Will You Lose Some of Your Social Security Due to Medicare Premiums?

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updated December 2025

Are You at Risk in 2026? What’s Changed Since 2023 – and Why Most Retirees are Getting Caught Off Guard

Social Security and Medicare often feel like separate systems. One sends money in. The other handles healthcare. In practice, however, they are tightly connected – and that connection becomes more noticeable every year.

By 2026, rising Medicare premiums, income-based surcharges, and slower benefit growth are reshaping how much retirees actually keep each month. While benefits still increase on paper, the net amount deposited into checking accounts frequently tells a different story.

Understanding how this evolved from 20023 through 2026 – and why so many people misunderstand the rules – is essential for anyone planning retirement income today.

In this recent episode of Dollars & Sense, Joel Garris and Rob Field unpack how Medicare premiums, income-based adjustments, and enrollment rules are affecting Social Security benefits today — and why these issues are becoming more impactful for retirees than they were just a few years ago.

How Medicare Premiums Reduce Social Security Payments

For most retirees, Medicare Part B premiums are deducted automatically from Social Security benefits. No invoice arrives in the mail. No monthly payment reminder appears. The reduction happens quietly before the deposit ever reaches your account.

That automatic process creates confusion. Many people assume Medicare operates independently, only realizing the connection once their Social Security payment comes in lower than expected. As discussed frequently on our podcast Dollars & Sense, both programs operate through the same federal system, which is why premiums come directly out of benefits.

The design simplifies administration but masks the real cost of healthcare inside what retirees view as guaranteed income.

In this earlier episode of Dollars & Sense, Joel Garris and Rob Field break down how Medicare premiums connect directly to Social Security, why retirees are often surprised by deductions, and where common misconceptions begin. While the numbers have changed since this conversation, the foundational concepts remain essential.

Medicare is Not Free – and Never Really Was

One of the most persistent myths surrounding Medicare is the idea that coverage becomes free at age sixty-five. That belief usually comes from Medicare Part A, which covers hospital care and does not require a monthly premium for people who paid Medicare payroll taxes for at least ten years.

Other parts of Medicare function very differently.

“One of the biggest misconceptions we run into is that Medicare is free. Part A might not have a premium, but once you start layering in Part B, prescription coverage, and supplements, the costs add up faster than most people expect.”

Part B covers doctors and outpatient services and includes a monthly premium. Part D addresses prescription drugs with additional costs. Supplemental policies and Medicare Advantage plans add further expenses. Dental, vision, and hearing coverage are often separate altogether.

As Rob Field explains in the podcast, traditional Medicare also follows an eighty-twenty cost-sharing structure. That arrangement frequently leads retirees to purchase additional coverage to limit exposure. When all layers are combined, monthly Medicare-related expenses can approach five hundred dollars per person.

For couples, healthcare costs alone can near four figures before factoring in deductibles or out-of-pocket spending.

How This Looked in 2023 – and Why Fewer People Panicked Then

Back in 2023, Medicare premiums were lower, cost-of-living adjustments were stronger, and many retirees felt the system remained manageable. Part B premiums sat under one hundred seventy dollars per month, and income-related surcharges affected a narrower segment of households.

Confusion still existed. People misunderstood enrollment deadlines, underestimated healthcare expenses, and assumed Medicare operated independently from Social Security. The financial impact, however, felt muted compared to what retirees experience today.

As premiums climbed year after year, that margin of comfort quietly disappeared. What once felt like a modest deduction now represents a meaningful reduction in monthly cash flow.

That gradual shift explains why Medicare felt manageable in earlier years and why it commands far more attention in 2026.

Medicare Part B Premiums: 2023 Through 2026

Premium increases have not occurred evenly. Instead, costs accelerated over a short window.

• 2023: $164.90 per month
• 2024: $174.70 per month
• 2025: $185.00 per month
• 2026: $202.90 per month

In just three years, monthly premiums rose by nearly forty dollars. Over twelve months, that change redirects hundreds of dollars away from Social Security benefits.

Social Security COLA vs. Medicare Costs

Social Security cost-of-living adjustments reflect broad inflation, not healthcare-specific price increases. Medicare expenses often rise faster.

For 2026, the Social Security Administration announced a 2.8% COLA, translating to roughly fifty to sixty dollars per month for the average retiree. Medicare Part B premiums increased by $17.90 per month during the same period.

After premiums are deducted, a meaningful portion of the COLA disappears immediately. What remains rarely feels like a raise.

