By Dave Allen, CFP® · Managing Partner, Security Financial Management · CRD #1210763
Reviewed by Frank Lovaglio, RFC® · CRD #1299700 · Published August 25, 2026
The Medicare Planning Audit: Six Decisions Between 63 and 66
The Six Decisions at a Glance
- Decision 1 — Map the MAGI runway. Identify which calendar years price which premium years. For enrollment at 65, the income year is age 63.
- Decision 2 — Settle Part B timing. Enrolling at 65 versus delaying under active employer coverage is a fork with a lifetime penalty on one branch.
- Decision 3 — Close the HSA window deliberately. Medicare enrollment ends HSA contributions permanently, and premium-free Part A backdates up to six months — so the real deadline is six months before enrollment, and it cannot be waived.
- Decision 4 — Choose the coverage structure. Original Medicare plus Medigap plus Part D, or Medicare Advantage. The Medigap guaranteed-issue window closes once and does not reopen.
- Decision 5 — Sequence income against the IRMAA cliffs. Roth conversions, gain harvesting, and property sales all carry a Medicare price two years out.
- Decision 6 — Build the appeal file before it is needed. Form SSA-44 works only for eight specific life-changing events, and only with documentation in hand.
What is a medicare planning audit?
A medicare planning audit is a structured review, run between roughly age 63 and 66, that sequences six decisions in order: mapping which income years price which premium years, settling Part B enrollment timing, closing Health Savings Account contributions before Medicare eligibility, selecting the coverage structure while guaranteed-issue rights are still open, sequencing income against IRMAA thresholds, and assembling documentation for a potential surcharge appeal.
Why the Audit Starts at 63, Not 65
The Social Security Administration determines Medicare premium surcharges using modified adjusted gross income from the tax return two years prior. A household enrolling in 2026 is priced on its 2024 return. A household enrolling in 2028 is priced on 2026 — the year currently in progress.
That two-year lag is the reason this audit has an age-63 start line. By 64, the income year that sets the first premium has already closed. By 65, two of them have. The decisions remain available in a technical sense but their leverage is gone.
What “leverage” means in practice
A household at 62 considering a $200,000 Roth conversion can model the tax cost and the Medicare cost together and choose the year that produces the better combined result. The same household at 66, looking at the same conversion, is choosing only the tax cost — the Medicare consequence lands in a year where the household is already enrolled and already paying, and there is no offsetting move available.
The audit is worth running at any age. It is worth substantially more before 63.
Decision 1 — Map the MAGI Runway
Start with a table, not a strategy. For each year between now and Medicare enrollment, write down the calendar year, the premium year it prices, and the projected modified adjusted gross income for that year.
Modified adjusted gross income for IRMAA purposes is adjusted gross income plus tax-exempt interest. That second term catches households by surprise. Municipal bond interest is federally tax-free and still counts fully toward the IRMAA calculation. A household holding a large muni allocation can sit in a higher surcharge tier than its taxable income alone would suggest.
The 2026 threshold table
These are the tiers currently in effect. The MAGI column refers to the tax return from two years earlier.
| Tier | Single MAGI | Married Filing Jointly | Part B surcharge/mo | Part D surcharge/mo | Combined annual (per person) |
|---|---|---|---|---|---|
| 1 | $109,000 or below | $218,000 or below | $0 | $0 | $0 |
| 2 | $109,001 – $137,000 | $218,001 – $274,000 | $81.20 | $14.50 | $1,148.40 |
| 3 | $137,001 – $171,000 | $274,001 – $342,000 | $202.90 | $37.50 | $2,884.80 |
| 4 | $171,001 – $205,000 | $342,001 – $410,000 | $324.60 | $60.40 | $4,620.00 |
| 5 | $205,001 – $499,999 | $410,001 – $749,999 | $446.30 | $83.30 | $6,355.20 |
| 6 | $500,000 and above | $750,000 and above | $487.00 | $91.00 | $6,936.00 |
Married couples filing separately face a compressed three-tier structure with the top tier reached far earlier. Households in that filing posture should model separately rather than reading across from the joint column.
The cliff, stated plainly
IRMAA does not phase in. A married couple at $274,000 of MAGI pays $1,148.40 per person in combined annual surcharges. At $274,001 that becomes $2,884.80 per person. One dollar of income costs the household $3,472.80 across the year.
This is the single most important structural fact in Medicare planning, and it is the reason mapping comes before strategy. A household that does not know where it sits relative to the nearest threshold cannot evaluate any other decision on this list.
Decision 2 — Settle Part B Enrollment Timing
The Initial Enrollment Period runs seven months: the three months before the month of the 65th birthday, the birthday month itself, and the three months after. Enrolling inside that window avoids any late-enrollment penalty.
