The Two-Year Window That Can Cost You $30,000

Most people approaching Medicare think about these two things separately: “What do I do about health insurance until I turn 65?” and “What will Medicare cost when I get there?” They’re actually the same problem, and if you’re 63 or 64 right now, the decisions you make about your income in 2026 affect both answers at once. (If you’re 62, everything here still applies — your double-duty year is 2027, because Medicare looks back exactly two years.)

Here’s the scenario nobody talks about enough.

The ACA cliff is back — and it’s steep

The enhanced ACA subsidies that softened premium costs from 2021 through 2025 expired at the end of last year. Congress didn’t extend them. That means the hard cliff is back in full effect for 2026.

The cliff sits at 400% of the federal poverty level. Cross it by even $1 and you lose your entire premium tax credit — not a partial reduction, all of it.

For 2026 coverage, based on the 2025 federal poverty guidelines, those thresholds are:

• Single filer: $62,600
• Married couple: $84,600
• Family of three: $106,600

Here’s what that means in dollar terms. Per KFF’s analysis, a 60-year-old earning $62,000 pays roughly $515 a month in health premiums — about 10% of income. The same person earning $64,000 — just $2,000 more — pays around $1,244 a month, roughly 23% of income. That’s not a typo. Two thousand dollars of extra income triggers roughly $8,750 in extra annual premiums. The math is brutal and it’s by design.

The income figure that determines your eligibility is your MAGI — modified adjusted gross income. And it includes everything you might be doing in retirement to manage your finances: Roth conversions, capital gain realizations, dividends, interest, part-time income, Social Security (if you’re already drawing it). All of it counts.

The IRMAA clock starts before you turn 65

But the ACA cliff is only half the trap.

Medicare uses a two-year lookback to set your premiums. Your 2028 Medicare Part B and Part D costs will be determined by your 2026 income — the same year you’re managing your ACA cliff right now.

The 2026 IRMAA thresholds (which reflect 2024 income, for those already on Medicare) give us a reliable proxy for what 2028 will likely look like — CMS won’t publish the actual 2028 brackets until late 2027. The first IRMAA tier kicks in at $109,000 for single filers and $218,000 for couples. Cross that threshold in 2026, and when you turn 65 in 2028, you’ll be paying an extra $81.20 per month per person in Part B premiums — $974 per person per year, on top of the standard $202.90/month premium.

That’s the first tier. The surcharges climb from there. And both Part B and Part D carry their own IRMAA surcharges, so couples can easily see $2,000 to $4,000 in added annual Medicare costs from a single income year that was too high. (See the full 2026 IRMAA bracket table for every tier.)

The bitter irony: the income year most likely to push you over an IRMAA threshold is often one of your last years before Medicare — when you might be selling an asset, doing a large Roth conversion, or drawing down a pre-tax account to fund living expenses.

The pincer — both cliffs on one chart

Put these two together and you can see the problem clearly. Take a 63-year-old couple with $80,000 of MAGI: they’re under the $84,600 cliff, subsidies intact. Now add a $20,000 Roth conversion. That one decision pushes them to $100,000 — wiping out the entire ACA subsidy this year. The same conversion, sized larger or stacked with a capital gain that crosses $218,000, would also raise their Medicare premiums starting in 2028. One income decision, two separate bills, two years apart.

Premium figures are illustrative, based on KFF’s national benchmark example for 60-year-olds; your numbers vary by age, location, and income. The $30,000 in the headline sits in the middle of this range.

The chart below plots 2026 MAGI against both costs at once: the bars are your annual ACA premium (green while subsidized, red past the cliff), and the line is the annual Medicare surcharge that same income locks in for 2028. Click any bar for the plain-English version.

If you’re 63 in 2026:

• Too much income this year → lose ACA subsidies → potentially $10,000 to $25,000 more in health premiums in 2026 and 2027
• Too much income this year → trigger IRMAA → pay $2,000 to $8,000+ more in Medicare premiums annually starting in 2028

To be precise: both cliffs draw from the same income year simultaneously — they’re not sequential. Your 2026 MAGI sets your ACA subsidy right now, and that same 2026 return sets your 2028 Medicare premium via the two-year lookback. One income decision, two invoices, arriving two years apart. And because these systems are designed and administered separately — one by the IRS/HHS, one by Social Security/CMS — most people don’t see the combined exposure until it’s already locked in.

What you can actually do about it

The goal is to keep your 2026 MAGI below both cliffs where possible — or at least to be deliberate about which cliff you’re willing to cross and why.

