay IRMAA. But federal retirees are heavily overrepresented in that 8%, and the reason is structural. A federal retirement produces substantial, reliable income from three stacked sources — the FERS pension, Social Security, and Traditional TSP withdrawals — and all of it counts toward the income figure IRMAA measures. A federal retiree with a solid pension and a healthy TSP can clear the first IRMAA threshold without ever feeling “high income” in any ordinary sense.

This is the through-line of federal retirement tax planning: the same three income streams that make a federal retirement comfortable also make it taxable, and IRMAA is one more place that bill arrives. For the full picture of how those streams are taxed, see how retirement income is taxed: the federal employee version.

2. The 2026 IRMAA brackets

IRMAA is structured as five income tiers above the standard premium. The income thresholds are the same for Part B and Part D. Here is the complete 2026 structure:

A few things to read out of that table.

The combined annual surcharge column is the number that matters — it’s the Part B surcharge plus the Part D surcharge, totaled for the year, for one person. At Tier 1 it’s $1,148 per person. For a married couple where both are on Medicare, every figure in that column doubles: a couple in Tier 1 pays roughly $2,297 in IRMAA surcharges per year, on top of their standard premiums.

The jumps between tiers are steep. Moving from no IRMAA to Tier 1 costs a couple about $2,297 a year. Moving from Tier 1 to Tier 2 adds roughly $3,475 more. These are not one-time costs — they recur every year your income stays in that tier.

For 2026, the income thresholds rose about 3% from 2025 (the first four tiers are inflation-indexed; the top tier is frozen until 2028). The surcharge amounts themselves rose about 9%. So the brackets got slightly wider, but the penalty for landing in them got meaningfully bigger.

The chart shows the per-person cost climbing tier by tier. Remember that for a two-Medicare-beneficiary household, every bar doubles — a couple in Tier 3 is looking at more than $9,000 a year in surcharges alone.

3. The two-year lookback that ambushes new retirees

Here’s the mechanic that catches more federal retirees than any other: IRMAA uses a two-year lookback. Your 2026 Medicare premiums are based on the modified adjusted gross income reported on your 2024 tax return.

The Social Security Administration determines IRMAA in the fourth quarter of the prior year, and the most recent complete tax data the IRS can give them is from two years back. So the income that sets your 2026 surcharge is income you earned in 2024 — for most new retirees, a year they were still working full-time.

This is the ambush. Consider a federal employee who retired at the end of 2025. Their 2026 Medicare premiums are set by their 2024 return — a full year of GS-14 salary, locality pay, maybe a use-or-lose annual leave payout. Their income in 2026, as an actual retiree, might be far lower. But IRMAA doesn’t know that yet. It sees the 2024 working-year income and bills accordingly.

The two-year lag cuts the other way too. A spike in income — a large Roth conversion, the sale of a house, a big one-time Traditional TSP withdrawal — doesn’t hit your Medicare premiums until two years later. A Roth conversion done in 2026 shows up in your 2028 IRMAA determination.

Your 2026 Medicare premium is set by your 2024 tax return. For a federal employee who retired in late 2025, that means a full year of working salary is determining what they pay for Medicare as a retiree — the single most common IRMAA surprise there is.

For a federal retiree, two practical consequences follow. First, the year you retire and the two years after it need to be looked at as a unit — the income decisions overlap with the IRMAA lookback in ways that aren’t obvious. Second, the surprise of a first-year IRMAA bill based on working income is often appealable, which section 6 covers.

4. The cliff effect: how one dollar costs you a thousand

The most painful feature of IRMAA is that it is a cliff, not a ramp.

Federal income tax brackets are marginal. If you earn one dollar past the edge of the 22% bracket, only that one dollar is taxed at 24% — everything below stays where it was. IRMAA does not work that way. IRMAA thresholds are hard cliffs. Cross one by a single dollar and the entire surcharge for that tier applies to the whole year.

The numbers make the point. A single federal retiree with MAGI of $109,000 pays no IRMAA. The same retiree with MAGI of $109,001 — one dollar more — is in Tier 1, owing about $1,148 in surcharges for the year. One dollar of income triggers $1,148 of cost. The effective “tax rate” on that single dollar is over 100,000%.

This cliff structure is what makes IRMAA a genuine planning problem rather than just a cost. With a marginal tax, being slightly over a line costs slightly more. With IRMAA, being slightly over a line costs a lot — and being slightly under it costs nothing. The entire game is staying on the right side of the nearest line.

