A large RSU vest year can raise your Medicare premiums two years later. Most SAP employees never see it coming.

What IRMAA is and why it matters for SAP employees

IRMAA stands for Income-Related Monthly Adjustment Amount. It is a surcharge applied to Medicare Part B and Part D premiums for beneficiaries whose income exceeds certain thresholds. IRMAA is calculated based on your Modified Adjusted Gross Income (MAGI) from two years prior. In 2025, the base Part B premium is $185 per month. With IRMAA surcharges, that can increase to $628 per month or more for the highest income tier, per person.

For a married couple at the highest IRMAA tier, the combined annual surcharge can exceed $10,000 per year. This is a real number that shows up as a reduction in Social Security payments or a direct bill from Medicare.

How SAP income events trigger IRMAA

• Large RSU vest years: A year with significant RSU vesting can spike MAGI well above IRMAA thresholds, creating a surcharge two years later.
• SAP stock sales: Selling a large block of SAP stock, even after retirement, generates capital gains income that counts toward MAGI and can push you into a higher IRMAA tier.
• Roth conversions: Converting a traditional IRA or 401(k) rollover to Roth adds to ordinary income in the conversion year, which affects IRMAA two years later. The Roth conversion benefit needs to be weighed against the IRMAA cost.
• Required minimum distributions: Once RMDs begin at age 73, the distributions add to MAGI each year and can keep you in a higher IRMAA tier on an ongoing basis.

Strategies to manage IRMAA exposure

• Smooth large income events over multiple years: Spreading SAP stock sales and Roth conversions over two or more years reduces the peak MAGI in any single year, potentially keeping you in a lower IRMAA tier.
• Time income events around Medicare enrollment: The years just before you turn 65, and the years after, are the ones that matter most for IRMAA. High-income events in those years have a direct and persistent cost.
• Use qualified charitable distributions (QCDs): After age 70.5, you can donate directly from an IRA to a qualified charity. QCDs count toward your required minimum distribution but are excluded from MAGI, reducing IRMAA exposure while satisfying your charitable goals.
• Appeal IRMAA in the year of a life-changing event: If your income drops significantly due to retirement, separation, or other qualifying events, you can request an appeal to have your IRMAA recalculated based on more recent income.

Why most SAP employees discover IRMAA too late

IRMAA is a two-year lookback, which means the income decisions you make today affect your Medicare premiums in two years. Most employees and even many retirees do not discover IRMAA until they receive their Medicare premium notice and find it dramatically higher than expected. Proactive planning connects today's income decisions to their future Medicare cost.

Blackshire is fee-only and fiduciary. We build IRMAA into every client's retirement income plan. See our SAP retirement planning page →