IRMAA Calculator

What is IRMAA?

IRMAA stands for Income-Related Monthly Adjustment Amount. It is a surcharge that the Social Security Administration adds to your Medicare Part B (medical insurance) and Part D (prescription drug) premiums when your income exceeds certain thresholds.

The standard Medicare Part B premium in 2024 is $174.70 per month. But if your modified adjusted gross income (MAGI) from two years ago exceeded $103,000 (single) or $206,000 (married), you pay more. The surcharge increases in tiers — at the highest tier, a married couple pays over $5,000 per year in extra Medicare premiums on top of the base cost.

IRMAA is not a one-time charge. It applies every year that your income (as measured two years prior) exceeds the thresholds. For a 30-year retirement, the cumulative IRMAA cost can reach $50,000 to $100,000 or more, making it one of the largest "hidden" taxes in retirement. Most people do not discover it until they receive the letter from Social Security telling them their premium has increased.

The two-year lookback rule

IRMAA is not based on your current income — it is based on your income from two years prior. Medicare looks at your most recent tax return on file with the IRS (which is typically the return from two years ago) to determine your premium tier.

This two-year delay has important implications:

1. A Roth conversion today affects your premiums two years from now. A large conversion at age 63 increases your MAGI for that year, which translates to higher Medicare Part B and Part D premiums starting at age 65 — right when you first enroll in Medicare.
2. Your first-year Medicare premium is based on income from before you retired. If you were earning $250,000 at age 63 and retire at 64, your Medicare premiums at 65 will reflect that high income, even though you now have no salary. You can appeal using Form SSA-44 if your income has dropped due to a life-changing event like retirement.
3. You can plan around the lookback. If you know your IRMAA tier will be high in two years, you can reduce conversions or other income in that lookback year to bring premiums down. The two-year delay is a planning window, not just a surprise.

ThunderHarbor models the two-year lookback explicitly. When calculating your year-by-year projection, the optimizer checks the MAGI from two years prior for each Medicare-eligible year and applies the correct IRMAA tier. This means Roth conversion recommendations account for the premium impact two years later.

IRMAA brackets and thresholds

IRMAA surcharges are structured in tiers. Each tier has a MAGI threshold, and crossing a threshold by even one dollar moves you into the next tier with the full surcharge. There is no gradual phase-in. The brackets for 2024 (based on 2022 MAGI) for single filers:

Note: thresholds are indexed for inflation and change each year. The Social Security Administration announces new thresholds annually. ThunderHarbor uses the current year thresholds and projects future adjustments based on inflation estimates.

Strategies to minimize IRMAA surcharges

The key insight is that IRMAA is based on MAGI, not total wealth. You can have millions in retirement accounts and pay no IRMAA if you keep your annual MAGI below the thresholds. Here are the main strategies:

1. Manage Roth conversions to stay below IRMAA tiers. Instead of one large conversion, do smaller conversions each year that fill your current bracket but stop before crossing the next IRMAA threshold. The savings from staying in a lower tier can exceed the tax benefit of converting more.
2. Use Roth withdrawals for spending. Roth IRA withdrawals do not count as income and do not affect IRMAA. If you have built up a Roth balance through conversions, use it for spending in years where you are near an IRMAA threshold.
3. Time capital gains carefully. Selling a large stock position or rental property creates a spike in MAGI that can trigger IRMAA for two years. Spread gains across multiple years or offset them with tax-loss harvesting.
4. File Form SSA-44 for life-changing events. If your income dropped due to retirement, death of a spouse, divorce, or other qualifying events, you can request a reduction in your IRMAA tier. Many retirees miss this opportunity.
5. Coordinate with Social Security timing. Claiming Social Security adds to your MAGI. Delaying benefits gives you years of lower income for IRMAA purposes while also increasing your monthly benefit by 8% per year.

How ThunderHarbor factors IRMAA into Roth conversion decisions

When the Roth conversion optimizer is active, ThunderHarbor treats IRMAA as a constraint alongside tax brackets and ACA subsidies. For each year of your projection:

1. Identifies the Medicare-eligible years in your projection (typically age 65+)
2. For each Medicare year, looks at your MAGI from two years prior
3. Determines which IRMAA tier your MAGI falls into
4. Calculates the dollar cost of each tier (Part B + Part D surcharge)
5. Checks whether a proposed Roth conversion would push the lookback year's MAGI into the next tier
6. If the IRMAA cost of the conversion exceeds the future tax benefit, the optimizer reduces the conversion amount to stay below the threshold

The result is a conversion strategy that maximizes the benefit of Roth conversions while explicitly avoiding the years and amounts where the IRMAA cost would be a net negative. You can see the trade-off clearly in the year-by-year projection: each year shows the tax saved by the conversion, the IRMAA cost (if any), and the net benefit.

Frequently asked questions