How One Big Withdrawal Can Spike Your Medicare Premiums (and How to Avoid IRMAA)
Pay off your mortgage, fund a renovation, or help a child with a down payment, and you could accidentally raise your Medicare premiums by thousands of dollars two years later.
It happens through a rule called IRMAA, and learning how to avoid IRMAA can save you real money. The good news is the trap is easy to sidestep once you see how it works. Below is the whole thing in plain English, plus the two simple moves that defuse it.
What is IRMAA?
IRMAA stands for Income-Related Monthly Adjustment Amount. In plain terms, it’s a surcharge added to your Medicare Part B and Part D premiums once your income climbs above certain lines. Most people pay the standard 2026 Part B premium of $202.90 a month. But cross an income threshold and that premium jumps in big steps, not gentle increases.
Here’s the part that surprises people: the IRS and Medicare share your income information. So a smart, responsible move you make with your 401(k) can come back to bite you through a higher Medicare bill.
The two-year look-back that catches people
IRMAA is based on your income, but not this year’s, and not even last year’s. Like a lot of tax rules, it looks back two years. Your 2026 premium is based on your 2024 tax return.
So if you apply for Medicare at 65, Medicare checks your income from age 63. The income it counts is your modified adjusted gross income (MAGI): the taxable part of your Social Security, your dividends, your withdrawals from a traditional IRA or 401(k), and even tax-free interest from municipal bonds. Those traditional IRA and 401(k) withdrawals are fully taxable, and they count.
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The 2026 IRMAA income limits
For 2026, the first surcharge starts at $109,000 of MAGI for a single filer and $218,000 for a married couple. Cross that first line and you pay an extra $974 per person for the year, on top of the standard premium. For a couple, that’s $1,948.
At the very top, a single filer over $500,000 (or a couple over $750,000) pays $689.90 a month instead of $202.90. That’s $5,844 extra per person per year, more than $11,600 for a couple, and that’s before Part D adds its own surcharge.
And here’s the kicker: IRMAA is a cliff, not a ramp. Go one dollar over a threshold and you owe the full surcharge for that whole tier.
A real example: Dave’s $120,000 mistake
Meet Dave. He’s 63, just retired, and has $410,000 in a traditional IRA. He wants to enter retirement debt-free, so he pulls $120,000 in one shot to pay off his mortgage.
Dave’s normal income that year, Social Security plus a small pension, is $68,000. Add the $120,000 withdrawal and his MAGI jumps to $188,000. As a single filer, that lands him in the third IRMAA tier. Two years later, when he’s 65 and on Medicare, his Part B premium is $527.50 a month instead of $202.90. That’s about $3,895 extra, for one year, all because of one withdrawal.
The frustrating part? Dave didn’t have to take it all at once. He could have paid the mortgage down over two or three years and stayed under the line. He just didn’t know the rule existed.
And this isn’t only a first-year problem. The two-year look-back applies every year you’re on Medicare. Take a big distribution at 67, and it can spike your premiums at 69. Take a large required minimum distribution at 72, and it can hit you at 74.
How to avoid IRMAA: the two-move fix
The good news is that this is very avoidable with a little planning. There are two moves, and you can use them alone or together.
Move 1: Spread big withdrawals across several years. Instead of pulling $120,000 in one year like Dave, take about $40,000 a year for three years. The mortgage still gets paid off, just on a slower schedule that keeps your income under the IRMAA line.
Move 2: Pull from the right accounts. A taxable brokerage account is gentler, because you’re taxed only on the gain, not the whole withdrawal, and long-term gains can even be taxed at 0% if your income is low enough. Roth IRA withdrawals are better still: they don’t count toward your MAGI at all, so they’re invisible to IRMAA.
This is also why many people do Roth conversions before age 63. The conversion creates taxable income now, but it lands before Medicare’s two-year window starts watching.
Two retirees, two very different bills
Picture twin brothers, Callum and Marvin, with identical portfolios and identical needs. Both need $40,000 for a renovation, then $80,000 later for a health event Medicare doesn’t cover.
Marvin pulls everything from his traditional IRA. The big withdrawal pushes his MAGI over the first IRMAA line, and two years later his Part B premium climbs by $974 for the year. That’s money he can’t get back.
Callum pulls the renovation money from his brokerage account (small gain, small tax hit) and the health-event money from his Roth (invisible to IRMAA). Same expenses, same portfolio, zero surcharge. The only difference was the order he tapped his accounts.
One more safety net: you can appeal
If your income drops because of a life change, retirement, divorce, or the death of a spouse, you can file an IRMAA appeal. It’s a real process, and it works, but you have to know to ask for it.
The bottom line
Your traditional IRA and 401(k) withdrawals count as income, Medicare looks back two years, and crossing an IRMAA line raises your premiums in big jumps for as long as your income stays high. The fix is simple but it takes planning: spread large withdrawals out, use Roth and brokerage money for one-time costs, and do Roth conversions before Medicare starts watching.
The hard part is seeing it coming, because the cost shows up two years after the decision. That’s exactly why it pays to map your withdrawals year by year, ideally with a plan or tool that shows how each move ripples into your future taxes and Medicare premiums, before you press the button.
This is educational information, not personal financial or tax advice. The rules and dollar figures here are current for 2026 but change every year, so confirm your own numbers at Medicare.gov or SSA.gov, or with a qualified tax or financial professional, before making a big withdrawal.
hapter Advisory, LLC (“Chapter”) is a private health insurance agency. In California, Chapter does business as Chapter Insurance Services (Lic. No. 6003691). Chapter is not affiliated with or endorsed by any government entity. While Chapter has a database of every Medicare plan option nationwide and can help you to search among all options, it has contracts with many but not all plans. As a result, Chapter does not offer every plan available in your area. Currently, Chapter represents 50 organizations which offer 18,601 products nationwide. You can contact a licensed Chapter agent to find out the number of products available in your specific area. Please contact Medicare.gov, 1-800-Medicare, or your local State Health Insurance Program (SHIP) to get information on all of your options. Enrollment in a plan may be limited to certain times of the year unless you qualify for a Special Enrollment Period or you are in your Medicare Initial Enrollment Period.
Average potential savings are based on realized premium, co-pay, and out of pocket savings estimates self-reported by consumers that worked with Chapter Advisory LLC to enroll in a Medicare Supplement, Medicare Advantage, and/or Part D Prescription Drug Plan. The average is limited to consumers that chose to self-report. Savings information is subject to periodic updates and corrections. There is no guarantee of savings and any savings may vary by policy type, state, or other factors.
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