The fork appears for households still covered by active employer group health insurance at 65. Those households may delay Part B without penalty, then use a Special Enrollment Period when the employer coverage ends.
The eight-month rule and the two-month trap
The Part B Special Enrollment Period runs eight months from the end of employment or the end of the group coverage, whichever comes first. Eight months is generous, and most households navigate it without difficulty.
The trap sits next door. The Special Enrollment Period for Part D and for Medicare Advantage is not eight months. It is two. A household that reads “eight months” and applies it across the board can enroll in Part B correctly and still incur a Part D late-enrollment penalty — a penalty that attaches to the premium permanently, calculated as a percentage of the national base beneficiary premium for every month of delay.
The 2026 Part D national base beneficiary premium is $38.99. That figure is the penalty calculation baseline, not what most enrollees actually pay for a plan.
What “active” employer coverage means
The delay option requires coverage from current employment — the household’s own or a spouse’s. COBRA continuation coverage does not qualify. Retiree health coverage does not qualify. Both are common points of confusion, and both produce the same outcome: a household believes it has a valid delay and is instead accruing a penalty.
Employer size matters as well. At employers with fewer than 20 employees, Medicare generally becomes the primary payer at 65 regardless of the group plan, which changes the calculus entirely.
Decision 3 — Close the HSA Window Deliberately
Health Savings Account contributions must stop upon Medicare enrollment. This is not a planning preference; it is a statutory requirement, and contributions made after enrollment are subject to penalty.
The 2026 contribution limits
| Item | Self-only | Family |
|---|---|---|
| HSA contribution limit | $4,400 | $8,750 |
| Catch-up contribution, age 55+ | $1,000 (statutory — this figure does not adjust for inflation) | |
| HDHP minimum annual deductible | $1,700 | $3,400 |
| HDHP maximum out-of-pocket | $8,500 | $17,000 |
The retroactivity problem
A household that delays premium-free Part A past 65 and then enrolls receives entitlement backdated up to six months, but never earlier than the first month of Medicare eligibility. For most people that first month is the month they turn 65. For anyone born on the first of a month, eligibility begins the month before the birthday month — a one-month difference that matters when counting backward.
Federal regulation sets this directly: an application filed within six months of the first month of eligibility is retroactive to that first month, and an application filed later is retroactive to the sixth month before the month of filing.
The retroactive months count as Medicare enrollment for HSA purposes. Contributions made during them become excess contributions after the fact, discovered only when the entitlement letter arrives.
So the practical rule is to stop HSA contributions six full months before the intended Part A start date — or before the first month of Medicare eligibility, whichever comes first. Households that discover this afterward face a corrective withdrawal and, in some cases, penalty.
Two details that surprise people
The retroactivity cannot be declined. Social Security’s own operating manual is explicit that individuals entitled to monthly benefits conferring hospital insurance eligibility may not waive that entitlement. The only route out is withdrawing the benefit application entirely and repaying every benefit already received.
Filing for Social Security does it automatically. Claiming retirement benefits at or after 65 enrolls the household in premium-free Part A without any separate Medicare decision. A household that files for Social Security while still contributing to an HSA has created the problem without ever thinking about Medicare.
Note that this backdating applies to premium-free Part A. A household without the required 40 quarters of coverage, buying Part A, follows standard enrollment-period rules instead. Part B does not backdate this way either — late Part B enrollment through the General Enrollment Period begins prospectively.
What the account is for afterward
Contributions stop. Distributions do not. An HSA remains available tax-free for qualified medical expenses indefinitely, including Medicare premiums for Parts B and D and Medicare Advantage, though not Medigap premiums. For households funding the income-insensitive portion of retirement healthcare — dental, vision, hearing, long-term care — a well-funded HSA entering Medicare is the most tax-efficient reserve available.
This is why the HSA decision belongs in the audit rather than in a separate conversation. The window to fund it closes on a date determined by the Part B timing decision made in Step 2.
Decision 4 — Choose the Coverage Structure
Two structures exist. Original Medicare — Part A and Part B — paired with a Medigap supplement policy and a standalone Part D drug plan. Or Medicare Advantage, which bundles hospital, medical, and usually drug coverage into a single private plan.
Medicare Part B vs Part D — what each covers
| Part B | Part D | |
|---|---|---|
| Covers | Outpatient care, physician services, preventive care, durable medical equipment, some drugs administered in a clinical setting | Self-administered prescription drugs filled at a pharmacy |
| 2026 standard premium | $202.90/mo | Varies by plan; $38.99 is the national base used for penalty and surcharge calculations |
| 2026 deductible | $283/year | Set by plan, within CMS limits |
| IRMAA surcharge applies? | Yes | Yes — same MAGI test, separate schedule |
| Special Enrollment Period after employer coverage ends | 8 months | 2 months |
| Late-enrollment penalty | 10% of the standard premium for each full 12-month period of delay, applied for as long as Part B is held | 1% of the national base premium per month of delay, applied for as long as Part D is held |
Note the last row. Both penalties are permanent. Neither expires after a catch-up period.
