The Medicare welcome packet arrived in the mail, and the premium quote inside did not match anything a 68-year-old retiree expected. After 24 years as a software architect at a Fortune 500 firm, he had walked away last year with $2.6 million, including a $1.8 million traditional 401(k), a $400,000 Roth, and a $400,000 brokerage account. He had delayed Medicare enrollment until 68 because his severance package included a bridge of employer health coverage. What no one flagged during the planning conversation: the $620,000 severance lump sum paid in 2024 would resurface two years later as a Medicare surcharge.
This scenario shows up regularly on the r/Medicare subreddit, usually phrased as some version of “Why is my Part B premium $600 a month?” The answer is almost always the same: a one-time income event two years before enrollment.
The Situation at a Glance
- Age and status: 68, single, retired this year after a 24-year career
- Assets: $2.6 million, weighted heavily toward pre-tax dollars
- The trigger: 2024 MAGI of roughly $942,000, inflated by a severance lump sum
- The damage: Top-tier IRMAA surcharges on both Part B and Part D for 2026
- What is at stake: Roughly $12,500 to $13,000 across two years
IRMAA, the Income-Related Monthly Adjustment Amount, is the Medicare surcharge layered on top of standard Part B and Part D premiums for higher earners. Social Security uses your tax return from two years prior to set today’s premium. 2026 premiums are calculated from 2024 MAGI.
For this retiree, 2024 looked like a normal high-earning year on paper: $280,000 in W-2 wages, $620,000 in severance, and $42,000 of investment income. Added together, MAGI cleared $942,000, well above the $500,000 single-filer threshold that triggers the top IRMAA tier. The resulting load: roughly $443 per month over standard Part B and $84 per month on Part D, adding up to $6,324 for 2026 alone. A similar hit is queued up for 2027 because 2025 MAGI was also elevated by deferred severance components.
By the time the premium notice arrives, the income year is closed. You cannot un-earn 2024 wages in 2026. This is why the single most important IRMAA conversation happens before the trigger event, not after.
The Rescue Most Retirees Never Hear About
Social Security allows a redetermination appeal when income drops because of a qualifying “Life-Changing Event.” The form is SSA-44, and the qualifying events include marriage, divorce, death of a spouse, loss of income-producing property, employer pension settlement, reduction in work hours, and, critically here, work stoppage. Retirement counts. Severance ending counts.
For this retiree, filing SSA-44 with documentation of the retirement date and an estimate of 2026 income (Social Security plus modest portfolio withdrawals, well below any IRMAA threshold) should knock the surcharge back to the standard premium. That single form recovers close to $12,500 over two years. File promptly with proof of the work stoppage; do not wait for the premium to start coming out of a Social Security check.
Where Prior Planning Would Have Helped
- Model IRMAA before any large taxable event. Anyone within two years of Medicare facing a severance package, a deferred compensation payout, a concentrated stock vest, or a real estate sale should run the MAGI math against current CMS brackets before signing anything.
- Negotiate the severance timing. If an employer will split a lump sum across two tax years, that flexibility can pull MAGI down a tier or two. Not every employer permits it, but it doesn’t hurt to ask.
- File SSA-44 the moment you retire. Work stoppage is the cleanest qualifying event on the form. Documentation is straightforward: a retirement letter and a projection of post-retirement income.
- Finish Roth conversions and large gain harvests before age 63. Because of the two-year lookback, age 63 is the last clean year for a 65-year-old Medicare enrollee.
Remember, IRMAA resets every year based on a return filed two years earlier, and a qualifying life event resets it sooner.
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