Will Your Retirement Income Trigger the IRMAA This Year? (Plus, 6 Ways to Avoid it in the Future)

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I'm a retired financial adviser and retirement income professional with more than 35 years of experience helping people to accumulate retirement funds and meet their goals.

One thing that constantly catches retirees out is the income-related monthly Adjusted amount (IRMAA), which can substantially increase the cost of Medicare Parts B and D or Medicare Advantage.

In 2003, the Medicare program was amended to include an increase in premiums for retirees whose modified adjusted gross income (MAGI) exceeded certain thresholds.

Today, these increases apply if your MAGI for 2024 exceeds each threshold by as little as $1. For example, if you are single and you have MAGI of $109,000, you don't pay IRMAA. If your income in 2024 was just $1 higher ($109,001), IRMAA is charged in 2026 for Part B and Part D.

If you're married, IRMAA applies if your 2024 MAGI was more than $218,000, and it will apply to both you and your spouse. At the lowest level, this could mean $81.20 per month. Just one extra dollar of income can cost you and your spouse $1948.80. If you earned more in 2024, your IRMAA costs are even higher.

How to limit or avoid IRMAA

What can you do to limit or avoid this surcharge? If you had a major life change such as a marriage, divorce, loss of job or loss of a pension, you can apply to the Social Security Administration by completing form SSA-44 or by making an appointment with your local Social Security office.

To adjust or eliminate future IRMAA costs, you need to consider ways to reduce your MAGI. There are several different definitions of MAGI depending on different parts of the tax code.

For IRMAA, MAGI is your adjusted gross income from line 11 on your Form 1040 tax return, plus tax-free interest from municipal bonds. Yes, even your tax-free bond interest can affect your MAGI. So, these bonds can affect your income when calculating IRMAA charges. This is why it is important to consult a qualified tax expert.

Here are six methods that I particularly like to recommend to reduce or eliminate MAGI when calculating the IRMAA:

1. Make qualified charitable distributions

If you have to take required minimum distributions from your traditional IRA, you can reduce that income by making qualified charitable distributions to non-profit charities, such as religious institutions, educational institutions and hospitals and groups that research new cures or treatments for conditions such as heart disease, cancer and so on.

To find out if an intended charity qualifies, use the Tax Exempt Organization Search Tool on the IRS website.

2. Invest in a qualified longevity annuity contract

Another way to reduce your current RMD is to invest part of your IRA into a qualified longevity annuity contract (QLAC). For 2026, you can invest up to $210,000 in a QLAC, which will provide a lifetime income from your IRA at a future date that is no later than the first month after you reach age 85.

Funds in a QLAC are not used in calculating your RMD.

3. Consider a non-qualified tax-deferred annuity

Rather than invest in tax-free municipal bonds, consider a non-qualified tax-deferred annuity. No earnings are reported on these unless you make a withdrawal. Withdrawals are treated as ordinary income first until all accumulated earnings are withdrawn, unless you annuitize or set up a fixed withdrawal period, for example 10 or 15 years.

Then the payments are prorated between interest and return of capital. Be aware that with variable annuities, even if you select equity portfolios, the income will be treated as ordinary income, not capital gains.

4. Invest in savings bonds or I-bonds

A simple investment choice is U.S. savings bonds. The current rate on EE bonds is 2.50% until April 2026. The Treasury also issues I-bonds, which adjust their rate with inflation.

These can be purchased online through a Treasury Direct account. You can only buy $10,000 of I-bonds per year per person, with one exception: You can purchase up to another $5,000 of I-bonds with a federal income tax refund.

5. Use tax-loss harvesting

If you have capital gains from the sale of securities or distributions from mutual funds, you can harvest capital losses. You can use capital losses to offset capital gains and also use losses in excess of gains to reduce your taxable gains.

Any net losses in excess of $3,000 can be carried forward to future years.

6. Consider a loan

Also remember that loans are not taxable income. If you are comfortable with borrowing against your investment portfolio or your life insurance or with taking out a reverse mortgage, the cash you receive won't be reported as taxable income.

As with annuities and investments or the other ideas discussed here, you should consult your financial adviser and/or a tax adviser like a CPA or enrolled agent.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.