Helping Clients Navigate IRMAA: A Planning Opportunity for Financial Advisors

When helping clients prepare for retirement, it's easy to zero in on investment performance, retirement income, tax efficiency and legacy planning. However, one often-overlooked focus is the Income — Related Monthly Adjustment Amount (IRMAA), a Medicare surcharge that can significantly increase health care costs for higher-income retirees.

Understanding how IRMAA works allows advisors to proactively manage Medicare costs while demonstrating the value of comprehensive retirement planning.

What Is IRMAA?

IRMAA is an additional premium applied to Medicare Part B and Part D for individuals whose income exceeds thresholds established by the Social Security Administration.

One of the most important planning considerations is that IRMAA is based on a client's Modified Adjusted Gross Income (MAGI) from two years earlier. For example, a client's 2026 Medicare premiums are generally calculated using their 2024 tax return. This two-year lookback creates opportunities for advisors to help their clients make proactive tax and income planning decisions before Medicare costs are affected.*

Income Sources That Can Trigger IRMAA

Many clients assume IRMAA is based solely on earned income, but numerous sources contribute to MAGI, including:

• Wages
• Pension income
• Retirement account withdrawals
• Capital gains
• Interest income (including tax-exempt interest)
• Dividends
• Rental income
• The taxable portion of Social Security benefits

Understanding how these income sources interact can help advisors identify opportunities to better manage taxable income and potentially minimize future Medicare surcharges.

When a Client's Income Changes

Not every IRMAA determination is permanent. If a client's income has decreased because of a qualifying life-changing event, they may be eligible to request an IRMAA reconsideration through Social Security.

Qualifying events include:

• Retirement or work stoppage
• Reduction in work hours
• Marriage or divorce
• Death of a spouse
• Loss of pension income
• Loss of income-producing property
• Certain employer settlement payments

Advisors who recognize these situations can help clients understand their options and encourage timely action. Requests are generally expected within 60 days of receiving an IRMAA determination notice.

Planning Strategies to Help Manage IRMAA

IRMAA shouldn't be viewed as simply another Medicare rule — it can be incorporated into a broader retirement income and tax planning strategy. Depending on a client's objectives, advisors may consider strategies such as:

• Spreading Roth conversions across multiple tax years
• Coordinating retirement account withdrawals to manage taxable income
• Leveraging cash value life insurance as part of an overall income strategy
• Incorporating long-term care insurance into retirement planning
• Timing charitable giving strategically
• Managing capital gains with Medicare premium thresholds in mind

Every client's situation is different, making it important to evaluate these strategies within the context of a comprehensive financial plan.

Turning Medicare Planning Into Advisor Value

Helping clients understand IRMAA goes beyond reducing Medicare premiums. It demonstrates a holistic approach to retirement planning by connecting investment decisions, tax strategy, health care costs and retirement income.

By proactively incorporating IRMAA into annual planning conversations, advisors can help clients avoid unexpected Medicare expenses, make more informed financial decisions and reinforce the value of ongoing financial guidance throughout retirement.

Help Clients Navigate IRMAA With Confidence

IRMAA can be complex. But explaining it to clients doesn't have to be. Senior Market Sales^® (SMS) gives its agents complimentary access to the Client Stream^® Marketing Library, featuring compliant, client-facing resources that help simplify IRMAA conversations. With ready-to-use educational materials, you can save time, strengthen client relationships and differentiate your practice. If you’re interested in gaining access to SMS’ Client Stream Marketing Library that includes IRMAA-centric pieces, then please complete the form below.

Additionally, SMS has created an IRMAA video on its Learning Academy platform. This video will help fine-tune your communication strategy for maximum success.

Are you looking for an IMO that works as hard as you? SMS might just be the partnership you need. If you have any questions on the information presented in this blog, or if we can help in any way, reach out and speak with a licensed marketing consultant at 1.800.786.5566.