Medicare Costs for High-Income Retirees in 2025: What You Need to Know  

Medicare remains a foundational part of retirement healthcare planning, but the cost of coverage is not one-size-fits-all. For high-income retirees, premiums may be significantly higher due to income-related monthly adjustment amounts, or IRMAA. In 2025, understanding how Medicare premiums are calculated—and how your past income influences current costs—can help you better manage out-of-pocket expenses and make informed financial decisions. 

How Medicare Costs Are Determined 

Each year, the Centers for Medicare & Medicaid Services (CMS) sets the standard premiums for Medicare Part B and Part D. According to the official CMS 2025 fact sheet, retirees should understand both the baseline costs and the potential for income-based surcharges. 

Part B Premium 

The standard monthly premium for Medicare Part B in 2025 is $185. This amount covers outpatient services such as doctor visits, lab work, and preventive screenings. While most Medicare enrollees pay this base rate, individuals with higher incomes may be subject to an IRMAA surcharge that raises their Part B premium significantly—potentially up to $560 per month depending on income tier. 

Part D Premium 

Medicare Part D covers prescription drugs. Each plan sets its own base premium, but high-income retirees may pay an additional surcharge on top of that base. Like Part B, this surcharge is based on your modified adjusted gross income (MAGI) from two years prior—in this case, your 2023 tax return. You can read more about how IRMAA applies to Part D here. 

What Is IRMAA and Who Pays It? 

The income-related monthly adjustment amount (IRMAA) is a surcharge added to Medicare premiums for individuals and couples whose income exceeds certain levels. In 2025, IRMAA applies to: 

• Individuals with MAGI above $103,000 

• Married couples filing jointly with MAGI above $206,000 

These surcharges are designed so that higher-income retirees contribute more toward the cost of the program. For both Part B and Part D, higher income equals higher monthly premiums. 

Why 2023 Income Affects 2025 Premiums 

IRMAA is calculated using tax returns from two years earlier. That means income reported in 2023 (such as capital gains, Roth conversions, or retirement distributions) directly affects your Medicare premiums in 2025. Even a one-time income event could push you into a higher IRMAA bracket for the year. 

If you’re unsure why your premiums are higher than expected, this two-year look-back rule is likely the reason. 

Other Medicare Costs to Consider 

In addition to premiums and surcharges, retirees should plan for out-of-pocket expenses: 

• Deductibles and coinsurance for hospital and outpatient care 

• Copayments for medications and routine visits 

• Part D plan changes such as formularies and tiered drug pricing 

• Long-term care costs, which Medicare doesn’t fully cover 

If you’re preparing for retirement, consider reading our full guide on healthcare and long-term care in retirement. 

Planning Strategies for Managing Medicare Costs 

Here are several strategies high-income retirees can use to reduce or manage Medicare-related expenses: 

• Time Roth conversions carefully: A single large conversion can trigger IRMAA. Learn how Roth conversion ladders may help smooth income over multiple years. 

• Consider qualified charitable distributions (QCDs): If you’re 70½ or older, QCDs reduce your taxable income and satisfy RMDs without increasing your AGI. 

• Plan your withdrawal strategy: Coordinating distributions from taxable, tax-deferred, and Roth accounts can help keep MAGI under IRMAA thresholds. 

• Coordinate Medicare with your tax and estate plan: Medicare premiums affect (and are affected by) your broader financial picture. 

Mistakes That Raise Medicare Costs 

Watch out for common missteps: 

• Not reviewing your income before year-end 

• Overlooking changes in prescription drug plans during open enrollment 

• Ignoring how capital gains or RMDs affect AGI 

These factors can all push you into a higher IRMAA tier, often without you realizing it until it’s too late. 

Looking Ahead: Why Planning Matters 

While 2025 gives us a snapshot of current costs, future Medicare adjustments are likely. Premiums and thresholds often change each year, and rising healthcare costs can make these shifts more impactful over time. Regularly reviewing your financial plan, healthcare coverage, and income levels is one of the best ways to prepare for the years ahead. 

Conclusion 

Medicare costs in 2025 extend far beyond standard premiums. For high-income retirees, IRMAA surcharges, out-of-pocket expenses, and long-term care considerations can all add complexity. Because premiums are tied to income from two years prior, decisions made in 2023 may already be influencing your costs today. 

Taking a proactive approach by reviewing income sources, timing conversions, and coordinating tax strategies can help you reduce unnecessary surcharges and prepare for future healthcare expenses with more confidence. 

If you’re ready to take a closer look at your Medicare outlook, download our Medicare Planning Essentials for 2025 guide or connect with our team at Liberty Group to schedule a personalized review. 

Standard Disclosure  

This blog expresses the author’s views as of the date indicated, are subject to change without notice, and may not be updated.  The information contained within is believed to be from reliable sources.  However, its accurateness, completeness, and the opinions based thereon by the author are not guaranteed – no responsibility is assumed for omissions or errors.  This blog aims to expose you to ideas and financial vehicles that may help you work towards your financial goals. No promises or guarantees are made that you will accomplish such goals.   

Past performance is no guarantee of future results, and any expected returns or hypothetical projections may not reflect actual future performance or outcomes. All investments involve risk and may lose money. Nothing in this document should be construed as investment, tax, financial, accounting, or legal advice. Each prospective investor must evaluate and investigate any investments considered or any investment strategies or recommendations described herein (including the risks and merits thereof), seek professional advice for their particular circumstances, and inform themselves about the tax or other consequences of any investments or services considered.    

Investment advisory services are offered through Liberty Wealth Management, LLC (“LWM”), DBA Liberty Group, an SEC-registered investment adviser.  For additional information on LWM or its investment professionals, please visit www.adviserinfo.sec.gov  or contact us directly at 411 30^th Street, 2^nd Floor, Oakland, CA  94609, T: 510-658-1880, F: 510-658-1886,  www.libertygroupllc.com. Registration with the U.S. Securities and Exchange Commission or any state securities authority does not imply a certain level of skill or training.  

References  

Ashford, Kate. (January 17, 2025). IRMAA Brackets 2025: What They Are and How They Work. NerdWallet. https://www.nerdwallet.com/article/insurance/medicare/what-is-the-medicare-irmaa  

Centers for Medicare & Medicaid Services. (November 8, 2024). 2025 Medicare Parts A & B Premiums and Deductibles. https://www.cms.gov/newsroom/fact-sheets/2025-medicare-parts-b-premiums-and-deductibles