The Hold Harmless Rule – Helpful, but Limited

Some retirees receive protection under the “hold harmless” provision, which prevents Medicare premiums from rising faster than Social Security benefits.

That safeguard only applies when:

• Part B premiums are deducted directly from Social Security
• The beneficiary is not subject to income-related adjustments

Anyone paying premiums directly or impacted by IRMAA does not receive this protection.

IRMAA: Why Higher Income Means Higher Medicare Premiums

Income-Related Monthly Adjustment Amounts, commonly referred to as IRMAA, increase Medicare premiums when income exceeds certain thresholds. These adjustments apply to both Part B and Part D.

“What throws people for a loop is that Medicare isn’t looking at what you make today. They’re looking at what you made two years ago, which is why retirees are often shocked by higher premiums right after they stop working.”

What frustrates retirees most is timing. Medicare looks back two years when determining premiums. For 2026, income from 2024 tax returns determines whether surcharges apply.

That timing catches many people by surprise. Someone who recently retired may see higher premiums even though current income dropped significantly. Roth conversions, required minimum distributions, capital gains, and one-time income events often trigger adjustments unintentionally.

Appealing IRMAA After Retirement

IRMAA often feels automatic, but it is not always final. Retirees who experience qualifying life events — including retirement — may appeal using Form SSA-44.

As discussed on Dollars & Sense, appeals have become more successful in recent years. Filing does not guarantee relief, yet the process is often worthwhile when income circumstances change meaningfully.

“We’ve actually seen more success lately with IRMAA appeals than we did several years ago. It doesn’t always work, but it’s absolutely worth filing when retirement changes your income picture.”

Medicare Enrollment Timing Adds Another Layer of Risk

Unlike Social Security, Medicare enrollment follows strict deadlines. Missing them can result in penalties that last for life.

“With Social Security, you can delay and there’s no penalty. Medicare doesn’t work that way. Miss a deadline and you could be paying more for the rest of your life.”

The initial enrollment period spans seven months, beginning three months before a sixty-fifth birthday. Delaying enrollment without qualifying coverage can permanently increase premiums.

That rigidity explains why Medicare planning deserves as much attention as Social Security claiming strategies.

Why This Matters More in 2026 Than It Did in 2023

Several years ago, premium increases felt manageable. Cost-of-living adjustments were larger. Income planning offered more flexibility. Healthcare inflation felt less aggressive.

By 2026, the environment looks very different. Medicare costs rise faster. IRMAA impacts a broader range of retirees. Required distributions push taxable income higher whether cash is needed or not.

Without coordinated planning, Medicare quietly consumes a growing share of retirement income.

Smart Retirement Planning Starts Before Medicare Begins

Effective planning now requires viewing Medicare, Social Security, taxes, and income as one system rather than separate decisions.

Thoughtful strategies may include:

• Coordinating Social Security timing with Medicare enrollment
• Managing taxable income years before age sixty-five
• Planning Roth conversions around IRMAA thresholds
• Reviewing Medicare costs annually rather than once

Nelson Financial Planning helps clients connect these moving parts so surprises become informed decisions rather than frustrations.

Frequently Asked Questions

Does Medicare actually reduce Social Security benefits?
Technically, benefits are not reduced. Medicare premiums are deducted from Social Security payments, which lowers the net amount received each month.

Why do Medicare premiums keep rising faster than Social Security?
Medicare costs track healthcare inflation, while Social Security COLAs reflect broader economic inflation. Those measures often move at different speeds.

What is IRMAA and who does it affect?
IRMAA is an income-based surcharge applied to higher-earning retirees. It impacts Part B and Part D premiums and is based on income from two years prior.

Can IRMAA be appealed?
Yes. Qualifying life events such as retirement may allow an appeal using Form SSA-44. Outcomes vary, but success rates have improved.

Is Medicare enrollment optional at age sixty-five?
Enrollment rules depend on employment status and coverage. Missing deadlines without qualifying coverage can result in lifelong penalties.

Final Thought

Social Security benefits are still increasing. Medicare premiums, however, are rising faster — and that difference matters far more in 2026 than it did just a few years ago.

Understanding how the rules changed from 2023 through today allows retirees to plan with clarity rather than react with frustration. When Medicare and Social Security are coordinated intentionally, retirement income becomes more predictable and far less stressful.

Schedule your complimentary consultation with one of our financial planners today!

