IF YOU’RE IN YOUR early 60s and retired, you probably have a lot of financial questions on your mind. The next few years may be among your lowest-income and lowest-tax-paying years. Your salary and bonus years are behind you. Social Security and required minimum distributions from your IRAs and 401(k)s have not started yet. You are hearing advice about doing Roth conversions during this low-tax window, and the arguments are compelling. You may also be thinking about consulting or part-time work to stay active and bring in some income. This article is about the hidden cost of those decisions: how income choices you make now can affect both your health insurance costs today and your Medicare premiums later. If you don’t understand the interaction, the surprise can cost thousands of dollars. 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. It’s not a partial reduction; it’s all of it. If you aren’t prepared, that can create real cashflow problems. 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

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, or 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 income figure that determines your eligibility is your MAGI. It includes everything you might be doing in retirement to manage your finances: Roth conversions, capital gain realizations, dividends, interest, part-time income and Social Security if you’re already drawing it.  The IRMAA clock starts when you’re 63, not 65 The ACA cliff is only part of the issue. 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 reflect 2024 income for those already on Medicare. They give us a reasonable proxy for what 2028 will likely look like, as the Centers for Medicare and Medicaid Services 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 looking at roughly an extra $81.20 per month per person in Part B premiums or $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. It is ironic but 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. Why do these two cliffs need to be planned together? 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 and it wipes 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. That is why the two cliffs need to be modeled together, not checked separately after the fact. Where the $30,000 comes from:

Scenario	Estimated Cost
Couple crosses the ACA cliff in 2026, full subsidy lost	≈ +$21,500/yr
Same 2026 MAGI over the first IRMAA tier triggers the 2028 Medicare surcharge (Part B + D, couple)	+$2,297
If 2027 income also stays over the ACA cliff	≈ +$21,500 more
Combined two-year exposure from the same income pattern	Potentially $45,000+

The chart below plots 2026 MAGI against both costs at once: the bars are your annual ACA premium (indigo while subsidized, red past the cliff), and the line is the annual Medicare surcharge that same income locks in for 2028. If you’re 63 in 2026: Too much income this year and you lose ACA subsidies, costing potentially $10,000 to $25,000 more in health premiums in 2026 and 2027. Too much income this year and you trigger IRMAA, paying $2,000 to $8,000+ more in Medicare premiums annually starting in 2028. Both cliffs draw from the same income year at once, not in sequence. Your 2026 MAGI sets your ACA subsidy right now, and that same 2026 return sets your 2028 Medicare premium through the two-year lookback. Because the two systems are run separately (one by the IRS and the Department of Health and Human Services, the other by Social Security and the Centers for Medicare and Medicaid Services) most people never see the combined exposure until it’s already locked in. What you can 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: reduce MAGI dollar-for-dollar, if you have earned income
• HSA contributions: a pre-tax reduction, but watch the Medicare timeline
• Capital gain timing: deferring a sale past Medicare can bypass the pincer entirely
• Roth conversions: the opposite, since they 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 and $91,000 of MAGI for single filers, or $129,000 and $149,000 for joint filers when the contributing spouse is covered. 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 and 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. Health savings account 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, 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. Medicare’s Part A coverage can backdate up to six months, which can turn recent contributions into excess contributions, so watch that timeline carefully. 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. One longer-horizon point, separate from the two-year window this article is about: if you’re in the pre-pincer years, your late 50s or early 60s, 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. That is a multi-decade trade, not a fix for the immediate cliff, and it works best when you have a decade or more of runway before Medicare enrollment. Plan this out 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 through Social Security, 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. ________________________________________________________________________________ John Urban is the founder of RetireSmartIRA, a retirement tax-planning app. Earlier, he founded GT Nexus, a supply-chain software company acquired by Infor in 2015. He lives in Northern California with his wife, Kathy, and enjoys time with family, travel, reading, Bay Area sports, and the occasional deep dive into the fine print of the tax code.

