Medicare: This "Gotcha" Can Cost You Thousands | Nasdaq

When we first shared this piece in late 2022, our note was simple: Medicare surcharges and IRMAA were now consistently showing up on the financial wires. The article in question — "Medicare: This 'Gotcha' Can Cost You Thousands" — was written by Dan Caplinger for the Motley Fool and featured on Nasdaq in October 2022. It remains some good general information and worth a quick read.

For years, the Income-Related Monthly Adjustment Amount was an obscure line item that only a small slice of Medicare beneficiaries — and an even smaller slice of financial advisors — paid attention to. Seeing a mainstream outlet like Nasdaq run a plain-English warning about it marked a turning point: IRMAA had officially become a mainstream retirement planning topic.

Below is our commentary on what the article covered, the numbers it cited, and the planning lessons that still hold up today.

The article opens with a trap many retirees fall into: assuming Medicare can run on autopilot. Because most people become eligible at 65 — and early Social Security claimers are enrolled automatically — it's tempting to ignore Medicare until a month or two before that birthday.

The "gotcha" is IRMAA. While Part A is premium-free for most people thanks to payroll taxes paid during their careers, Part B outpatient coverage and Part D prescription drug plans both carry monthly premiums — and higher-income retirees pay additional premiums on top of the standard amounts. Beneficiaries whose modified adjusted gross income (MAGI) exceeds certain thresholds are assessed these income-related surcharges automatically.

What makes it a genuine gotcha rather than just another cost? Three things the article highlights:

• It's based on old income. The surcharge is calculated from your tax return two years prior — income earned before you were even on Medicare. Learn more about how IRMAA is calculated.
• It's a cliff, not a slope. Crossing a threshold by a single dollar triggers the full surcharge for that tier.
• It's easy to miss. Since premiums are usually deducted from Social Security checks automatically, many people pay the surcharge for years without realizing it.

The article laid out the CMS bracket tables for both 2022 and 2023, and the numbers make the point better than any adjective could. In 2022, the standard Part B premium was $170.10 per month. But for single filers with MAGI over $500,000 (joint filers over $750,000), the total Part B premium was $578.30 — a surcharge of $408.20 per month, more than triple the base premium.

Here's the 2022 Part B bracket structure cited in the piece (data source: Centers for Medicare & Medicaid Services):

The 2023 table told an unusual story: the numbers actually went down. The standard premium fell to $164.90, the first bracket threshold rose to $97,000 single / $194,000 joint, and the top-tier total premium eased to $560.50. A rare reduction in base Medicare costs drove the change — a genuine anomaly, since premiums almost always march upward. You can see the full year-by-year detail on our 2023 IRMAA brackets page.

The article also flagged the Part D side of IRMAA, which fewer people know about: surcharge-bracket beneficiaries added between $12.40 and $77.90 per month to their drug plan premiums in 2022, easing slightly to between $12.20 and $76.40 in 2023.

The sharpest insight in the piece — and the reason we shared it in the first place — is its framing of the two-year lookback. IRMAA isn't based on your current income. It's based on the tax return you filed two years before the coverage year. Someone who turned 65 in 2022 had their surcharge determined by their 2020 income — earned when they were 63 and possibly still working full-time at peak career earnings.

That timing mismatch is exactly why so many new Medicare enrollees get blindsided. Their income has dropped in retirement, but Social Security is looking at a W-2 world that no longer exists. The practical conclusion the article draws is the same one we'd give any client or advisor: IRMAA planning starts at 63, not 65.

• Income realized at 63 — capital gains, Roth conversions, large IRA withdrawals, deferred compensation payouts — lands squarely in the first Medicare determination window.
• Keeping MAGI below a threshold in those pre-Medicare years can save hundreds or thousands of dollars per year in surcharges once coverage begins.
• Because brackets are cliffs, even modest income smoothing near a threshold has an outsized payoff. See our guide on how to reduce MAGI.

For married couples the stakes double, since both spouses on Medicare each pay their own surcharge off the same joint return.

The article is careful to note that an IRMAA determination isn't necessarily final. If the two-year-old income picture no longer reflects reality because of what the Social Security Administration calls a "life-changing event," you can ask SSA to use your more recent, lower income instead.

Qualifying events include marriage, divorce, death of a spouse, work stoppage or work reduction, and loss of certain income sources. The vehicle for the request is Form SSA-44 — and retirement itself counts as a work stoppage, which is precisely the situation most new enrollees are in.

The article's warning here is blunt and correct: if you don't ask for the reduction, you won't get it. SSA doesn't proactively check whether you retired. Many beneficiaries never even notice the surcharge because it's deducted automatically from their Social Security payment. Our full walkthrough of the process is on the IRMAA appeal page.

When mainstream financial media starts running IRMAA explainers, two things happen. First, clients start asking about it — often after they or a friend get a surprise determination letter. Second, advisors who can answer with specifics, brackets, and a plan immediately stand apart from those who wave it off as "just a Medicare thing."

The Motley Fool piece is a solid consumer-level primer, but it stops where an advisor's work begins. Knowing that the cliff exists is step one. Modeling a client's MAGI trajectory across their early retirement years — layering in Roth conversion schedules, capital gain timing, RMDs, and Social Security claiming — is where the thousands of dollars in the headline actually get saved or spent.

That multi-year, threshold-aware modeling is exactly what RetirementAdvisorPro was built for. Advisors use it to show clients precisely where each year's projected income lands relative to the IRMAA cliffs, and what a conversion or withdrawal decision this year does to Medicare premiums two years out. If you'd like to see it against a real client scenario, book a demo.