The Medicare Letter that Creates Doubt

The wealth management industry has a habit of teaching people to fear lines. Tax brackets, contribution limits, phaseouts and income thresholds are presented as boundaries to be managed carefully, sometimes avoided entirely, as though crossing one were evidence of carelessness rather than the result of an intentional decision.

Few thresholds carry as much emotional weight in retirement as IRMAA, the Income-Related Monthly Adjustment Amount that increases Medicare Part B and Part D premiums when income exceeds certain levels. On paper, it is a surcharge. Emotionally, it can feel like a verdict on the care someone has taken to plan.

The letter arrives from Social Security informing the recipient that Medicare premiums will increase because income from two years earlier exceeded a threshold. For many, this is the first time they have encountered the term. The notice feels official and a bit frightening. Although the increase may amount to several thousand dollars over the course of a year, it rarely destabilizes an income plan. The reaction, however, can be disproportionate to the result. What surfaces in that moment is not merely irritation at the higher premium. It is doubt, and the subtle disappointment that something might have been overlooked.

People begin replaying past decisions. A Roth conversion, a capital gain, or the sale of a property. They wonder whether they should have seen it coming, and whether their advisor did. The surcharge becomes a symbol of error, and the cost is its visible consequence. What is rarely examined is how the industry has conditioned that reaction.

Some advisors consider IRMAA as trivial. If income rose enough to trigger higher premiums, then prosperity is the explanation. “If you’re paying taxes, you’re making money” is one platitude often repeated. The statement is technically correct, yet it misses what the client is experiencing. The concern is not about making money. It is about coordination. When financial decisions are made without modeling their ripple effects, the eventual premium increase feels less like a strategy and more like a surprise.

For other advisors, IRMAA is treated as something to be avoided at all costs. The implication is that crossing a line signals poor planning. Fear, subtle but effective, reinforces vigilance and positions avoidance as wisdom. Both approaches share the same flaw. They treat the threshold as the center of gravity.  When thresholds come first, judgment quietly recedes.

Structurally, IRMAA is straightforward. Income above certain levels results in higher Medicare premiums in the benefit year, reflecting income from two years prior. The tiers are incremental rather than cliff-like, and the increases are predictable. Large income events, Roth conversions, capital gains and business sales can all move someone across a tier. None of this is inherently problematic. The problem arises when the existence of a line is mistaken for a directive never to cross it, or when it is not recognized at all.

Consider Sam, a 65-year-old newly retired single filer whose income is temporarily lower than it may be later in life. She is evaluating a Roth conversion to reduce future required minimum distributions. For 2026 Medicare premiums, the first IRMAA tier begins at $109,000 of modified adjusted gross income (MAGI). For IRMAA purposes, MAGI is adjusted gross income plus any tax-exempt interest.

The standard 2026 Part B premium is $202.90 per month. If Sam’s MAGI exceeds $109,000 but remains under $137,000, her total Part B premium rises to $284.10, and her Part D surcharge increases by $14.50 per month. That represents an additional $95.70 per month, or $1,148.40 per year, in Medicare premiums, based on that higher income.

Assume Sam requires $100,000 to support her lifestyle. She receives $2,500 in dividends, $1,000 in taxable interest, realizes $8,000 in long-term capital gains, and withdraws $48,000 from her IRA, placing her MAGI at $59,500. She therefore has approximately $49,500 of additional income she could recognize, including through a Roth conversion, while remaining below the first IRMAA threshold.

If she chooses to convert more and move into the second IRMAA tier, her total Part B premium would rise to $405.80, and her Part D surcharge would increase to $37.50 per month, for a total increase of $240.40 per month, or $2,884.80 per year. The roughly $1,736 annual difference between the first and second tiers must be evaluated alongside the income taxes owed on the conversion and the potential reduction in future required distributions. Whether that trade-off is worthwhile cannot be determined solely by the premium increase. It requires examining the broader trajectory of her retirement income and tax exposure.

In that context, the premium increase is not a mistake. It is a cost associated with a broader objective. What determines whether the surcharge feels strategic or careless is not the number itself, but whether the trade-off was understood beforehand. When the letter arrives, and the increase was anticipated, it is simply the unfolding of prior judgment. When it arrives unexpectedly, it feels like negligence.

Retirement, however, is not merely a financial transition. It is a psychological one. For decades, discipline has been defined by staying within limits, minimizing taxes, and avoiding unnecessary costs. Crossing a government threshold can feel like a lapse in prudence, even when the broader plan remains intact. IRMAA then becomes more than a surcharge. It becomes the seed of doubt, quietly casting a shadow over the rest of the plan.

Yet Medicare premiums are not the foundation of a retirement strategy. They are one variable among many. When the focus is on staying below every line, choices narrow. Decisions begin to form defensively. Attention shifts toward managing thresholds rather than clarifying purpose. The objective becomes avoidance, not alignment. Over time, the original reason the threshold mattered is forgotten. It is no longer understood as a planning input, but simply as something not to cross.

A boundary meant to inform begins to dictate. Judgment becomes reactive rather than reflective. Adaptability gives way to rigidity, not because discipline is lacking, but because the structure itself rewards vigilance over perspective.

IRMAA deserves consideration. It does not deserve control. It requires modeling the two-year lookback and understanding how income decisions ripple forward. It requires weighing the premium increase against lifetime tax exposure and future required distributions. It requires awareness. What it does not require is fear.

When judgment leads, thresholds return to their proper place. They inform decisions without dictating them. They become inputs rather than verdicts. For some, premiums will rise. For others, they will not. What determines whether that envelope carries anxiety or calm is rarely the surcharge itself, but whether the decision behind it was made consciously.

IRMAA does not represent failure. It does not certify competence. It simply reflects income in a given year.  What ultimately matters is not whether a line was crossed, but whether the decision behind it was made with care, context, and judgment. Dogma cannot do that. Models can provide clarity, but only thoughtful attention to the specifics of a life can determine what is appropriate.