The Medigap window closes once
The Medigap open enrollment period runs six months from the date Part B coverage first takes effect. During that window, a household can purchase any Medigap policy sold in its state at the standard rate, with no medical underwriting and no health-based denial.
After the window, in most states, Medigap insurers may underwrite. A household with a developed medical history can be charged more or declined outright. The window does not reopen, and it is not restored by moving states or changing plans.
This makes Decision 4 partially irreversible in a way the other five are not. A household that selects Medicare Advantage at 65 and wishes to move to Original Medicare plus Medigap at 72 may find the supplement unavailable or unaffordable. The reverse move — Medigap to Advantage — carries no such barrier.
What actually drives the choice for $1M+ households
Cost is rarely the deciding factor at this asset level. The deciding factors are usually provider network breadth, whether the household splits time between states, and how much administrative friction it is willing to absorb. Original Medicare with Medigap travels well and imposes no network. Medicare Advantage often costs less monthly and imposes both.
A household that winters in Florida and summers elsewhere has a structural reason to look hard at Original Medicare regardless of the premium comparison.
Decision 5 — Sequence Income Against the IRMAA Cliffs
This is where the audit connects to the rest of the household’s tax planning. Every income-generating decision in a runway year carries two prices: the tax owed that year, and the Medicare surcharge triggered two years later.
The events that matter most
Roth conversions raise MAGI dollar for dollar. A conversion sized against bracket capacity alone can clear a bracket ceiling comfortably and still cross an IRMAA threshold, because the two systems use different boundaries.
Realized capital gains raise MAGI, including gains a household considered “free” because they fell inside the 0% long-term capital gains rate. Zero federal tax does not mean zero MAGI.
Property sales — a business, a rental, a second home — can produce a single-year MAGI spike that pushes a household from Tier 1 to Tier 5 for exactly one premium year. This is the most common cause of a surprise surcharge, and it is also the case most likely to qualify for an appeal.
Required Minimum Distributions raise MAGI on a schedule the household does not control. Because RMDs begin at 73 or 75 depending on birth year, they typically arrive after Medicare enrollment and permanently raise the household’s baseline MAGI. Conversions done before RMDs begin reduce that permanent baseline — which is the argument for accepting a temporary IRMAA cost in exchange for a lower lifetime one.
The sequencing rule
Check the threshold before executing, not after. For any planned income event in a runway year, the question is not “what does this cost in tax” but “does this cross a line, and if so, what does the crossing cost across both Part B and Part D for a full year.”
Sometimes the answer is that crossing is worth it. A conversion that permanently lowers future RMDs may justify one year in a higher tier. The failure mode is not crossing the line — it is crossing it without having calculated the toll.
A Worked Example — Tom and Susan
Tom is 63. Susan is 61. They hold $2.4 million across a traditional IRA, a taxable brokerage account, and a small Roth. Tom plans to enroll in Medicare at 65 — in calendar year 2028, which will be priced on their 2026 return.
Their 2026 baseline MAGI is projected at $196,000: pension income, Social Security not yet claimed, dividends, and taxable interest. That sits comfortably in Tier 1, where a married couple faces no surcharge below $218,000.
Their advisor has proposed a $90,000 Roth conversion in 2026 to reduce future required minimum distributions. Considered on tax grounds alone, the conversion is efficient — it fills the remainder of their 22% bracket without reaching the 24% ceiling.
Considered on Medicare grounds, it moves their 2026 MAGI to $286,000. That crosses two thresholds, landing them in Tier 3. For 2028, both Tom and Susan — once she enrolls — face $2,884.80 each in combined annual surcharges.
The revised sequence. Splitting the conversion across two years at $21,000 in 2026 and the balance in 2027 keeps 2026 MAGI at $217,000, just under the Tier 1 ceiling. The 2027 conversion prices the 2029 premium year and can be sized against that year’s threshold separately.
The tax outcome is nearly identical across the two approaches. The Medicare outcome differs by $2,884.80 for the first premium year alone. Nothing about the conversion strategy changed — only its distribution across calendar years.
This example is hypothetical and provided for illustration only. It does not represent any actual client, account, or outcome. Individual results depend on facts and circumstances that differ in every household. Consult qualified tax and financial professionals before acting.
Decision 6 — Build the Appeal File Before It Is Needed
An IRMAA determination can be appealed using Form SSA-44, but only when the household’s income has fallen because of a specific qualifying event. The Social Security Administration recognizes eight.
- Marriage.
- Divorce or annulment.
- Death of a spouse.
- Work stoppage — retirement or job loss.
- Work reduction — a decrease in hours, treated separately from full stoppage.
