Medicare Cost Calculator: Project Your Annual Expenses in Retirement
Use this guide to understand the assumptions, inputs, results, and next steps behind the calculator.
Planning for retirement expenses requires a clear-eyed view of your biggest potential cost: healthcare. For most retirees, this means understanding the complex and rising costs of Medicare. This calculator helps you project your total annual Medicare expenses, from your first day of eligibility through your life expectancy, accounting for premiums, Medigap coverage, and potential high-income surcharges.
A 65-year-old couple retiring in 2026 could face over $700,000 in lifetime healthcare costs. This tool is designed for individuals approaching Medicare eligibility (typically age 65) who want to create a realistic healthcare budget. It projects your costs for Original Medicare (Parts A & B), a Part D prescription drug plan, and a Medigap supplement, including the critical impact of the Income-Related Monthly Adjustment Amount (IRMAA). See a detailed breakdown in our guide on how much healthcare costs in retirement.
Understanding IRMAA: The High-Income Surcharge Explained
The single biggest variable in your Medicare costs is the Income-Related Monthly Adjustment Amount (IRMAA). This is an extra charge added to your Part B and Part D premiums if your income exceeds certain thresholds. The Social Security Administration determines IRMAA based on your Modified Adjusted Gross Income (MAGI) from two years prior. For example, your 2026 premiums are based on your 2024 tax return.
Understanding your projected MAGI is critical for accurate Medicare budgeting. Key sources of MAGI in retirement include:
- Withdrawals from traditional 401(k)s and IRAs
- Pension and annuity income
- Capital gains
- Wages from part-time work
- Taxable Social Security benefits
- Tax-exempt interest
Withdrawals from Roth IRAs and Roth 401(k)s do not count toward your MAGI, making them a powerful tool for managing future Medicare costs. Similarly, funds from a Health Savings Account (HSA) can be withdrawn tax-free for medical expenses without impacting MAGI.
Below are the projected 2026 IRMAA income brackets and the corresponding total monthly Part B premium you would pay. An additional surcharge for Part D also applies at each tier.
2026 Projected IRMAA Thresholds & Total Part B Premiums
| MAGI (from 2024 tax return) - Individual | MAGI (from 2024 tax return) - Joint | Total Monthly Part B Premium (Standard + Surcharge) |
|---|---|---|
| $108,181 or less | $216,363 or less | ~$194.50 |
| $108,182 - $135,231 | $216,364 - $270,463 | ~$272.20 |
| $135,232 - $168,031 | $270,464 - $336,063 | ~$389.00 |
| $168,032 - $200,831 | $336,064 - $401,663 | ~$505.70 |
| $200,832 - $499,999 | $401,664 - $749,999 | ~$622.50 |
| $500,000 or more | $750,000 or more | ~$659.30 |
As you can see, crossing an IRMAA threshold can increase your annual Part B premium by thousands of dollars. This is especially relevant for retirees who must take Required Minimum Distributions (RMDs), as these withdrawals are fully included in MAGI. Planning your retirement drawdown strategy is essential to manage or avoid these surcharges.
Original Medicare vs. Medicare Advantage: A Cost Comparison
This calculator focuses on projecting costs for "Original Medicare" (Parts A and B) combined with a Part D drug plan and a Medigap supplemental policy. The main alternative is a Medicare Advantage (Part C) plan. Understanding the fundamental cost differences is key to making the right choice for your needs.
| Factor | Original Medicare + Medigap | Medicare Advantage (Part C) |
|---|---|---|
| Monthly Premiums | Higher (Part B + Part D + Medigap). Can total $400-$600/month. | Often lower. Many plans have a $0 premium (you still pay Part B). |
| Provider Network | Nationwide access to any doctor/hospital that accepts Medicare. No referrals needed. | Restricted to a local or regional network (HMO/PPO). May require referrals. |
| Out-of-Pocket Costs | Predictable. With a good Medigap plan (like G), you have very little out-of-pocket cost. | Variable. You pay co-pays and co-insurance until you hit an annual out-of-pocket maximum. |
| Annual Out-of-Pocket Max | No limit for Original Medicare itself, but a Medigap plan covers most costs, creating a low effective cap. | Capped by law. The average is around $5,500 for in-network care. |
| Extra Benefits | None. You need separate policies for dental, vision, and hearing. | Often includes dental, vision, hearing, and gym memberships. |
The choice often comes down to a trade-off: pay higher, predictable monthly premiums for maximum provider choice (Original Medicare + Medigap), or pay lower premiums for a plan with network restrictions and potentially higher out-of-pocket costs when you need care (Medicare Advantage).
How Your Medicare Costs Are Calculated
The calculator projects your annual costs by combining base premiums, applying specific growth rates to each component, and adding any income-based surcharges. Here are the core formulas it uses.
The primary calculation sums the five main cost components for a given year:
Total Annual Cost = Annual Part B Premium + Annual Part D Premium + Annual Part A Premium + Annual Medigap Premium + Annual Estimated Out-of-Pocket
Where:
- Annual Part B Premium = The standard premium plus any IRMAA surcharge based on your MAGI.
