In plain words
Medicare is the federal health insurance program for people 65 and older and some younger people with disabilities. It has four parts:
- Part A: hospital. Inpatient stays, short skilled nursing stays, hospice. Most people pay no premium because they or a spouse paid Medicare taxes for about 10 years. In 2026 the hospital deductible is $1,736 per benefit period.
- Part B: medical. Doctor visits, outpatient care, tests and equipment. The 2026 standard premium is $202.90 a month and the yearly deductible is $283. After that you usually pay 20% coinsurance, with no yearly cap in Original Medicare.
- Part C: Medicare Advantage. Private plans that replace Parts A and B (and often D), usually with networks and a yearly out-of-pocket limit.
- Part D: drugs. Private drug plans. In 2026, out-of-pocket costs for covered drugs are capped at $2,100 a year.
Many people on Original Medicare add a Medigap (Medicare Supplement) policy to cover the 20% and other gaps.
IRMAA: the income surcharge
If your income is above a set level, you pay more for Part B and Part D. This is the income-related monthly adjustment amount (IRMAA). It is based on your modified adjusted gross income from two years earlier, so 2026 premiums use your 2024 tax return.
| 2024 income, single | 2024 income, joint | 2026 Part B monthly premium | Part D add-on |
|---|---|---|---|
| Up to $109,000 | Up to $218,000 | $202.90 | $0 |
| $109,001 to $137,000 | $218,001 to $274,000 | $284.10 | $14.50 |
| $137,001 to $171,000 | $274,001 to $342,000 | $405.80 | $37.50 |
| $171,001 to $205,000 | $342,001 to $410,000 | $527.50 | $60.40 |
| $205,001 to under $500,000 | $410,001 to under $750,000 | $649.20 | $83.30 |
| $500,000 or more | $750,000 or more | $689.90 | $91.00 |
The tiers are cliffs. One dollar over a line puts you into the next tier for the whole year, per person.
How it helps real people
Health care is one of the largest retirement costs, and Medicare’s rules are unforgiving. Missing the sign-up window can mean a penalty for life. A one-time spike in income, such as selling a property or a large Roth conversion, can raise premiums two years later. Wealthy retirees plan their taxable income years ahead to stay under thresholds. Anyone can use the same idea.
A worked example
Illustrative.
Walter and Mae, both 66, file jointly. In 2024 they sold a rental property, and their income was $290,000. In 2026 they each pay $405.80 a month for Part B instead of $202.90, plus $37.50 each for Part D, about $5,770 more for the year as a couple.
Their income from 2025 on is back near $150,000. A one-time property sale is not a “life-changing event” that allows an appeal, so they accept the higher premiums for one year. From 2027, when Medicare looks at their 2025 return, their premiums return to standard. For future years, they spread Roth conversions so each year’s income stays under $218,000.
Signing up on time
- Initial Enrollment Period. Seven months: the three months before the month you turn 65, that month, and the three months after.
- Still working at 65? If you have group health cover from your own or your spouse’s current job, you can usually delay Part B without penalty and sign up later during a Special Enrollment Period. Cover from a former job, COBRA or retiree plans does not count as current employment cover.
- Late penalties. For Part B, the penalty is generally 10% of the standard premium for each full 12-month period you could have had it and didn’t, for as long as you have Part B. Part D has its own lifelong penalty if you go without creditable drug cover.
- Medigap timing. Your best window to buy Medigap is the six months after you are 65 or older and enrolled in Part B. In many states, buying later can mean health questions.
- HSAs. You can’t contribute to an HSA once you’re enrolled in any part of Medicare. Part A can start up to six months back when you sign up late, so plan HSA contributions with care.
Who it’s for
- Anyone turning 65 in the next few years.
- Retirees with pensions, large IRAs or one-time income events.
- People still working at 65 who need to decide whether to enroll.
Who it’s not for
- People under 65 who are not on disability, who will find more help in planning for health cover before Medicare.
Risks and trade-offs
- Original Medicare vs Advantage. Original Medicare with Medigap gives wide doctor choice and predictable costs, but higher premiums. Advantage plans often cost less upfront but use networks and prior approval. Switching back to Medigap later may require health questions.
- IRMAA planning has limits. Avoiding a tier shouldn’t lead you to skip a smart Roth conversion or sale. Compare the surcharge with the long-term benefit.
- Two-year lag. Income decisions at 63 can affect premiums at 65.
Common mistakes
- Missing the enrollment window and facing lifetime penalties.
- Assuming COBRA protects you. It does not count for delaying Part B.
- Forgetting IRMAA in the retirement budget. It can add thousands a year per couple.
- Not appealing after a life-changing event. Retirement, divorce, a spouse’s death and certain income losses qualify. Use form SSA-44.
- Picking a plan only on premium. Check doctors, drugs and the out-of-pocket maximum.
FAQs
Does Medicare cover long-term care?
No. It covers short skilled stays and home health care in some cases, not ongoing help with daily living.
Can I appeal IRMAA?
Yes, if a life-changing event lowered your income, such as stopping work. File SSA-44 with Social Security and include proof.
Do Roth withdrawals count toward IRMAA?
Qualified Roth IRA withdrawals don’t count as income for IRMAA. Roth conversions do count in the year you convert.
Is the surcharge per person?
Yes. Each spouse on Medicare pays it.
Do I need Part D if I take no drugs?
Many people enroll anyway to avoid the late penalty, choosing a low-cost plan.
Related strategies
- Retiring before 65: health coverage options
- Roth money in retirement
- How much do you need to retire?
Your next step
Ask VeraLife at /#ask to check your income against the IRMAA tiers.
Education, not advice. Examples are illustrative. VeraLife.ai is not a registered investment adviser, broker-dealer or insurance agency.