When you’re retired, you don’t just get a paycheck. You must make decisions about withdrawing money from retirement plans to provide yourself with income. Unfortunately, the choices can have far-reaching and sometimes surprising effects.
Let’s pretend, for example, that Maryann is 66-years-old and is thinking about taking a large amount out of her 401(k) to do some home renovation projects.
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Unfortunately, Maryann is concerned about the impact this could have on her Medicare premiums, and she’s 100% correct to be worried.
The good news is that she may have some options to try to avoid a large withdrawal impacting her Medicare costs. The bad news is that those options are pretty limited and may not work for her. Here’s why.
Why would a large 401(k) withdrawal affect your Medicare premiums?
First, it’s important to understand why Maryann is worried about the impact of a 401(k) withdrawal on Medicare costs.
Most people pay a standard premium for Medicare Part B (It’s $202.90 in 2026 (1)). However, those with higher incomes pay more, thanks to the Income-Related Monthly Adjustment Amount (IRMAA). Because of IRMAA, Medicare premiums increase if your income is above a certain level.
The thresholds at which your premiums increase (2) change over time. In 2026, once your income hits $109,000 as a single tax filer, premiums jump to $284.10 for Medicare Part B. You’ll also owe an extra $14.50 for your Part D plan.
The Social Security Administration (2) has a table showing how premiums change based on income and tax filing status. They could go as high as $689.90 per month for a single filer with an income of $500,000 or higher, so the increase is pretty substantial.
So, when Maryann takes a large withdrawal, her taxable income will increase, and she could be pushed above the thresholds that trigger extra premiums.
It’s also worth noting, though, that this increase won’t hit right away.
“IRMAA is based on MAGI from two years ago (3),” Clifford C. Cornell (4), financial advisor at Bone Fide Wealth, LLC, told Moneywise. “So, a large distribution this year might not impact someone immediately, but two years down the line, those surcharges can show up.”
Read More: About 1 in 5 Americans over 50 has zero retirement savings — here’s the catch-up plan you can actually use
What can you do to avoid an IRMAA surcharge?
Unfortunately, there’s not a whole lot you can do about an IRMAA surcharge. You can request to lower premiums (5)if your circumstances have changed since your high-earning year. But that’s allowed only if you’ve had a qualifying life-changing event like marriage, divorce, the death of a spouse, loss of income, or an employer settlement payment.