- Annual Part D Premium = The average plan premium plus any IRMAA surcharge.
- Annual Part A Premium = This is $0 for most people. If applicable, it's a fixed amount based on work history.
- Annual Medigap Premium = The premium for your chosen supplemental plan (e.g., Plan G or N).
- Annual Estimated Out-of-Pocket = For Plan N, this includes estimated co-pays. For those with no Medigap, it's a larger estimate for co-insurance and deductibles.
Each premium component grows over time. The calculator projects future costs using this formula:
Future Cost = Base Cost in 2026 × (1 + Annual Growth Rate) ^ Number of Years from 2026
- Base Cost in 2026 = The starting premium for a specific component (e.g., the ~$194.50 for Part B).
- Annual Growth Rate = A specific inflation rate for that cost. Medicare and Medigap premiums historically grow faster than general inflation.
- Number of Years from 2026 = The projection year relative to the 2026 baseline.
Finally, the calculator determines your IRMAA surcharge by looking up your projected MAGI in the appropriate threshold table for your filing status.
Part B Surcharge = IRMAA Surcharge Amount for the Tier matching your MAGI
Planning Your Medicare Budget: Inputs That Drive Your Projection
Your projection is only as good as your inputs. While age and life expectancy set the timeline, three key choices dramatically influence your final cost estimate.
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Your Initial MAGI and Growth Rate: This is the most powerful input. A high Modified Adjusted Gross Income can easily double your Part B and D premiums. When estimating this, consider all income sources, including RMDs from traditional retirement accounts. A thoughtful retirement withdrawal strategy can help manage your MAGI and potentially save you thousands in surcharges.
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Your Medigap Plan Choice: The difference between a comprehensive plan like Plan G, a lower-cost option like Plan N, or forgoing Medigap entirely is significant.
- Plan G: Higher premium, but near-zero out-of-pocket costs for covered services. Best for predictability.
- Plan N: Lower premium, but you accept small co-pays. Good for healthier individuals comfortable with minor cost-sharing.
- No Medigap: Lowest premium "cost," but exposes you to unlimited 20% co-insurance on Part B services. This is a high-risk strategy.
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Your Part A Premium Status: For over 99% of people, Part A is free. However, if you or a spouse have fewer than 40 quarters (10 years) of paying Medicare taxes, you will face a substantial Part A premium. This can add $3,700 to over $6,700 to your annual bill, making it a critical factor for those it affects.
Frequently Asked Questions About Medicare Costs
What is Modified Adjusted Gross Income (MAGI) for Medicare?
For most retirees, MAGI is their Adjusted Gross Income (AGI) from their tax return plus any tax-exempt interest they received. It includes income from nearly all sources, including IRA withdrawals, pensions, and capital gains, but excludes withdrawals from Roth accounts.
At what income level do IRMAA surcharges start in 2026?
For 2026, IRMAA surcharges are projected to begin for individuals with a 2024 MAGI above $108,181 and for couples filing jointly with a 2024 MAGI above $216,363.
Is Medigap Plan G better than Plan N for most retirees?
Plan G is generally preferred by those who want maximum cost predictability and are willing to pay a higher premium to avoid co-pays and potential excess charges. Plan N is a good value for those who are healthy, want a lower premium, and don't mind paying small, predictable co-pays for doctor visits.
How can I legally reduce my MAGI to avoid IRMAA?
Strategies include using Roth conversions strategically years before Medicare starts, directing RMDs to charity via a Qualified Charitable Distribution (QCD), funding retirement with Roth accounts, and careful timing of capital gain realizations. For more, see these RMD strategies to minimize the tax hit.
Does this calculator account for Medicare Advantage (Part C) plans?
No, this calculator is specifically designed to project costs for Original Medicare (Parts A & B) combined with a Part D drug plan and a Medigap supplemental policy. Medicare Advantage plans have a different cost structure based on co-pays and provider networks.
When do I need to enroll in Medicare to avoid penalties?
Your Initial Enrollment Period (IEP) is a 7-month window that starts 3 months before your 65th birthday month and ends 3 months after. If you miss your IEP and don't have other qualifying coverage (like from an active employer), you could face lifelong late enrollment penalties for Part B and Part D.
Can I pay for Medicare premiums from my Social Security check?
Yes. If you are receiving Social Security benefits when you enroll in Medicare, your Part B premium will typically be deducted automatically from your monthly benefit payment. You can also arrange to have Part D and Medigap premiums deducted.
Next Steps for Your Retirement Healthcare Plan
This projection is a crucial first step in building a resilient retirement plan. With an estimate of your annual healthcare costs, you can now see how this expense fits into your overall budget.
Use your results to inform other key retirement decisions. See how long your money will last with this new expense factored in. You can also use this data to refine your safe withdrawal rate to ensure your portfolio can sustain both your lifestyle and healthcare needs. Finally, consider the potential for future long-term care needs, which are not covered by Medicare, using our long-term care cost calculator.
Last updated: July 2026