Can I Reduce My Medicare Premiums by Lowering My Income Strategically?

A lot of people assume their Medicare premiums are fixed once they retire. Then they get the bill. Suddenly their Medicare Part B premium is much higher than expected, and they start wondering what happened.

In many cases, the answer comes down to something called IRMAA.

IRMAA stands for Income-Related Monthly Adjustment Amount. It’s an additional charge added to your Medicare Part B and Part D premiums if your income is above certain thresholds.

And here’s the important part: Medicare does not look at your current income. They look at your tax return from two years ago. So your 2026 Medicare premiums are based on your 2024 income.

That catches a lot of people off guard.

Maybe you’re retired now and living on less income than before. Maybe you had a one-time financial event a couple years ago that temporarily pushed your income higher. Either way, Medicare is using that older number to determine what you pay today.

The good news is this: with some planning, there are ways to potentially reduce your Medicare premiums over time.

The challenge is that many people do not realize how many different things count toward income for IRMAA purposes.

It’s not just your paycheck. Capital gains from investments count. Roth conversions count. Required Minimum Distributions count. Interest, dividends, rental income, and even selling certain properties can all increase your Modified Adjusted Gross Income, which is the number Medicare uses to calculate IRMAA.

That means someone who considers themselves “retired” can still end up paying significantly higher Medicare premiums because of financial decisions or transactions happening behind the scenes.

We see this a lot with Roth conversions.

A Roth conversion can be a very smart long-term tax strategy. But the amount converted is treated as taxable income in that year. So if someone converts a large amount all at once, it can push them into a higher IRMAA bracket and increase their Medicare premiums two years later.

The same thing can happen when someone sells appreciated investments or property.

None of these are necessarily bad decisions. In fact, many make perfect financial sense. But it’s important to understand the ripple effect they can have on Medicare costs.

This is where strategic income planning becomes important.

In some situations, spreading income out over multiple years instead of taking a large hit all at once can help keep you below certain IRMAA thresholds. For example, instead of doing one large Roth conversion in a single year, some people choose to do smaller conversions over several years. Others become more intentional about when they realize investment gains or begin taking withdrawals from retirement accounts.

Sometimes even a relatively small adjustment can keep someone from crossing into the next IRMAA bracket.

And once you cross a threshold, the increase applies to your entire Medicare premium, not just the amount over the limit. That’s why planning ahead matters.

Now, this does not mean you should avoid smart financial decisions simply to keep your Medicare premiums lower. Sometimes paying slightly higher Medicare premiums is worth it if the overall tax strategy benefits you long term.

The goal is not necessarily to eliminate IRMAA completely. The goal is to avoid unnecessary surprises and make informed decisions.

There’s another important piece here too. If your income has gone down because of a major life event, Medicare may allow you to request a reduction in your IRMAA. Retirement is one of the most common examples. If you stopped working and your income dropped significantly, you can file an appeal with Social Security using a form called SSA-44.

Other qualifying events include divorce, death of a spouse, or loss of income-producing property.

A lot of people do not realize this option exists, so they simply pay the higher premium without questioning it.

At the end of the day, Medicare premiums are tied much more closely to your tax situation than most people realize. And while you cannot always avoid IRMAA, strategic planning can absolutely help reduce the impact over time. That’s why these conversations are important before making large financial moves, not after.

If you’re planning a Roth conversion, selling investments, retiring soon, or simply wondering why your Medicare premiums increased, we'd be happy to sit down with you and your financial professional to help coordinate a game plan. A little planning today can help avoid unnecessary costs later.