Prepare for the Rising Cost of Medicare

Nearly everyone enrolled in Medicare pays a monthly premium for Part B coverage, which helps pay the expense of doctor visits, lab tests, and other care that occurs outside of the hospital. (Hospitalization is covered under Part A, and typically no one pays a premium for that coverage.)

Part B just got a lot more expensive for 2026.

The standard monthly premium for Part B coverage in 2026 will be $202.90 per person. That is a steep 9.7% more than the cost for 2025.

Even if you have yet to enroll in Medicare, I need you to listen up. Part B is a significant expense you need to work into your financial planning for retirement.

The Part B premium is adjusted every year to reflect the cost of the program. In the past decade, the standard monthly charge for Part B has increased by nearly 53%. I think it’s smart to assume the price increases will continue. If the next decade looks anything like the past 10 years, the Part B premium could be more than $300 a month per person in 2036.

Clearly, that’s a retirement expense you need to plan for. And everything I just explained is the baseline cost. The $202.90 premium is actually the lowest possible monthly premium you will pay in 2026. It could be even higher, based on your income.

The standard premium of $202.90 for 2026 is for individuals with modified adjusted gross income (MAGI) below $109,000, or a spouse whose joint tax return reports modified adjusted gross income below $218,000.

If your income is above those levels, your monthly Part B premium will be even higher.

In 2026, an individual with MAGI between $109,000 and $137,000, or a spouse who files a joint tax return with income between $218,000 and $274,000, will have a monthly premium of $284.  The premium is even higher for incomes above those levels.

MAGI 101

Clearly, a smart strategy is to try to keep your MAGI as low as possible.

MAGI for Medicare is your regular adjusted gross income (line 11 of your federal 1040 tax return) plus any income you receive from municipal bonds.

And remember: Any withdrawals from a traditional IRA or 401(k) are treated as regular taxable income that shows up in your AGI/MAGI. And a portion of your Social Security benefit, if you are collecting, is also included in MAGI. Importantly, any Roth conversions you make will also raise your MAGI: every dollar you convert from a Traditional 401(k) or Traditional IRA will be counted as taxable income for that year.

So you can see, if you do a big Roth conversion, or just make a large withdrawal from your traditional retirement plans, you likely could find yourself paying a higher Part B premium.

And it’s even trickier: The Medicare system looks at your tax return from two years ago to set your current-year Part B premium. So, for 2026, your MAGI reported on your 2024 federal tax return determines your premium.

Can you see the potential problem here? Say you wait until age 63 to do a Roth conversion because the timing feels right. Well, my friend, two years later, when you are 65 and ready to enroll in Medicare, if that conversion two years ago was large, chances are you will be charged a higher Part B premium when you enroll at age 65.

This is why thinking about Medicare long before you turn 65 is so important. If you think you may want to convert Traditional 401(k) and IRA savings into Roth accounts, you may want to consider taking care of this before you turn 63. This is where a trusted tax pro is so valuable.

A Potential Break

Okay now, I also want you to know that even if you have a lot of MAGI at age 63, you may be able to qualify for a lower Medicare premium at age 65.

If, at age 65, when you enroll in Medicare, your current income is much lower than it was two years earlier, due to a “life-changing event,” you can appeal to have your Part B premium reflect your current income. That is, you can ask that your premium be based on your current income, not your higher income from two years earlier.

Life-changing events include retirement (you no longer have high wages), divorce, or being widowed. Those are one-time events that are a basis for appealing a higher Medicare Part B premium.

But you can’t appeal based on one-time spikes in income that were because of an investment choice you made, such as a big MAGI two years ago triggered by a Roth conversion, or large capital gain, or a big dividend haul. All of those income sources will be counted.