- Loss of income-producing property — through disaster or other circumstances beyond the household’s control, not through sale.
- Loss of pension income.
- Employer settlement payment — arising from employer closure or bankruptcy.
What does not qualify
A one-time Roth conversion is not a qualifying event. Neither is the sale of a business, a rental property, or a residence, however large the resulting spike. Nor is a good-faith planning error. The appeal route addresses income that fell for structural reasons, not income that rose for elective ones.
This is worth stating clearly because the misunderstanding is common and expensive. Households sometimes proceed with a large elective income event on the assumption that an appeal is available afterward. It is not.
Assembling the file
For households where a qualifying event is foreseeable — a planned retirement date, an expected pension termination — the documentation should be gathered before the determination notice arrives, not after. Form SSA-44 requires evidence of the event and an estimate of the reduced income year, and the appeal is faster when the supporting material already exists.
The determination notice typically arrives in the autumn preceding the premium year. A household that knows a qualifying event is coming can file proactively rather than reactively.
What the Full Audit Costs to Skip
The arithmetic is straightforward. A married couple that unintentionally lands in Tier 3 rather than Tier 1 pays $5,769.60 in combined surcharges across both members for one premium year. A couple in Tier 5 pays $12,710.40. If the elevated MAGI persists — as it does when it stems from RMDs rather than a one-time event — those figures repeat annually.
Add a Part D late-enrollment penalty from the two-month window misread in Decision 2, and a Medigap policy that became unavailable because the six-month guaranteed-issue window in Decision 4 closed unnoticed, and the cost of an unaudited transition into Medicare reaches well into six figures across a retirement.
None of these outcomes require a bad decision. They require a well-intentioned decision made in the wrong year, or in the wrong order, or without knowing a deadline existed.
Continue with the August Medicare & Healthcare Pillar
- → Read the Insight: Why Medicare Planning Isn’t About Medicare — It’s About the Two-Year Lookback
- → Read July’s Brief: The Bracket-Window Audit: Mid-Year Tax Strategy for $1M–$3M Households
- → 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
Medicare Planning FAQ
At age 63, or earlier if a large income event is anticipated. Because Medicare uses a two-year income lookback, the tax year at age 63 sets the premium for age 65. By 64, that year has closed and the most valuable planning window has passed.
Yes, if you are covered by active employer group health insurance through current employment — your own or a spouse’s. COBRA and retiree coverage do not qualify. At employers with fewer than 20 employees, Medicare generally becomes the primary payer at 65 regardless, which changes the analysis.
Eight months for Part B. Only two months for Part D and Medicare Advantage. This difference is the most common source of accidental late-enrollment penalties, because the eight-month figure is widely quoted without the Part D distinction attached.
Six full months before your intended Part A start date. Contributions must stop once you are enrolled in Medicare, and premium-free Part A backdates up to six months when you enroll after 65 — never earlier than your first month of Medicare eligibility. For most people that is the month they turn 65; if you were born on the first of a month, eligibility begins the month before. Filing for Social Security at or after 65 enrolls you in Part A automatically, and you cannot waive that entitlement.
The first threshold is $109,000 for single filers and $218,000 for married couples filing jointly, based on 2024 modified adjusted gross income. Above that, six tiers apply, reaching $500,000 single and $750,000 joint at the top tier, where the combined Part B and Part D surcharge is $578.00 per month per person.
No. Form SSA-44 covers eight specific life-changing events: 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. An elective Roth conversion, a business sale, or a property sale does not qualify, regardless of size.
Next month — September 2026 — the pillar moves to Social Security claiming strategy, including how the claiming decision interacts with the IRMAA thresholds established here and with the required minimum distribution schedule that follows.
Schedule with Security Financial Management
A 15-minute call establishes where a household sits on the MAGI runway and which of the six decisions still have room to move. The audit is most valuable before age 63 and remains useful at every stage after.
About the Author
Dave Allen, CFP® · Managing Partner and founding partner, Security Financial Management. CRD #1210763. Dave has coordinated retirement and tax-planning strategies for multigenerational households since the firm’s founding. Verify credentials at BrokerCheck by FINRA or SEC IAPD.
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, deductibles, and income thresholds are established by the Centers for Medicare & Medicaid Services and the Social Security Administration and are subject to annual change. The case study presented is hypothetical, provided solely for illustration, and does not represent any actual client, account, or result. Medicare enrollment, appeal, and coverage 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, including the Centers for Medicare & Medicaid Services and the Social Security Administration. Past performance is not indicative of future results.
Securities offered through Kestra Investment Services, LLC, member FINRA/SIPC (Kestra IS). Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS). Security Financial Management, Bluespring Wealth Partners, LLC, Kestra IS and Kestra AS are affiliated through common ownership by Kestra Holdings.
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