Medicare for High-Income Retirees: Enrollment, IRMAA, and Costly Mistakes

High-income retirees pay more for Medicare through IRMAA, the income-related monthly adjustment amount. In 2026, the standard Part B premium is $202.90 per month, but surcharges based on your tax return from two years ago raise it as high as $689.90, plus up to $91.00 added to Part D, per person (CMS, 2026). The surcharges start at $109,000 of income for single filers and $218,000 for joint filers. The other expensive mistakes are missed enrollment windows, the one-time Medigap underwriting exemption, and HSA contributions that quietly become excess.

When do you have to enroll?

Your initial enrollment period (IEP) is seven months: the three months before the month you turn 65, your birthday month, and the three months after. If you or your spouse are still actively working with group coverage from an employer of 20 or more employees, you may delay Part B and Part D without penalty, then use a special enrollment period (SEP) that runs eight months after the employment or coverage ends. Two traps inside that rule: coverage from an employer with fewer than 20 employees does not allow penalty-free delay, and COBRA does not count as active employer coverage for this purpose.

Miss both windows and you wait for the general enrollment period, January 1 through March 31, with coverage beginning the month after you sign up. The late penalties are permanent. Part B costs an extra 10 percent of the standard premium for each full 12-month period you went without it; Part D costs 1 percent of the national base beneficiary premium, $38.99 in 2026, for every month without creditable drug coverage (Medicare.gov, 2026). Executives retiring with generous severance or consulting arrangements should confirm in writing whether their coverage qualifies as active employment coverage before delaying.

What is IRMAA and how much does it cost in 2026?

IRMAA is a premium surcharge for Parts B and D, set by your modified adjusted gross income, defined as AGI plus tax-exempt interest, from two years prior. Your 2026 premiums are based on your 2024 return. The brackets are cliffs: one dollar over a threshold triggers the full surcharge for both parts for the entire year.

Source: CMS 2026 premium announcement, as compiled by Kiplinger and the Social Security Administration. Married filing separately uses narrower, harsher brackets.

The surcharge applies per person. A couple in the top tier pays the difference between $689.90 and $202.90 on Part B, plus $91.00 on Part D, each: about $1,156 per month, or roughly $13,900 per year, above what a standard-premium couple pays. The Part D surcharge is billed by Medicare directly, even if an employer or plan pays your drug premium.

Why does age 63 matter? The two-year lookback

Because of the lookback, the income that sets your first Medicare premiums at 65 is earned at 63. Every income decision from age 63 onward, Roth conversions, large capital gains, deferred compensation payouts, property sales, lands in a future IRMAA calculation.

A hypothetical example: a Madison couple, both turning 65 in 2026, normally shows about $180,000 of MAGI, safely below the $218,000 joint threshold. In 2024, at 63, they converted $400,000 of an IRA to Roth, pushing 2024 MAGI to about $580,000. For all of 2026 they sit in the fifth tier: $649.20 each for Part B and an extra $83.30 each for Part D. That is about $12,700 more than the standard couple's cost for the year, an effective 3.2 percent additional toll on the conversion. Had they completed the same conversion in 2023, at 62, it would never have touched a Medicare calculation.

The lesson is not to avoid conversions; a one-year surcharge can still be a fair price for decades of tax-free growth. The lesson is to sequence them. Large conversions are often best finished before age 63, sized to stop just under a bracket threshold afterward, or deliberately bunched so the IRMAA hit lands in one year instead of several. We cover the conversion math in Roth conversions for high earners and the broader bracket choreography in tax-smart withdrawal sequencing.

Can you appeal an IRMAA?

Yes, but only for qualifying life-changing events: retirement or work reduction, marriage, divorce, death of a spouse, and a few others. File Form SSA-44 with evidence, and Social Security will use your more recent, lower income instead. Retirement is the common case: a 66-year-old whose 2024 return shows a full executive salary can ask that her post-retirement income be used instead of paying surcharges into 2027.

One-time income spikes do not qualify. A Roth conversion, a home sale, or a business sale is not appealable; the surcharge simply applies for that one year and resets when the lookback rolls forward. Build it into the decision as a known cost.

The Medigap window most people learn about too late

If you buy Original Medicare with a supplement, your Medigap open enrollment period lasts six months from the month you are 65 or older and enrolled in Part B. During that window, insurers must sell you any policy at standard rates regardless of health. Afterward, in most states, applications are medically underwritten and can be rated up or declined. For a retiree with any meaningful health history, this one-time guaranteed-issue window can matter more than any premium consideration, and it is a reason to think carefully before defaulting into a Medicare Advantage plan you may want to leave later.

The HSA conflict

HSA contributions are not permitted in any month you are enrolled in any part of Medicare. Two timing traps follow. First, claiming Social Security after 65 automatically enrolls you in Part A, retroactive up to six months (but not before your 65th birthday), and contributions made during the retroactive window become excess contributions subject to correction. Second, in your enrollment year the annual HSA limit is prorated by month. High earners working past 65 with family HSA coverage should stop contributions at least six months before Part A enrollment or Social Security claiming, which also makes this decision interact with the timing covered in when to take Social Security.

Frequently asked questions

What income counts for IRMAA?MAGI for IRMAA is adjusted gross income plus tax-exempt interest, from your return two years prior. Roth IRA withdrawals, HSA distributions, and QCDs do not count; municipal bond interest does.

Is IRMAA permanent?No. It is recalculated annually from the rolling two-year lookback. A high-income year costs you one year of surcharges, then drops off.

Do both spouses pay IRMAA?Yes. Brackets are set by joint MAGI, but each enrolled spouse pays the full surcharge, doubling the household cost.

Can I avoid IRMAA with municipal bonds?No. Tax-exempt interest is added back into IRMAA MAGI. Strategies that actually help include Roth assets, QCDs after 70 and a half, and harvesting gains before 63.

What if my income just barely crosses a threshold?You pay the full surcharge for that tier; there is no proration. Near year-end, a single dollar of avoided income can be worth over $1,000 in premiums for a couple.

Does Medicare Advantage avoid IRMAA?No. Part B IRMAA applies regardless of plan type, and Part D IRMAA applies to drug coverage inside Advantage plans as well.