AS WE CELEBRATE 250 years since the Declaration of Independence, I’m reminded of an expression that’s popular in the investment world: “This time is different.” The phrase dates to a 1993 publication titled “16 Rules for Investment Success,” authored by the veteran investment manager Sir John Templeton. Rule number 11 included the following admonition: “The investor who says, ‘This time is different,’ when in fact it’s virtually a repeat of an earlier situation, has uttered among the four most costly words in the annals of investing.” Templeton’s message, in other words: Human nature doesn’t change. Though the facts change with each new market cycle, the outcome will ultimately be driven by the same human tendencies and emotions as we’ve seen many times before. The phrase “this time is different” was further popularized by a book by that name published during the worst of the financial crisis in 2009. Economists Carmen Reinhart and Kenneth Rogoff studied dozens of market cycles going back centuries and concluded that Templeton’s somewhat informal hypothesis turned out to be more accurate than even he might have guessed. Things always seem different but rarely are. As a result, “this time is different” is an expression that’s usually invoked with irony, as if to suggest that whatever investors are excited about today is likely—with the benefit of hindsight down the road—to look no different from similar events in the past. What makes this notion tricky, though, is that sometimes things do change in ways that are fundamentally new and discontinuous. In other words, we can’t dismiss every new development we see in investment markets with the glib assertion that the future will be no different from the past. Even if human nature is a constant, in other words, a more critical analysis of current events is always warranted. Here are four such areas where change is underway but the ultimate result is still an open question. Question 1 - The impact of the internet on investing. Years ago, the assumption was that the internet would democratize investing because it would make more information accessible to more people at lower costs. This hypothesis was logical, and to some degree, it was accurate. Information that was previously only available through a pricey Bloomberg terminal is now available through any number of free or low-cost online services.  But there have been unintended consequences. As much as the internet enables the spread of information, it also accelerates the spread of less-than-useful information that can drive events like the meme stock craze in 2021. The internet has also given rise to various forms of gambling. It’s enabled inventions like non-fungible tokens, which seem to be of dubious value. And the internet has enabled cryptocurrencies, of which there are apparently millions. Many have lost all or virtually all of their value. Which way will this go? On the positive side, the internet has lowered costs dramatically. Where brokerage commissions were more than $100 not too long ago, most brokers now charge little or nothing to trade stocks and exchange-traded funds. At the same time, recent trends suggest that the internet has been of mixed value, especially with the recent rise in so-called prediction markets. But reversion to the mean is a powerful force, and ultimately the internet may be a net positive for investors. Question 2 - The impact of artificial intelligence on the workforce. Not long ago, there was the belief that AI would displace large numbers of workers. This view was supported most notably by OpenAI co-founder Sam Altman, who commented more than once that AI was likely to “replace most of the jobs people do today.” But he’s since changed his mind. “I'm delighted to ⁠be wrong about this,” Altman said this spring. “I thought there would have been more impact on entry-level white-collar jobs being eliminated by now than ​has actually happened.” What did Altman overlook in his earlier prediction? Investor Bob Haber offers an analog. When railroad networks became widespread in the 1800s, there was the assumption that demand for horses would fall significantly. But the opposite happened.  As Haber explains, “rail displaced horses in one narrow function, long-haul transport, but it increased demand for them almost everywhere else. Rail depots needed drayage. Growing railroad towns needed more cartage. Farms connected to wider markets needed more local hauling. Rail automated one visible task while enlarging the surrounding economic system in ways that created more complementary work for horses and for the humans who depended on them.” We may see something similar with AI. The jury is still out, but it’s clear that the most pessimistic predictions overlooked potential second-order effects. Question 3 - Whether the stock market is overvalued. For a decade, and maybe more, there’s been hand-wringing over stock market valuations. Using the popular cyclically-adjusted price-to-earnings (CAPE) ratio as a yardstick, the market’s valuation has been rising almost continuously since 2009 and is now just a few percent below the peak reached in 2000. Through that lens, there’s a lot to worry about, and those who argue that this time is different seem like they’re straining to justify numbers that shouldn’t be dismissed. There’s another side to this argument, though, driven by the fact that the composition of the market has changed over time. Today’s largest companies are almost all in technology and are faster growing than the largest firms were in past generations. As a result, the argument goes, today’s technology companies deserve higher valuations. And that, in their view, makes the CAPE ratio an outdated metric. Who’s right? Of course, time will tell. That’s why investors’ best defense, in my view, is a defensive asset allocation. Question 4 - The value of international diversification. Twenty years ago, the accepted wisdom was to diversify a stock portfolio internationally. One reason was because many economies outside the U.S. were growing quickly. Another argument was that exchange rate fluctuations were a potential source of added returns. Those who limited their investments to the U.S. were accused of “home bias.” But this view came under pressure when, for most of the past 20 years, domestic markets outpaced their global peers, and that’s reversed only recently. How should we think about this question? One point of view is that we shouldn’t abandon diversification simply because it delivered a string of losing years, and indeed, the recent resurgence of international stocks might represent the beginning of a new trend.  The opposing view cites the relative anemia of many international markets, especially in Europe. Over the 15-year period between 2008 and 2023, GDP per capita in the European Union fell from 76.5% of the level in the U.S. to just 50%. Which side is correct? It is, of course, anyone’s guess, which is why I continue to believe in international diversification.   Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam's Daily Ideas email, follow him on X @AdamMGrossman and check out his earlier articles.