Why are you paying more for Medicare than your neighbor?

Your retirement income decisions could be triggering higher Medicare premiums—and you may have options if your financial situation has changed.

By Amanda Stilwell

Imagine discovering that your neighbor pays significantly less for Medicare than you do, even though you’re both retired, the same age and enrolled in similar coverage.

How is that possible?

What many retirees don’t realize is that Medicare premiums aren’t necessarily the same for everyone. Your income can influence what you pay for Medicare Part B and Part D, and financial decisions made years earlier may be responsible for higher costs today.

Understanding how these costs are calculated, and when you may be able to challenge an increase, can help you avoid surprises in retirement.

1. Why Medicare Premiums Aren’t the Same for Everyone

Most Medicare beneficiaries pay a standard monthly premium for Part B, which covers services such as doctor visits and outpatient care.

However, higher-income beneficiaries may pay an additional amount for Medicare Part B and Part D prescription drug coverage.

This additional charge is called the Income-Related Monthly Adjustment Amount (IRMAA).

IRMAA is determined based on your federal income tax return from two years prior. (2026 premiums are based on 2024 tax returns)  

Two retirees with similar savings, lifestyles and healthcare needs could pay different Medicare premiums simply because their reported incomes differ.

Learn more about Medicare premiums at: https://www.medicare.gov/basics/costs/medicare-costs

2. The Two-Year Lookback That Can Catch Retirees by Surprise

Here’s where Medicare planning becomes especially important.

Social Security generally uses your federal income tax return from two years earlier to determine whether you owe an income-related Medicare surcharge.

For example, your 2026 Medicare premiums are generally based on your 2024 income.

That means your current Medicare costs may reflect a financial situation that no longer exists.

Consider someone who:

• Earned a high salary before retiring
• Received a large bonus during their final working year
• Sold an investment and realized substantial capital gains
• Completed a significant Roth conversion
• Took a large distribution from a traditional IRA

These events can increase reported income and potentially trigger higher Medicare premiums two years later.

3. The Domino Effect of Retirement Income Decisions

Retirement financial decisions rarely happen in isolation.

Think of them as dominoes. One decision can trigger another financial consequence that you may not have anticipated.

For example:

• Domino 1: You withdraw a large amount from your traditional IRA.
• Domino 2: The withdrawal increases your taxable income.
• Domino 3: Your higher income crosses an IRMAA threshold.
• Domino 4: Two years later, you may face higher Medicare Part B and Part D premiums.

A Roth conversion can create a similar chain reaction.

That doesn’t mean these financial strategies should be avoided. It means you should understand the potential consequences before making a decision.

Your retirement income strategy, tax planning and Medicare costs should work together—not compete with one another.

4. Your Income Changed. Can You Appeal Higher Medicare Premiums?

Here’s something many retirees don’t know: Certain Medicare income-related surcharges can be reconsidered.

Suppose you recently retired and your income dropped significantly. Your Medicare premiums may still reflect the higher income you earned while working.

If you’ve experienced a qualifying life-changing event, you may be eligible to request a new determination from Social Security.

Qualifying circumstances can include:

• Retirement or another loss of income-producing work
• Reduction in work hours
• Marriage, divorce or death of a spouse
• Loss of certain pension income

To request a reconsideration based on a qualifying event, you generally submit Form SSA-44 along with supporting documentation.

Not every income change qualifies. For example, a voluntary Roth conversion or investment sale generally isn’t, by itself, a qualifying life-changing event.

Learn more about requesting a lower income-related Medicare premium at: https://www.ssa.gov/medicare/lower-irmaa

5. Questions to Ask Before Making Retirement Income Decisions

Before taking a significant withdrawal or making a major tax-planning move, consider:

• Could this decision increase my Medicare premiums?
• Am I approaching an IRMAA income threshold?
• Would spreading income over multiple years make sense?
• Are my current premiums based on income I no longer earn?
• Have I experienced a qualifying event that could justify requesting a lower surcharge?

Understanding these connections may help you avoid unexpected expenses and make more informed financial decisions.

The Bottom Line

Medicare costs aren’t always determined by your healthcare needs alone. Your income—and decisions made years earlier—can influence what you pay.

The good news is that understanding these rules gives you an opportunity to plan ahead. And if your financial circumstances have changed, you may have options worth exploring.

If you’re unsure why your Medicare premiums increased or how your retirement income decisions could affect future costs, consider speaking with a financial professional who understands how these pieces fit together. At Clarity Financial Solutions, we believe informed planning starts with understanding the full picture.

About Amanda Stilwell

Amanda Stilwell is the Founder and Financial Advisor of Clarity Financial Solutions, where she helps individuals and families navigate retirement planning with a focus on healthcare, income and long-term financial confidence. Drawing from her early career in home health and hospice care, Amanda brings a unique perspective to retirement planning, understanding firsthand the impact unexpected healthcare events can have on families without a clear plan in place.

With more than a decade of experience, she specializes in Medicare planning, retirement income strategies, Social Security maximization, portfolio management and long-term-care protection. Known for her thoughtful, education-first approach, Amanda is passionate about helping clients make informed decisions that reflect their unique goals and priorities while preparing for the future with greater confidence and peace of mind.