5. What counts as MAGI for IRMAA

You cannot plan around IRMAA without knowing exactly what income it measures. IRMAA’s version of modified adjusted gross income is specific:

MAGI for IRMAA = your adjusted gross income (Form 1040, line 11) + tax-exempt interest (line 2a).

That’s it — two lines. But the components hide some traps for federal retirees:

Two of those rows deserve emphasis.

Tax-exempt municipal bond interest counts. This surprises retirees who bought municipal bonds specifically for their tax-free status. The interest is free of federal income tax — but IRMAA adds it back into MAGI. A retiree who shifted heavily into munis to “lower taxable income” may have done nothing to lower IRMAA exposure, and possibly increased it.

Qualified Roth withdrawals do not count. This is the single most important fact for IRMAA planning. Money pulled from a qualified Roth TSP or Roth IRA is invisible to IRMAA. It doesn’t touch AGI, it doesn’t touch MAGI, it doesn’t push you toward a threshold. A retiree with a meaningful Roth balance has a source of spending money that can be drawn on without any IRMAA consequence at all — which is the foundation of most IRMAA planning. See Roth vs Traditional TSP in 2026 for how to build that balance.

6. The SSA-44 appeal most retirees never file

The two-year lookback creates a genuine unfairness for new retirees — and there is a formal remedy that most of them never use.

If your income dropped because of a qualifying life-changing event, you can file Form SSA-44 to ask the Social Security Administration to use a more recent year’s income instead of the two-year-old return. The qualifying events include:

• Work stoppage — retirement is explicitly a qualifying event
• Work reduction — going part-time
• Marriage, divorce, or death of a spouse
• Loss of pension income
• Loss of an income-producing property through no fault of your own

Retirement is on that list, and that’s what makes the SSA-44 so valuable for federal employees. Consider the retiree from section 3 — retired late 2025, hit with a 2026 IRMAA bill based on a full 2024 working-year salary. That retiree can file an SSA-44, document their actual (much lower) retirement income, and ask the SSA to base the 2026 determination on the more recent year. The surcharge can be reduced or eliminated entirely.

The SSA-44 doesn’t help with every IRMAA situation — if your income is genuinely high as a retiree, the appeal won’t change that. But for the specific and very common case of the first-year-retiree ambush, it is the direct fix.

7. Planning around IRMAA: what actually works

IRMAA is manageable, but only with deliberate, forward-looking planning. The moves that actually work:

Know exactly where the nearest threshold is. IRMAA planning is threshold planning. For 2026, the first cliff is $109,000 single / $218,000 married filing jointly. Build your withdrawal plan each year with the nearest threshold as a hard ceiling, and keep a deliberate buffer of a few thousand dollars below it so a small surprise — a larger-than-expected dividend, a year-end fund distribution — doesn’t tip you over.

Use the two-year lag deliberately. Because IRMAA looks back two years, you can see it coming. A large Roth conversion in 2026 affects 2028 IRMAA, not 2026. If you have a high-income event you can’t avoid, knowing the downstream year lets you plan the surrounding years around it.

Spend from Roth in threshold years. Qualified Roth withdrawals don’t count toward MAGI. In a year when a Traditional withdrawal would push you over a cliff, drawing the marginal dollars from a Roth balance instead keeps you under the line. This is the single most powerful IRMAA tool — and it only exists if you built the Roth balance in advance.

Do Roth conversions before Medicare, in the gap years. The window between retirement and age 73 — and especially the years before Medicare enrollment at 65 — is when many retirees do deliberate Roth conversions. Converting earlier, when it doesn’t yet feed an IRMAA determination, gets pre-tax money into Roth before the surcharge mechanics apply. The trade-off is the conversion’s own tax cost, which the conversion-window strategy weighs in detail. Federal retirees also have to decide how FEHB and Medicare coordinate at 65 — Federal Warrior covers the FEHB and Medicare enrollment decision ↗ in depth.

Coordinate large one-time withdrawals. A big Traditional TSP withdrawal to buy a home or car can blow through an IRMAA tier on its own. Splitting it across two tax years — part in December, part in January — can keep each year under the nearest threshold. The same logic that controls income tax brackets controls IRMAA tiers.

File the SSA-44 when life changes. Covered in section 6 — retirement, work reduction, loss of a spouse, and loss of pension income are all grounds to ask the SSA to use more recent income.

A federal retiree with both a Traditional and a Roth balance has real control here. The Traditional balance is IRMAA-exposed; the Roth balance is not. Managing which bucket you draw from, year by year, against the known thresholds is the whole game. A retiree with everything in Traditional TSP has far fewer levers — every dollar of spending money is a dollar of MAGI. That’s the deeper argument for tax diversification, and it runs through this entire pillar.