By Frank Lovaglio, RFC® · Managing Partner, Security Financial Management · CRD #1299700
Reviewed by Dave Allen, CFP® · CRD #1210763
Why Medicare Planning Isn’t About Medicare — It’s About the Two-Year Lookback
What Medicare Planning Actually Prices
Medicare Part B has a standard premium. In 2026 that figure is $202.90 a month. Every enrollee below the first income threshold pays exactly that. Above the threshold, the Social Security Administration adds an Income-Related Monthly Adjustment Amount — IRMAA — on top of both Part B and Part D.
The word “adjustment” understates it. IRMAA is not a percentage of income and it does not scale smoothly. It is a stepped surcharge with six tiers, and it applies as a cliff. A household one dollar over a threshold pays the entire tier surcharge. There is no proration, no phase-in, no partial credit for being close.
Here is the 2026 schedule. The MAGI column refers to the 2024 tax return.
| Tier | Single MAGI (2024) | Married Filing Jointly (2024) | Part B surcharge/mo | Part D surcharge/mo |
|---|---|---|---|---|
| 1 | $109,000 or below | $218,000 or below | $0 | $0 |
| 2 | $109,001 – $137,000 | $218,001 – $274,000 | $81.20 | $14.50 |
| 3 | $137,001 – $171,000 | $274,001 – $342,000 | $202.90 | $37.50 |
| 4 | $171,001 – $205,000 | $342,001 – $410,000 | $324.60 | $60.40 |
| 5 | $205,001 – $499,999 | $410,001 – $749,999 | $446.30 | $83.30 |
| 6 | $500,000 and above | $750,000 and above | $487.00 | $91.00 |
Read the second row carefully. A married couple with $274,000 of 2024 MAGI pays $95.70 per person per month in combined surcharges. The same couple at $274,001 pays $240.40 per person per month. The single dollar costs the household $3,472.80 across the year. That is the cliff.
At the top tier, a married couple pays $689.90 per person per month for Part B alone — $202.90 standard plus $487.00 surcharge. Over a year, for two people, that is $16,557.60 in Part B premiums against $4,869.60 for a couple below the first threshold. The difference is $11,688 annually, driven entirely by a tax return filed two years prior.
What is medicare planning?
Medicare planning is the coordination of income, enrollment timing, and account decisions in the years before Medicare eligibility, so that modified adjusted gross income stays below the IRMAA thresholds that determine Part B and Part D premiums. Because Medicare uses a two-year income lookback, medicare planning effectively begins at age 63 for a household enrolling at 65.
The MAGI Runway: Why Medicare Planning Starts at 63
The two-year lookback creates a specific window. Call it the MAGI runway — the stretch of years where income decisions still have a Medicare price attached, and after which they do not.
For a household enrolling at 65 in 2028, the relevant income year is 2026. That year is happening now. Every Roth conversion, every realized capital gain, every deferred-compensation payout, every property sale booked this calendar year lands on the return that sets the first Medicare premium. Once December 31 passes, that number is fixed.
This is why the July mid-year tax audit and the August Medicare conversation are the same conversation held twice. A Roth conversion sized purely against bracket capacity can look efficient in isolation and still push MAGI across an IRMAA cliff two years downstream. The tax saved and the premium added are different line items in different years, and households rarely see them side by side.
The runway has three distinct segments
Age 63 and earlier — full flexibility. Income decisions here price the enrollment year. Roth conversions, gain harvesting, and business-sale timing all still have room to be sequenced against the thresholds. This is where medicare planning does its actual work.
Ages 63 to 65 — the pricing window. Each year’s MAGI now sets a specific future premium year. The household is effectively pre-paying or pre-avoiding surcharges two years at a time. Decisions remain available but their Medicare consequence is no longer abstract.
After enrollment — appeal only. Once premiums begin, the only route to a lower tier is an appeal on Form SSA-44, and only for a qualifying life-changing event. Regret is not a qualifying event.
Healthcare Costs in Retirement Are Not One Number
Households often carry a single mental figure for retirement healthcare — a lump sum they have read somewhere. That framing hides the structure. Retirement healthcare cost has at least four moving parts, and only one of them is fixed.
Part B premiums move with income, through IRMAA. Part D premiums move with income the same way, on their own surcharge schedule. The Part B annual deductible in 2026 is $283, and applies regardless of income. Part A hospital coverage carries no premium for most enrollees but does carry a $1,736 deductible per benefit period — and “per benefit period” is not “per year.” A household with two separate hospitalizations more than sixty days apart pays it twice.
Then there is everything Medicare does not cover: dental, vision, hearing, and long-term care. Those costs do not respond to income planning at all. They respond to reserves.
