Picture a married couple, both about 67, both newly on Medicare. She taught middle school for three decades. He spent his career as a firefighter. Between them, two solid public-sector pensions bring in roughly $140,000 a year. No million-dollar 401(k), no rental empire, no big stock sales. So when the Medicare letter arrived showing higher Part B premiums for both of them, the reaction was the one you see in retirement forums constantly: we don’t even have a big nest egg, how are we considered high income?
The answer is the Income-Related Monthly Adjustment Amount, known as IRMAA, and it does not care where the income comes from. Pension dollars count exactly like portfolio withdrawals. After the Social Security Fairness Act, signed into law on January 5, 2025, repealed the Government Pension Offset and Windfall Elimination Provision, roughly 3.2 million retired teachers, police officers, and firefighters gained access to Social Security checks they had previously been denied or sharply reduced. Restored Social Security stacked on top of two pensions is exactly the combination that pushes a household over the IRMAA line.
The Two-Year Lookback That Catches People Off Guard
Medicare premiums for 2026 are set from 2024 tax returns, not from what a retiree earns today. As Suze Orman put it on her Women & Money podcast, “IRMAA is based on your modified adjusted gross income from two years prior. So they’re always looking back two years.” Income from the final working years can cast a long shadow over the first years of Medicare enrollment, with no way to undo it after the fact.
For a married couple filing jointly in 2026, IRMAA kicks in once modified adjusted gross income tops $218,000. Below that line, each spouse pays the standard Part B premium of $202.90 a month. Cross it by a dollar and each spouse pays an extra $81.20, bringing each Part B premium to $284.10. There is no phase-in. The system works as a cliff: one dollar over the threshold triggers the full surcharge for the entire year.
For this couple, $140,000 in pensions alone does not reach the threshold. Add restored Social Security (up to 85% of which becomes taxable at higher incomes), some savings account interest, and joint MAGI can clear $218,000 without anyone doing anything unusual or extravagant. Once it does, both Medicare premiums rise, because IRMAA is assessed per person and deducted from each Social Security check.
There is also a Part D dimension that often goes unnoticed. IRMAA applies to Medicare drug coverage as well, adding $14.50 per month per person in the first tier on top of whatever the plan itself charges. For a two-person household in Tier 1, that brings the combined IRMAA exposure across Parts B and D to roughly $191 a month before accounting for any plan premiums.
A New Wrinkle: The Retroactive Payment Problem
The SSA began issuing retroactive WEP and GPO payments starting February 25, 2025, covering the benefit increase back to January 2024. For many retirees, those lump sums were substantial. Any retroactive payment received in 2024 landed directly on the 2024 tax return as taxable income, and that is the very return Medicare will read when setting 2026 premiums. A household that had no prior IRMAA exposure could find itself in a surcharge tier in 2026 purely because of a one-time SSA catch-up payment, even if ongoing monthly income sits comfortably below the threshold. The SSA distributed an estimated $17 billion in such retroactive payments by mid-2025.
Why the Sting Outlasts the Dollar Amount
The combined Part B surcharge in the first tier runs roughly $162 a month for the household, close to $1,950 a year. The harder part is permanence. Pensions do not turn off. Social Security does not turn off. Unless a spouse passes away or there is a genuine income drop, the surcharge tends to repeat year after year, not as a one-time penalty but as a structural feature of the retirement income picture.
The situation also compounds in a way most retirees do not anticipate. As provisional income climbs, more of Social Security becomes taxable, which raises AGI, which raises MAGI, which is the figure IRMAA reads. The pieces reinforce each other in a cycle that is already fully in motion by the time the Medicare letter arrives.
What You Can Actually Control
Pensions are fixed, so the standard MAGI-trimming strategies mostly do not apply here. A few approaches still offer meaningful leverage:
- Spend from the right buckets. Withdrawals from a Roth account or from taxable savings principal do not add to MAGI. Cash needed for a large purchase is better pulled from those sources than from a traditional IRA, which adds dollar-for-dollar to the MAGI that IRMAA reads.
- Avoid stacking discretionary income into a single year. Selling a long-held stock, cashing a savings bond, or taking a lump-sum distribution can push a household into the next IRMAA tier, where the per-person Part B surcharge jumps to $202.90 on top of the standard premium. Spreading those moves across two calendar years often keeps a household a tier lower and saves thousands.
- Know what Form SSA-44 will and will not fix. The Life-Changing Event form allows a reduction in IRMAA after a qualifying event such as retirement, a spouse’s death, divorce, or the loss of income-producing property. It does not apply to ordinary pension income that simply keeps arriving each month, and it does not address a retroactive payment that boosted a prior year’s return.
The Realistic Takeaway
For a two-pension household with restored Social Security, some IRMAA exposure may simply be the cost of having reliable, lifetime income from two full careers in public service. The practical goal shifts from eliminating IRMAA to avoiding making it worse by accident, particularly in years involving a large capital gain, a sizable IRA withdrawal, or a Roth conversion made without modeling the tax ripple effect.
Anyone nearing 65 with a similar income profile should pull the prior two years of tax returns now. Those are the returns that set Medicare premiums for the next two years, and a single unexpected line item can shift which tier a household lands in. Every household’s facts differ slightly, which is why a quick review before reaching Medicare age carries far more weight than an appeal filed after the fact.
Editor’s note: This update adds the Part D IRMAA surcharge of $14.50 per person per month in the first tier, which the original article omitted, and includes new context on how retroactive Social Security payments issued under the Social Security Fairness Act starting in February 2025 (roughly $17 billion distributed by mid-2025) may have pushed some retirees’ 2024 MAGI into an IRMAA tier for the first time. The figure of approximately 3.2 million retirees affected by the WEP and GPO repeal has also been added.
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