Retirement’s Haunted House: IRMAA, the Monster Behind the Door

Retirement is often imagined as a peaceful life transition.  Activities like traveling, trying out hobbies, and spending time with loved ones replace traditional workflows.  But for many retirees, their finances can feel like a new and scary workflow – like wandering through a haunted house.  Each door (decision) might reveal a surprise effect.  One of the most unsettling surprises?  The IRMAA monster (just kidding… sort of).

IRMAA, or Income-Related Monthly Adjustment Amount, is a surcharge added to Medicare premiums when your income crosses certain thresholds.  What might appear to be a minor jump can potentially be a significant increase in healthcare costs.  And sometimes, the smallest lifestyle adjustments can have the biggest impact.

Imagine walking through a haunted house.  You are faced with multiple doors and hallways.  You can stay where you are or navigate forward, hoping to find the exit and avoid the fright.  Among the many decisions retirees face, selling a big asset (like your home) might seem like a smart move.  But beware: that door could be hiding the IRMAA monster.  Why is that?  Capital gains from those sales could bump your income above the IRMAA threshold, which could cause your Medicare premiums to spike and your tax bill to grow.

So, What Can Retirees Do?

To avoid opening the wrong door, proactive planning is key.  As Kiplinger’s article on retirement phases explains, retirement isn’t a one-time event: it’s a series of stages, each requiring different strategies (Johnson, 2025).  Income planning is one of the most important phases, especially if you plan to make large financial decisions in the near future.

Michael Abbate, Partner and Advisor in the ATLAS Lifestyle Planning Group, states, “Retirees should consult both their financial advisor and tax professional before selling a highly appreciated asset.”  Communicating openly with both professionals ensures that tax implications are understood, and strategies are in place to mitigate negative impacts.  Waiting to communicate with your professionals until after the sale is often too late.

What if You’ve Already Opened the Door?

If you’ve made a big financial decision without your professionals holding the flashlight, don’t scream.  Work with your advisor to avoid triggering additional gains.  Income planning for the next few years can help smooth out the effects of a large capital gain and potentially reduce future IRMAA surcharges.

“The spooky part about retirement income is figuring out which door has the scary monster (IRMAA) behind it,” as Abbate cleverly says.  Whether that door leads to selling your home, converting to a Roth IRA, or taking a large distribution, the real trick is understanding the impact creeping behind that door, before you open it.

Retirement should be a time of freedom, not fear.  With thoughtful planning and the right guidance, you can avoid the haunted house of unexpected taxes and surcharges.  So, before you make a decision, pause, plan, and peek behind the door – with your tax professional and advisor lighting the way.

This article includes information gathered from Kiplinger, linked here.  Special ‘thanks’ to Michael Abbate, an ATLAS Partner who leads our Lifestyle Planning Group, for providing this topic and sources.