IRMAA Surcharges in IPO-Year Retirement: The 2-Year Medicare Look-Back

Medicare Part B and Part D premiums are income-based. The base 2025 Part B premium is $185/month; the top IRMAA tier adds $443/month, pushing premiums past $628/month per person. For a couple, the spread between lowest and highest tier is roughly $10,600 per year.

The surcharge is set by MAGI from two calendar years prior. The 2025 premium is based on 2023 MAGI. The 2027 premium is based on 2025 MAGI.

For retirees with large equity income in specific years, an IPO windfall, a secondary sale, an exchange-fund redemption, a major Roth conversion, the two-year look-back can lift IRMAA into the top tier for one or two years, then drop back. Planning around this can save $10K-$20K over a multi-year window.

The 2025 tiers

For single filers (2025 premiums, based on 2023 MAGI):

Under $106K: Tier 0, $185/month Part B
$106K-$133K: Tier 1, +$74/month
$133K-$167K: Tier 2, +$185/month
$167K-$200K: Tier 3, +$296/month
$200K-$500K: Tier 4, +$407/month
$500K+: Tier 5, +$443/month

Married filing jointly thresholds are double: $212K, $266K, $334K, $400K, $750K. Part D IRMAA is a smaller surcharge ($13-$85/month) but stacks on the same tiers.

The IPO-year problem

A senior IC with a 2023 IPO year might have had $2M of vested RSU income, pushing MAGI to $2.5M. In 2025, that retiree is in Tier 5 for both Part B and Part D: about $5,700/year per person in surcharge.

If they retired in 2024 and are living off Roth and taxable in 2025, their 2025 MAGI is $80K, well below Tier 0. But Medicare doesn’t see that; it sees 2023’s $2.5M. The high IRMAA persists for one year (or two, if 2024 MAGI was also elevated from IPO lockup releases).

The math: two years of top-tier IRMAA for a couple = $11,500. That’s a real cost.

What counts as MAGI for IRMAA

MAGI for IRMAA purposes is AGI plus tax-exempt interest. Not the broader definitions used for other benefits. It includes:

Wages (including RSU vest income)
Capital gains (including from RSU sales, ISO exercises, secondary sales)
IRA and 401(k) distributions
Roth conversions
Pension income
Taxable Social Security
Interest (including tax-exempt municipal bond interest)

It excludes:

Roth IRA distributions (if qualifying)
HSA distributions for qualified medical
Return of basis from non-qualified accounts

The appeal mechanism (SSA-44)

If your income dropped significantly because of a “life-changing event,” you can file Form SSA-44 to request IRMAA reduction based on projected current-year MAGI instead of 2-year-old MAGI. Qualifying events:

Marriage, divorce, or widowhood
Work stoppage or reduction (retirement, layoff)
Loss of income-producing property (not stock decline)
Loss of pension income
Receipt of settlement payment from current or former employer

Retirement counts. Pure stock market volatility does not. A retiree who left work in 2024 can file SSA-44 in 2025 showing projected 2025 MAGI is far below 2023. Medicare will set premiums based on projected MAGI.

Timing: file SSA-44 as early as possible in the year you want the reduction. It won’t apply retroactively to prior months.

Sequencing large income events

If you know an IPO is coming, you can sometimes shift income out of “bad years”:

Accelerate secondary sales into pre-retirement years when IRMAA doesn’t yet apply (before 63)
Delay deferred comp receipt until after the IRMAA-affected window
Roth-convert in later low-income years instead of the IPO year

For a senior IC at 62 with an expected 2026 IPO, the cleanest play is to recognize as much income as possible in 2024-2025 while still working (IRMAA doesn’t apply pre-Medicare). Starting Medicare at 65 in 2029 means 2027 MAGI sets the premium. Keep 2027 low and avoid the surcharge.

The two-year coincidence window

One practical challenge: you turn 65 and enroll in Medicare. Premiums begin immediately. But Medicare pulls 2-year-old MAGI, when you were probably still working, with peak RSU income.

For someone retiring at 63 and Medicare-enrolling at 65, the first two years of Medicare (65-66) use AGI from working years (age 63-64). IRMAA is almost guaranteed to be at top tier for those two years.

After 67, IRMAA finally reflects retirement-era AGI and typically drops to Tier 0 or Tier 1.

SSA-44 covers this. File it at enrollment citing “work stoppage” and provide projected current-year MAGI.

Roth conversion timing with IRMAA

Roth conversions in the 60s are usually attractive for tax efficiency, but they spike MAGI and feed IRMAA two years later. Conversion sizing should model the IRMAA hit.

Example: retiree at 65 with $100K baseline MAGI. Converting $50K pushes MAGI to $150K. This stays below Tier 2 ($167K for single). Converting $100K pushes MAGI to $200K, Tier 3, adding $296/month to Part B plus Part D. The incremental tax + IRMAA cost on that last $50K is effectively 27-28% instead of the 22% bracket rate.

For couples, the thresholds are higher and the effective cost is usually smaller, but the principle is the same: convert up to but not past the next IRMAA threshold.

Frequently asked

Does HSA withdrawal count toward MAGI? Tax-free qualified medical withdrawals don’t. Non-qualified withdrawals (after 65 for non-medical) do count as ordinary income and feed MAGI.

How often can I file SSA-44? Once per qualifying event. If retirement happens in 2025, file in 2025 or 2026 for that year’s premium. If a subsequent year has a new event (death of spouse, loss of pension), file again.

What if I underestimate MAGI on SSA-44? Medicare reconciles when the actual tax return is filed. Underestimates result in retroactive billing for the surcharge. Not a disaster, but budget for it.

Does IRMAA apply to Medigap premiums? No. Medigap (Medicare Supplement) premiums are set by the insurer, not by CMS. IRMAA only affects Part B (government) and Part D (private but regulated).

How does charitable giving reduce IRMAA? Charitable deductions reduce AGI. A $30K DAF contribution at age 63 can drop MAGI by $30K, potentially dropping an IRMAA tier at age 65. QCDs from IRAs after 70½ also reduce MAGI without even requiring itemization. Appreciated stock to a DAF is often the cleanest mechanism under IRC §170(b)(1)(C)(ii) at the 30% AGI limit.