Medicare, IRMAA, and Your Pension Strategy
By John Schwalenberg | April 2026
Most people think about Medicare purely as health coverage. Fewer realize that how much retirement income you draw in a given year can directly increase what you pay for it. That connection is called IRMAA, and it's worth understanding well before you're the one getting the letter in the mail.
A note on the figures below: all dollar amounts and thresholds in this article reflect Medicare and IRMAA figures as of this article's publish date. These numbers are adjusted annually, so please confirm current figures for the year you're actually planning around.
What IRMAA Actually Is
IRMAA stands for Income-Related Monthly Adjustment Amount. It's a surcharge added on top of your standard Medicare Part B and Part D premiums if your income exceeds certain thresholds. For 2026, the standard Part B premium is $202.90 a month. If your income crosses the first IRMAA threshold, that monthly premium can climb into the $280s, and it keeps climbing across five income tiers, up to roughly $690 a month at the highest tier. Part D carries its own smaller surcharge on top of whatever your drug plan already costs.
The Two-Year Lookback
Here's the detail that catches people off guard. Your Medicare premium in a given year isn't based on that year's income. It's based on your income from two years earlier. That means a large withdrawal, a Roth conversion, or a big capital gain today might not show up as a higher Medicare bill until two years from now, well after the decision that caused it is long forgotten.
The Cliff Effect
This is the part worth reading twice. IRMAA does not work like a normal tax bracket, where only the income above a threshold gets taxed at a higher rate. It works as a cliff. If your income exceeds a threshold by even one dollar, your entire premium jumps to the next tier's full surcharge, not just a prorated amount on the extra dollar. For 2026, that first cliff sits at $109,000 in income for single filers and $218,000 for married couples filing jointly. Crossing it by even a small amount can cost a couple over two thousand dollars a year, for each of you, every year your income stays above it.
What Counts as Income for This Calculation
IRMAA is based on Modified Adjusted Gross Income, which is broader than most people expect. It includes wages, interest, dividends, capital gains, RMDs, and any income your annuity pays you. A single large withdrawal in one year, even a one-time event, can be enough to push you across a threshold you didn't see coming.
How This Fits Your Pension Strategy
This is where guaranteed, predictable income has a genuine planning advantage. A Pension Strategy is built around a known, steady income figure rather than reactive withdrawals pulled from a portfolio during a down year or to cover an unplanned expense. Knowing your income figure in advance makes it far easier to plan around IRMAA thresholds deliberately, rather than discovering two years later that a single withdrawal quietly pushed you over a cliff you didn't know existed.
This is also a good example of why coordinating your Pension Strategy activation date with your broader tax picture, including RMDs, matters. The two are connected, and planning them together avoids surprises on both fronts.
A note on this topic: I am not a tax advisor, and this article is general education, not personalized tax or Medicare advice. IRMAA thresholds, your specific MAGI, and how your income sources interact are matters to review with a qualified tax professional as part of your complete financial picture.