Tax Time Bomb 5: Medicare Premiums Artwork

Divorce the IRS

Welcome to Divorce the IRS, the Retirement Income Planning Podcast—built for people who want to pay the least amount of taxes possible and create retirement income that actually lasts. Inspired by Jimmy Miller’s bestselling book Divorce, the IRS, this show takes you behind the scenes of the tax rules, retirement strategies, and planning decisions that can quietly determine how much of your money you keep.

The truth is, taxes aren’t just “something you deal with later.” The U.S. tax code is massive, confusing by design, and full of traps that can hit hardest right when you need your money most. From 401(k)s and IRAs to Social Security and Medicare, many common “smart moves” can turn into expensive surprises—like required minimum distributions, Medicare surcharges, the widow’s penalty, and other retirement tax time bombs most people don’t see coming until it’s too late.

With 20+ years of experience as a global wealth manager, Jimmy breaks these topics down in a clear, practical way—so you can plan proactively, avoid unnecessary taxes, and build a retirement where your delayed gratification finally pays off. Subscribe so you never miss an episode, and remember: this podcast is for general education only and isn’t legal, tax, or investment advice—always consult a qualified professional for guidance specific to your situation.

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Divorce the IRS

Tax Time Bomb 5: Medicare Premiums

March 24, 2026 • James Miller

0:00 | 5:47

In this episode of The Divorce the IRS Podcast, we continue our series on retirement tax time bombs with a surprise many people encounter around age 65—Medicare premium surcharges.

While many assume Medicare is free, the reality is far more complex. Your premiums for Medicare Part B and Part D are based on your income, and for higher earners, those costs can increase significantly. These surcharges, known as IRMAA (Income-Related Monthly Adjustment Amount), can quietly add thousands of dollars in additional expenses throughout retirement.

We break down how Medicare works, including the different parts, what you can expect to pay, and the costly penalties that can apply if you delay enrollment. We also explain how income from two years prior determines your current premiums—and why many retirees are caught off guard.

Most importantly, we explore strategies that may help reduce or avoid these higher premiums. By understanding how different income sources are treated, including tax-deferred and tax-free withdrawals, you can begin to make more informed decisions about how to structure your retirement income.

If you want to avoid unnecessary surprises and keep more of your money working for you in retirement, this is an episode you won’t want to miss.

SPEAKER_00 0:01

Welcome to the Divorce the IRS Podcast, the retirement income planning podcast designed specifically for those who want to pay the least amount of taxes possible and build a retirement income that lasts. Inspired by the best-selling book, Divorce the IRS, you get to go behind the scenes with financial planner, author, and speaker Jimmy Miller. Learn how to set yourself up to pay the least amount of taxes in retirement when you'll need your money the most. And now, here's your host, Jimmy Miller.

SPEAKER_01 0:27

Welcome. Welcome to episode 14 of the Divorce the IRS podcast. For some people, the tax time bombs just keep going off. Today we're going to discuss the fifth tax time bomb that usually surprises people right around the age of 65, when they had to sign up for Medicare, because Medicare premium surcharges are another tax people don't think about until they have to pay it. Healthcare and retirement is widely misunderstood. The nationwide retirement institute's fourth annual health care and long-term care survey found that about 72% of American adults over age 50 admit they don't fully understand how Medicare works, and more than half believe that the coverage is free. Well, I'm here to tell you that Medicare is far from free, and that premiums increase with income, a lot like Social Security tax. At certain income thresholds, you'll have to pay higher Medicare Part B and Part D premiums. Let's take a quick look at how Medicare and Medicare premiums work. First, it's important to understand that Medicare is made up of different parts. The first part, called Part A, is completely free if you have paid enough into the system to qualify for it. This is the part of Medicare that pays for inpatient hospital stays. It's important to make sure that you sign up for Part A when you turn 65 years old and become eligible for it. The next two parts, Part B and Part D, are not free and you have to pay for them. Part B is your for your regular doctor visits. The lowest cost for Part B in 2026 is$202.90 per person per month. And depending on your income, the cost can go up from there. For most people, this premium is automatically withheld from their Social Security benefits. But if you're 65 or older and haven't started your Social Security benefits yet, Medicare will send you a quarterly bill for your premiums. Part D is for prescription drug coverage. The cost for this will also rise with your income. Now it's important to know that if you don't sign up for Part B once you're eligible at age 65 and you don't have coverage still from an employer plan because you're still working, there is a 10% lifetime penalty added to your premiums for each year that you don't enroll. So if you wait till you're 70 to enroll, you'll pay an extra 50% penalty increase on your premium for the rest of your life. For part D, if you don't sign up at age 65, the penalty is 1% higher premiums for life for each month that you're not signed up. So if you waited until you were 70 to sign up for part D, you would be looking at a 60% penalty tacked on to your regular premiums for the rest of your life. It's very important to understand how this all works and make sure that you sign up once you become eligible. Now, the next thing to understand is that this tax or extra premium is based on your income from two years ago. So if you're single in 2026 and your modified adjusted gross income in 2024 exceeded$109,000, or you're married and your combined income exceeded$218,000, you will have to pay increased premiums. The first bracket increase is an extra 40% in premiums per person per month, which means you would jump from paying the$202.90 a month up to$284.10 a month, and it keeps going up from there. The higher your income, the more you get to pay. You pay the top premiums once your individual income is over$500,000 or$750,000 for couples. This top bracket is a 240% increase from the base premium per person per month. So what's the secret to avoiding this escalating tax or penalty? Well, you can be poor or you can utilize tax-free strategies early in your retirement planning that don't produce taxable income. You see, tax-free withdrawals from Roth accounts do not count towards these thresholds, and you can withdraw as much money as you'd like from your tax-free bucket without worrying about taxes on the withdrawals or triggering Social Security tax, and now the extra taxes on your Medicare premiums. If you don't want to pay these extra premiums in retirement and would rather use your money for something a little more fun, start planning now to avoid producing too much taxable income in retirement. This will help you divorce the IRS and keep more money for yourself. And you may need some of that money for your required minimum distributions, which is the next tax time bomb we'll discuss. Make sure to subscribe so you don't miss the next important tax time bomb you should be aware of now.

SPEAKER_00 5:10

Want even more ideas, tools, and resources on how to navigate your financial life? Check out all the resources on the Divorce the IRS website at divorce-the-IRS.com or the Bayob Wealth website at bayobwealth.com and subscribe to the blog to stay up to date on issues affecting retirement income planning. Don't forget to subscribe to the podcast so you never miss an episode. Bayobub Wealth and Bayabut Wealth Abroad are DBAs of Bayob Wealth LLC, a Florida registered investment advisor. This podcast is designed for general education purposes only and shouldn't be taken as legal investment or tax advice. You should seek out a qualified tax professional or licensed financial advisor to determine what is best for your personal situation.