Your retirement deserves more than guesswork. It deserves a strategy.
Get a free copy of our book and workbook Next Gen Dollars & Sense

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2023 Medicare and Social Security

Your 2023 Social Security COLA Notice

When you opened your letter from Social Security, the first thing you may have noticed was the impressive cost-of-living adjustment (COLA). The 8.7% increase was the largest we’ve seen in over 40 years. COLAs have been lagging significantly for decades, but at least you got your 8.7% Social Security increase this year.

Or did you? For about one in 10 Americans, IRMAA came through and blew out some of that increase.

The Medicare income-related monthly adjustment amount—otherwise known as means testing—is what you pay on top of your Medicare premium if your income is above a certain level. IRMAA was enacted in 2007 on Part B, and Part D joined it in 2011.

The means test is a cliff determination, not a sliding scale, so if you go $1 over the threshold, you have to pay the extra amount on your Medicare premium. Surcharges trigger at five different income tiers.

The incomes listed here include one-time transactions, such as selling a property or earning inheritance money. The IRS doesn’t care whether your earnings spiked on your 2021 tax return because of a one-time transaction—if you tripped the threshold, you have to pay more for Medicare this year.

7 Ways to Challenge IRMAA

Fortunately, there are ways to challenge the IRS’s determination. Here are the seven arguments you can bring up if they occurred since filing your 2021 taxes:

• You got married.
• You got divorced.
• You became a widow.
• You retired.
• You lost income from an income-producing property due to a natural disaster.
• You experienced a termination or reorganization of an employer pension plan.
• You received a settlement from your employer following a business closure or bankruptcy.

To support one or more of these claims, you must file Form SSA-44 explaining that you had a major life-changing event that caused your income to go down. Therefore, you’re requesting a reduction in your income-related monthly adjustment amount. There’s no need to wait until filing your 2022 tax return to submit your appeal.

Tax Changes on 1099-K Reporting

One of the biggest changes for the 2023 tax year involves 1099-K reporting. These changes were originally expected to impact 2022 but thankfully the IRS delayed these changes for one year. Under the change, third-party vendors such as Venmo, Cash App, and PayPal must now report payments of over $600 received for goods and services rendered. This automatically generates a Form 1099-K, which would arrive in the mail by January 31 of the following year.

Under the old rule, vendors only had to report transactions to the IRS if a user had over 200 transactions and sold over $20,000 worth of goods and services. This is a hugely significant change affecting a lot of people. Indeed, the IRS estimates it will generate an extra $8.4 billion in tax revenue.

The new 1099-K reporting requirements have caught many people off-guard, but it was actually announced as part of the American Rescue Plan of 2021, so it’s been a work in progress for some time now. In fact, the IRS has been trying to collect on unreported third-party transactions for years.

This is the first major attempt to stop people from excluding income on their tax returns simply because it’s not reported on a tax form. Independent contractors are one example. These workers don’t get a W-2 because they’re not formal employees. Instead, they may be paid inconsistently or in small amounts by different vendors. The IRS is trying to stop these people from not reporting taxable income.

The whole concept of collecting tax revenue from people who don’t pay their taxes was originally sold as something that would stop the rich from cheating on their returns. But in reality, the people most often getting paid through Venmo are not upper-income earners—they’re babysitters, cleaning ladies, handymen, and small business owners.

3 Takeaways From the New 1099-K Reporting Requirements

Transactions Between Friends and Family Are Non-taxable

Still, you could receive a 1099-K by mistake if you receive over $600 worth of split payments, reimbursements, and gifts. To dispute this, the IRS says to go directly to the payment platform and ask them to correct it. The burden of proof is on the taxpayer, so be sure to label transactions with their purpose as they occur.

If worse comes to worst, you should report the income from your 1099-K on your tax return and offset it, attaching a statement explaining why. This way, if the IRS manually compares your return to their records, the income will line up, and you’ll avoid getting in trouble.

Reselling Concert Tickets, Used Furniture, and Other Items Online Will Trigger a 1099-K if You Pass the $600 Threshold

You’ll have to report this income, but you’ll only be taxed on the capital gain (the payment you received minus any vendor or processing fees minus what you originally paid for the item). If you sell at a loss, you can’t use the loss to offset other transactional gains.

Be Careful as a Business Owner Using Third-Party Vendors

Keep detailed records and compare them to your 1099-Ks to avoid accidentally double-counting your income.

Get More Help From Nelson Financial Planning

If you’re concerned about rising Medicare premiums or changes to 1099-K reporting, turn to Nelson Financial Planning for personalized advice. Our Certified Financial fiduciaries can help you change your life with a successful financial plan that provides peace of mind for the future.

Contact us online or call our Winter Park, FL, office at 407-307-3061 to get started.

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