Medicare is a critical part of retirement planning, but it can feel confusing at first. In this guide, we’ll break it down in simple terms — including Medicare Parts A, B, and D, how your income affects premiums, and how to prepare.
What Are the 4 Parts of Medicare?
Medicare is made up of four key parts, but most retirees only use the first three:
Part A – Hospital Insurance (Usually Free)
- Covers inpatient care, skilled nursing, hospice, and some home health care.
- Free if you or your spouse paid Medicare taxes for at least 10 years.
Part B – Medical Insurance
- Covers doctor visits, outpatient care, preventive services, and some home health.
- Monthly premium is income-based (starts at $174.70/month in 2025).
Part D – Prescription Drug Coverage
- Helps pay for prescription medications.
- Premiums vary by plan and income, with possible IRMAA surcharge.
Part C – Medicare Advantage
- Alternative to Original Medicare, combining A, B, and sometimes D.
- Offered by private insurance companies.
How Does Income Affect Your Medicare Premium?
Medicare premiums for Parts B and D are tied to your Modified Adjusted Gross Income (MAGI) from two years prior.
What Counts Toward MAGI?
- Adjusted Gross Income (AGI) + Tax-Exempt Interest
- Includes income from:
- Social Security
- Pensions
- IRA/401(k) withdrawals
- Dividends and capital gains
- Rental and business income
2025 Medicare Income Thresholds (Single Filers)
| MAGI | Part B Monthly Premium | IRMAA for Part D |
|---|---|---|
| Under $103,000 | $174.70 | Plan Premium Only |
| $103,000–$129,000 | $244.60 | +$12.90 |
| $129,000–$161,000 | $349.40 | +$33.30 |
| $161,000–$193,000 | $454.20 | +$53.80 |
| $193,000–$500,000 | $559.00 | +$74.20 |
| Over $500,000 | $594.00 | +$81.00 |
Joint filers’ limits are double.
Planning Tip: Retiree Income Can Trigger Higher Premiums
If you withdraw large amounts from retirement accounts (IRAs, 401(k)s), you may unintentionally increase your Medicare Premiums. Roth conversions can dramatically alter your medicare cost. This is why tax-efficient withdrawal strategies and a plan customized to your specific filing are essential.
Quick Summary: Medicare Made Simple
- Part A is free for most.
- Part B and D have income-based premiums.
- Your retirement income affects what you pay.
- Planning ahead can reduce costs and avoid surprises.
Need Help Navigating Medicare and Retirement Income?
At Decima Wealth Consulting, we help retirees coordinate their income and Medicare costs with smart, tax-aware planning. Our goal is simple: help you keep more of your money and enjoy your retirement with confidence.