The practical consequence is that medicare planning splits into two disciplines. The income-sensitive portion — premiums and surcharges — is a coordination problem solved in the years before enrollment. The income-insensitive portion is a funding problem solved with dedicated assets, most efficiently a Health Savings Account funded before Medicare enrollment closes the door on contributions.
Medicare Part B vs Part D: Two Surcharges, One Income Test
Part B covers outpatient care, physician services, and durable medical equipment. Part D covers prescription drugs. They are separate programs with separate premiums, and a household can hold Part D through a standalone plan or bundled inside Medicare Advantage.
What they share is the income test. The same 2024 MAGI figure drives both surcharge schedules simultaneously. A household that crosses a threshold does not cross it for Part B alone — it crosses for both at once. That is why the tier table above shows two surcharge columns, and why the true cost of crossing a threshold is the sum of the two.
For medicare planning purposes, the two programs are one decision. There is no configuration in which a household optimizes Part B exposure and leaves Part D untouched.
Medicare Open Enrollment Is Not the Planning Moment
Medicare Open Enrollment runs October 15 through December 7 each year. It is the window for switching Part D plans, moving between Original Medicare and Medicare Advantage, or changing Advantage plans. It receives most of the public attention, most of the advertising, and most of the calendar reminders.
It does not touch IRMAA. A household can change every plan election during open enrollment and its surcharge tier stays exactly where the 2024 return put it. Open enrollment is a coverage decision. Medicare planning, in the sense that matters for $1M–$3M households, is an income decision made years earlier.
Both matter. They are not the same activity, and the calendar attention is distributed almost backwards relative to the dollars involved.
What This Means for Households Approaching 65
The households that handle this well tend to share three habits.
They know their current-year MAGI trajectory by mid-year, not at filing. They treat every large income event — conversion, sale, distribution, exercise — as a two-part decision with a tax consequence this year and a Medicare consequence in two. And they check the threshold table before executing, not after.
The households that get surprised are rarely careless. They are usually households that ran a technically sound tax decision in a single-year frame, in a system that prices across years.
Continue with the August Medicare & Healthcare Pillar
- → Walk the Resource: The Medicare Planning Audit: Six Decisions from Age 63 to 66
- → Read July’s Insight: Why Most Roth Conversions Fail Coordination Math (Not Market Timing)
- → Listen to the Conversation: Net Investment Income Tax: The 3.8% Cliff Most Mid-Year Plans Miss
- → Read July’s Brief: The Bracket-Window Audit: Mid-Year Tax Strategy for $1M–$3M Households
Medicare Planning FAQ
Medicare uses the modified adjusted gross income from your tax return two years prior. For 2026 premiums, the Social Security Administration uses the 2024 return. This two-year lookback is why medicare planning has to begin well before the enrollment year itself.
No. IRMAA applies as a cliff. Crossing a threshold by one dollar triggers the full surcharge for that tier. A married couple crossing the first threshold moves from $0 in combined surcharges to $95.70 per person per month, which is $2,296.80 across the year for the couple.
Yes, using Form SSA-44, but only for a qualifying life-changing event. The Social Security Administration recognizes eight: marriage, divorce or annulment, death of a spouse, work stoppage, work reduction, loss of income-producing property, loss of pension income, and an employer settlement payment. A one-time Roth conversion is not a qualifying event.
No. Open enrollment, which runs October 15 to December 7, governs plan elections for Part D and Medicare Advantage. Your IRMAA tier is determined by your tax return from two years earlier and does not change during open enrollment.
In 2026 the standard Part B premium is $202.90 a month. At the top tier the same coverage costs $689.90 a month, because the $487.00 surcharge is added. For a married couple in the top tier, Part B alone runs $16,557.60 a year against $4,869.60 for a couple below the first threshold.
Wednesday’s Resource turns this into a working sequence — the six decisions between ages 63 and 66, in the order they have to be made, with the thresholds and deadlines attached to each.
Schedule with Security Financial Management
A 15-minute call establishes where a household currently sits on the MAGI runway and which decisions still have room to move. Coordinating income before the lookback year closes is materially different from managing premiums after enrollment.
About the Author
Frank Lovaglio, RFC® · Managing Partner, Security Financial Management. CRD #1299700. Frank has guided multigenerational families through coordinated retirement and estate planning since 1989. Verify credentials at BrokerCheck by FINRA or SEC IAPD.
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Disclosures
The information presented is for educational purposes only and does not constitute legal, tax, medical, or investment advice. Security Financial Management, Inc. is a registered investment advisor under Kestra Advisory Services, LLC. Medicare rules, premiums, and income thresholds are set by the Centers for Medicare & Medicaid Services and the Social Security Administration and are subject to annual change. Medicare enrollment and appeal decisions should be coordinated with qualified tax professionals and, where appropriate, licensed insurance professionals familiar with your specific situation. Security Financial Management is not affiliated with or endorsed by any government agency. Past performance is not indicative of future results.
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