Understanding Medicare Costs
Medicare is the federal health insurance program for people 65 and older (and some younger people with disabilities). While Medicare provides essential coverage, it's not free. Understanding the various costs—premiums, deductibles, and copays—helps you budget for healthcare in retirement.
Medicare Parts Explained
- Part A (Hospital Insurance): Covers inpatient hospital stays, skilled nursing, hospice. Usually premium-free if you or your spouse paid Medicare taxes.
- Part B (Medical Insurance): Covers doctor visits, outpatient care, preventive services. Requires monthly premium ($185 in 2026 for standard beneficiaries).
- Part C (Medicare Advantage): Private plans that bundle Parts A, B, and often D. Costs vary by plan.
- Part D (Prescription Drugs): Drug coverage through private plans. Average premium around $30/month.
What is IRMAA?
IRMAA (Income-Related Monthly Adjustment Amount) is a surcharge that higher-income Medicare beneficiaries pay for Part B and Part D coverage. If your modified adjusted gross income (MAGI) exceeds certain thresholds, you'll pay more than the standard premium.
For 2026, IRMAA kicks in for singles with MAGI above $106,000 and married couples above $212,000. The surcharges increase progressively at higher income levels, potentially adding hundreds of dollars to your monthly premiums.
💡 Pro Tip: Plan for IRMAA
IRMAA is based on your tax return from two years prior. If you're approaching Medicare age and have high income, consider strategies to reduce MAGI, such as Roth conversions before age 63 or strategic retirement account withdrawals.