• Traditional IRA contributions — dollar-for-dollar MAGI reduction, if you have earned income
• HSA contributions — pre-tax reduction, but watch the Medicare timeline
• Capital gain timing — deferring a sale past Medicare can bypass the pincer entirely
• Roth conversions — the danger zone: conversions add directly to MAGI

For people with earned income, deductible Traditional IRA contributions can be one of the most direct MAGI reducers. If you or your spouse has earned income, you can contribute to a Traditional IRA and deduct it, reducing MAGI dollar-for-dollar. The 2026 limit is $7,500 per person, or $8,600 if you’re 50 or older. For a couple where one spouse is still working, that’s potentially $17,200 off your MAGI. One catch: if you’re covered by a workplace retirement plan, the deduction phases out at higher incomes (for 2026, between $81,000–$91,000 of MAGI for single filers, $129,000–$149,000 for joint filers when the contributing spouse is covered) — most readers near the ACA cliff are fine, but if you’re managing the IRMAA threshold instead, check before counting on it.

The counterintuitive part: you’re putting money into a pre-tax account when your tax rate is relatively low, with the understanding that you’ll pay taxes on it later — possibly at higher rates. For some people, that trade doesn’t pencil out. For others, protecting a $10,000 ACA subsidy this year is worth the future tax cost. The math depends on your specific situation, and it’s worth modeling rather than assuming.

HSA contributions work similarly — pre-tax contributions reduce MAGI directly. The catch is that you must be on an HSA-eligible high-deductible health plan to contribute. If your ACA marketplace plan qualifies (some do, some don’t), and you’re not yet on Medicare, this can be a meaningful lever. The 2026 limits are $4,400 for self-only coverage and $8,750 for family coverage, plus an extra $1,000 catch-up if you’re 55 or older. Plan to stop contributions before Medicare begins — and if you enroll after 65, watch out for Medicare’s retroactive coverage rule (Part A can backdate up to 6 months), which can turn recent contributions into excess contributions.

Capital gain timing is often the biggest swing. If you’re planning to sell appreciated assets — a taxable brokerage position, a rental property, anything with embedded gain — the year you do it matters enormously. Deferring a large realization from 2026 to 2029, after Medicare begins, sidesteps both the ACA cliff and the IRMAA lookback simultaneously. That’s not always possible, but it’s worth asking whether the transaction needs to happen this year.

Roth conversions don’t reduce MAGI — they add to it. If you’re in the pincer zone, aggressive Roth conversion in 2026 can push you over the ACA cliff and set your 2028 IRMAA tier at the same time. That’s not an argument against Roth conversions generally. It’s an argument for sizing them carefully relative to where you are on both cliff structures. If you’re already below both thresholds with room to spare, a modest conversion can make sense. If you’re hovering near either line, the math changes quickly.

There’s also a proactive case worth considering. If you’re in your late 50s or early 60s — before you enter the pincer years — modest Roth conversions now can reduce the size of your future RMDs. Smaller RMDs mean less forced taxable income in your late 60s and beyond, which means less pressure on the IRMAA tiers you’ll face once you’re on Medicare. Paying a manageable tax bill today to shrink the involuntary tax bill later is a legitimate trade — one that works best when you have a decade or more of runway before Medicare enrollment.

The window closes faster than you think

The two-year lookback means you lose the ability to affect your 2028 Medicare premiums after December 31, 2026. You can’t file an amended return and get a different IRMAA. (There is an appeal process — Form SSA-44 — but it’s designed for genuine life-changing events like retirement or divorce, not for voluntary income decisions that turned out to be more expensive than expected.)

For ACA purposes, 2026 is the year in question. January 1, 2027 starts a new calculation.

That means the window for planning is now. Not 2027, when you’re closer to Medicare. Now.

See both cliffs in one view

RetireSmartIRA models the ACA cliff and the IRMAA lookback on the same screen

Adjust your projected 2026 income and see where you land on the ACA subsidy scale and which IRMAA tier you'd hit in 2028 — before you convert, sell, or withdraw. Free through 2026.

The thresholds in this article are based on 2026 ACA coverage-year guidelines (using 2025 federal poverty levels) and 2026 IRMAA brackets. IRMAA brackets for 2028 haven’t been published yet — they’ll be set by CMS in late 2027 based on 2028 Medicare cost projections. The planning logic applies regardless of the exact future thresholds; the two-year lookback mechanism is structural and isn’t going away.