IRMAA for Military Retirees: How Pension Plus TSP Sets Your Premium

Read the two-year lookback rule

Most military retirees believe this year's income sets this year's premium. The Social Security Administration does not work that way. It uses the modified adjusted gross income (MAGI) from the tax return filed 2 years earlier. For Part B premiums charged in 2026, that means the MAGI reported on your 2024 tax return. This two-year lag is the single most important fact in IRMAA planning, because it gives you time to decide.

MAGI starts with your adjusted gross income and adds back any tax-exempt interest. For military retirees, it includes taxable retired pay, any second pension from a civilian employer or FERS, W-2 wages from a second career, all traditional TSP withdrawals (but not qualified Roth withdrawals) and capital gains from taxable accounts. VA disability compensation, the combat-related portion of CRSC and the portion of retired pay replaced by a VA waiver do not count.

For 2026, Medicare Part B premiums for married couples filing jointly fall into these tiers: MAGI up to $218,000 pays $202.90 each month per person; over $218,000 to $274,000 pays $284.10; over $274,000 to $342,000 pays $405.80; over $342,000 to $410,000 pays $527.50; over $410,000 to $750,000 pays $649.20; $750,000 and above pays $689.90. For single filers the lines are $109,000, $137,000, $171,000, $205,000 and $500,000.

The tiers are cliff-edged. One dollar over a line moves you to the next tier for the entire year. A married couple paying the surcharge pays it twice—once per spouse on Part B. Part D (prescription drug coverage) carries its own separate IRMAA surcharge based on the same income figures, so the total premium increase can be higher than Part B alone.

What happens if part of your income is exempt?

Many military retirees assume all military income counts toward IRMAA. This is wrong in ways that matter. VA disability compensation is tax-free and stays completely out of MAGI. So does the combat-related portion of CRSC. If your retired pay has been waived in exchange for VA disability, the waived portion does not count either. These exemptions can move a household from one tier to another.

Withdrawals from qualified Roth accounts—a Roth TSP or a Roth IRA held for 5+ years after opening—add $0 to MAGI. Every dollar withdrawn from a traditional TSP or a traditional IRA adds to your MAGI for that year. This is why a military retiree with both a traditional TSP balance and a Roth TSP balance can choose which account pays for a large expense: the choice changes whether the year pushes into a higher tier.

The Social Security Administration allows one exception to the two-year rule. If your income dropped because of a life-changing event—stopping work, marriage, divorce or a spouse's death—you can ask Social Security to use a more recent tax year on Form SSA-44. A one-time TSP withdrawal or a single stock sale does not qualify. The event has to reduce your income going forward.

Lump sum, cash now or Roth: three ways to pay for one big expense

A hypothetical household illustrates how the choice works. Ramon and Keiko retire in the year he turns 65 and she turns 63. His retired Army pay is $50,000 a year. His contractor salary in that final year is $120,000, and Keiko's salary managing a dental office is $45,000. Their MAGI that year: $215,000. They are under the $218,000 joint line. They need $10,000 for a roof.

Option 1: Take the traditional TSP withdrawal while both salaries are still running. The $10,000 withdrawal adds to MAGI, moving it from $215,000 to $225,000—over the $218,000 line. Two years later, both Ramon and Keiko are on Medicare Part B. (Keiko's military TRICARE coverage requires it after age 65.) Each premium rises from $202.90 to $284.10 per month: $81.20 more each month, $974.40 a year per person. For the couple, that is $1,948.80 in extra premiums. The withdrawal cost them nearly two years of the surcharge before income drops.

Option 2: Pay from cash now and refill the cash account with a TSP withdrawal in January, after Ramon's contractor salary ends. His final year's MAGI, with only retired pay and Keiko's salary, is roughly $95,000. Two years later, when both hit Medicare, the income that year was under any tier line. The surcharge is $0. The trade-off: they need enough cash on hand to cover the roof without the TSP, and they must be confident Ramon's contractor work is ending.

Option 3: Use qualified Roth money. Ramon or Keiko (or both) may hold a Roth TSP balance or a Roth IRA. A withdrawal of $10,000 from either account, if the account has been open for 5+ years, adds $0 to MAGI. The roof costs nothing in extra premiums. The trade-off: the Roth money has to exist and has to be available to withdraw, which means no early withdrawal penalties or pro-rata complications.

Option 1 fits a couple with MAGI that is more than $10,000 under the line—they have room to absorb a withdrawal. Option 2 fits a couple with cash reserves and a known retirement date when the lower-earning spouse's income drops out. Option 3 fits any couple holding qualified Roth dollars. Savant Wealth Management asks clients which option fits their situation before they request a withdrawal.

An IRMAA calendar for the year

December 31 is the only day in the year that actually moves your MAGI. Every other date only reports or bills it. Understanding the calendar helps a military retiree take action at the right moment without scrambling at the last minute. Savant Wealth Management walks clients through the year in this order:

• October: estimate this year's MAGI from pay stubs and the myPay retiree account statement; compare the total with the next tier line.
• Early December: request any traditional TSP withdrawal you are planning to take; ask whether the payment will post to this year's 1099-R or next year's.
• December 31: the income year closes; no withdrawal made after today will count on this year's return.
• January 31: 1099-R forms arrive from the TSP or custodian; check the withdrawal amounts match your request.
• April 15: file your tax return; this return will set Part B premiums 2 years later.
• Fall of the next year, roughly 2 years later: Social Security mails the IRMAA letter; if a major life change applies (death, divorce, job loss), file Form SSA-44 within 60 days.

Run a quick test before you bother

If your estimated MAGI for the year is more than $10,000 under the next tier line, IRMAA planning probably is not worth your time. The difference between the two tiers is usually $82 to $124 per month per person—not small, but not worth restructuring a withdrawal either. If your MAGI lands within $10,000 of a line, or just over one, the choice of funding source is worth thinking through. This is the zone where Savant Wealth Management's advice changes what a couple pays.

Talk it through at the kitchen table

The spouse who reads the Social Security statement usually spots the higher premium first, because it is deducted from the benefit. One conversation matters: agree that neither of you requests a TSP withdrawal or sells a concentrated position in your taxable account in October or November without first checking that year's estimated MAGI together. A $10,000 decision made alone in December can cost $1,500 to $2,000 a year for both of you.

Your question for Savant Wealth Management

Bring this question when you are within 5 years of either spouse turning 65. Which tax return will set our Part B premium when the younger spouse reaches 65, and how close to a tier line is that income year likely to be? Bring your last two tax returns, your current TSP statement and your IRA statements. The firm will map out the income years ahead and help you decide whether to time a large withdrawal or use a different funding source.