Retire in 2026 and Medicare Prices 2027 on Your 2025 Salary and 2028 on Your Last Year of Work. Neither Year Corrects Itself. One Form Does, and It Has to Be Filed Twice
Retiring mid-year creates two separate income drops, and Medicare's standard lookback prices both of them on the wrong salary. One form can fix consecutive premium years at once, but most retirees never realize they can file it twice.
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He drew a full salary for all of 2025, works until September 2026, and then retires. His income falls twice. The first drop comes in 2026, when he gets only about nine months of pay. The second comes in 2027, when the paycheck ends entirely. Under Medicare’s normal IRMAA lookback, each drop would show up about two years later.
Medicare adds an income-based surcharge to Part B and Part D premiums based on your tax return from two years prior. Most retirees have the surcharge withheld from their monthly benefit. In one online Medicare discussion, a retiree celebrated getting the surcharge removed based on a 2024 retirement. He wants that same result for two years in a row.
Medicare Prices You One Paycheck Behind
Consider an individual whose modified adjusted gross income (MAGI) runs $170,000 in 2025, $90,000 in 2026, and $65,000 in 2027. Without action, his 2027 premiums are based on the $170,000 year and his 2028 premiums on the $90,000 year. He could be living on $65,000 while Medicare bills him as if he were working.
Under 2026’s published brackets, $170,000 sits in the single band from $137,000 to $171,000. That band adds $202.90 a month to Part B and $37.50 to Part D. The 2027 brackets aren’t out yet, but the 2026 table gives a fair sense of the cost.
Together, those surcharges come to $240.40 a month, or $2,884.80 a year, charged on income he no longer makes.
The latest estimate puts the 2027 cost-of-living adjustment (COLA) at about 3.5%, which works out to roughly $87.50 a month on a $2,500 benefit. The surcharge would wipe out that raise and then some.
Retirement Unlocks a Fresh Determination
Form SSA-44 lists Work Stoppage as a qualifying life-changing event. On the form, he gives his retirement date, filing status, updated adjusted gross income (AGI), and any tax-exempt interest. Social Security accepts an estimate when the tax return isn’t available yet.
Two Income Steps for Two Premium Years
The form breaks the problem into two year-specific estimates. If he files after retiring in 2026, Step 2 can use his estimated $90,000 MAGI for 2026. Step 3 can carry his estimated $65,000 for 2027 because his income is expected to fall again the next year.
Social Security uses separate premium-year inputs when a life-changing event affects consecutive years, but the beneficiary can supply both numbers on one SSA-44. A 2026 filing with 2026 in Step 2 and 2027 in Step 3 addresses the current and next premium years.
Under the ordinary lookback, 2028 would use his $90,000 MAGI from 2026. That is already below the 2026 single IRMAA threshold of $109,000; the 2028 threshold has yet to be published. Final working years are often uneven, however. A bonus, payout for unused vacation, or deferred compensation can push a partial-year MAGI higher than expected.
Retirement Replaces the Salary but Leaves Other Income in Play
His updated MAGI still includes every other source Medicare counts:
- Pension and annuity income, which often begins the same month the salary ends.
- Taxable IRA withdrawals and Roth conversions. A large conversion in early retirement can bring back the surcharge.
- Capital gains, interest, and dividends, including gains from rebalancing a taxable brokerage account.
- Tax-exempt municipal bond interest, which Medicare adds back into income even though it escapes federal income tax.
Reporting the work stoppage swaps out the outdated salary figure, but every other source above still counts toward his total (we listed the IRMAA surcharges and the other premium traps retirees walk into in a free Medicare guide here: Medicare’s Hidden Bills).
What to Send Before the Old Years Set Your Premiums
The package includes SSA-44 with Work Stoppage checked, his retirement date, a 2026 income estimate, a 2027 estimate if income falls again, and proof of retirement, such as a statement from an employer. He can sign in to his Social Security account to complete and submit SSA-44 online, or fax or mail the completed form and evidence to a Social Security office.
Put real care into the estimates. Social Security later checks them against IRS records, so an estimate that comes in too low can turn into a bill. If he plans a Roth conversion or a large withdrawal in 2027, it belongs in that number now.
Getting the two updated numbers to Social Security before the old salary years set his premiums is the critical step. A spouse’s income, a change in filing status, or an unusually large final paycheck can change the result, so run your own figures before you sign.
Contact [email protected] for any questions or corrections.
Gerelyn Terzo is the author of dividend investing handbook "Dividend Investing Strategies: How to Have Your Cake & Eat It Too." A veteran financial journalist, she covers agri-finance for outlets like Global AgInvesting and the broader stock market and personal finance for 24/7 Wall Street. She began at CNBC and later helped launch Fox Business in New York. Gerelyn currently resides in Woodland Park, Colorado and dabbles in nature photography as a hobby.
