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How to Get Your Medicare Premiums Reduced After You Retire and Avoid Expensive Surprises

High-income beneficiaries could see premiums increase by hundreds of dollars

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If you’re single and your modified adjusted gross income is more than $91,000, or more than $182,000 if you’re married and filing jointly, then your monthly Part B premiums may be $238.10 to $578.30 per person, depending on your income. You may also have to pay an extra $12.40 to $77.90 per month if you have Medicare Part D prescription-drug coverage. The Centers for Medicare & Medicaid services estimates that 7 percent of Medicare beneficiaries will have to pay the high-income surcharge in 2022, and they’ll receive a notice of the higher premiums in the next few weeks.

You may be surprised to receive this notice if your income is lower now. That’s because the Parts B and D premiums are generally based on your last income-tax return on file (in most cases that means 2022 premiums are based on 2020 income). But if your income dropped since then because of certain life-changing events, you may be able to have the surcharge reduced or eliminated. But you need to submit paperwork to have the premiums reconsidered and provide evidence of the eligible change.

Life-changing events

The IRMAA (income-related monthly adjustment amount) is based on your adjusted gross income plus tax-exempt interest income. If your income has decreased since you filed your last tax return, you can ask the Social Security Administration to recalculate your premiums based on a more recent tax year — but only if your income dropped because of an eligible life-changing event, such as retirement or job loss, divorce, marriage or death of a spouse. “If your financial situation has changed because you lost your job or retired, appeal the IRMAA,” says Tatiana Fassieux, education and training specialist at California Health Advocates.

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Work reduction is also an eligible life-changing event, so you may be able to contest the surcharge if your hours were reduced because of COVID, says Diane Omdahl, president of 65 Incorporated in Mequon, Wisconsin, which helps people who have Medicare sign-up issues.

To request the change, file Form SSA-44 with the date of the life-changing event and a copy of your more recent tax return (or you can estimate your annual income and send the return when you file it). You also need to provide evidence of the life-changing event, such as a letter from your former employer stating that you retired, or a death certificate, divorce decree or marriage certificate. If you can’t get a letter from your employer, you can provide a signed statement, under penalty of perjury, that you partially or fully stopped working or accepted a job with reduced compensation. See the list of eligible evidence with the instructions for Form SSA-44.

You can usually mail the forms or submit them in person at your local Social Security office (you can’t submit them online). Although Social Security offices have been closed because of the pandemic, Omdahl recommends sending the paperwork through Federal Express or UPS, so you have a tracking number and know when it arrived. As local offices start to open up, Casey Schwarz, senior counsel for education and policy at the Medicare Rights Center, recommends calling Social Security (800-772-1213) or your local office to ask for the best way to submit your forms. See the Social Security office locator for contact information.

Contesting the surcharge

Sandy Leith, director of the Senior Health Insurance Program at the Illinois Department on Aging, says the agency's SHIP counselors report an uptick in people who are asking about contesting the high-income surcharge because they lost their jobs or retired. She says that the procedure for filling out SSA-44 and submitting the evidence usually isn’t complicated, but it can take a few weeks for the request to be processed. You usually need to keep paying the extra premiums while you wait. If the change is approved and the surcharge is eliminated or reduced, you’ll receive a refund of the extra premiums you paid.

“Keep your documentation and notes,” advises Omdahl, who accumulated a file two inches thick with paperwork after her husband signed up for Medicare several years ago. Since he had retired midyear, the couple needed to submit the documents to get the IRMAA reduced twice — for the year he retired and then again the following year.

You can get help from your State Health Insurance Assistance Program or more information from the Medicare Rights Center's Medicare Interactive Guide. The Social Security Administration’s “Premiums: Rules for Higher-Income Beneficiaries” also includes more information about the surcharge and instructions for reporting a life-changing event.

How to avoid the Medicare surcharge in the future

You can contest the high-income surcharge only if you’ve experienced an eligible life-changing event. But what if your income was unusually high for a year and then dropped for other reasons? Although you won’t be able to get your premiums reduced, you may have to pay the surcharge for only one year.

The surcharge is recalculated annually, so your premiums will go down if your income drops. If you earned a lot of money in 2020 (from, say, a big stock sale, bonus at work or taxable home-sale profits), you may be subject to the high-income surcharge for 2022, but then your 2023 premiums will be reduced if your 2021 income is lower. Converting money from a traditional IRA to a Roth IRA can also bump up your income for the year.

It can pay to be careful with year-end financial moves that could cause your premiums to rise in the future, such as converting a substantial amount of money from a traditional IRA to a Roth or selling investments for a large profit.

Omdahl has seen people who didn’t know about the income-related premiums have to pay the surcharge after earning just a few thousand dollars over the cutoff. A single filer whose modified adjusted gross income was even just slightly over $91,000 in 2020 will have to pay an extra $68 per month for Part B in 2022, plus $12.40 per month extra for Part D if they didn’t experience an eligible life-changing event. Each spouse has to pay the surcharge for married couples filing jointly with 2020 income above $182,000. But if you plan in advance, you may be able to avoid the surcharge. “I worked with a woman who was familiar with it, and she went $1,500 under the cutoff because she planned,” she says. The income levels can rise for inflation each year, but keeping your income below the current cutoffs can help.

Kimberly Lankford, a longtime columnist at Kiplinger's Personal Finance, is the author of Rescue Your Financial Life.

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