Jun 14, 2026
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). 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 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 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.
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It’s also worth noting, though, that this increase won’t hit right away.
“IRMAA is based on MAGI from two years ago,” Clifford C. Cornell, 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.”
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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 premiumsif 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.
Maryann’s desire for home improvement isn’t going to cut it, and her other choices are limited.
“The best solution is active tax management that takes into consideration the tiers for modified adjusted gross income, as even a $1 increase over the MAGI threshold can be very costly,” Brando Reyna, CFA, founder of Reyna Capital Advisors, told Moneywise.
Reyna recommended, for example, that if Maryann had $100,000 in income and needed $15,000 for her projects, she could split the withdrawal between December and January to stay below the threshold in both years.
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Of course, if Maryann was taking out an even larger sum, that may not work for her. In that case, she could harvest tax losses by selling some losing assets in the year she takes the distribution. But tax loss harvesting is primarily used to offset capital gains. The maximum deduction from ordinary income due to capital losses is $3,000, so that may not help her much.
Ultimately, Maryann may be out of luck and simply have to pay the extra cost for a year until her income drops below the threshold again, and that’s by design.
“Uncle Sam has done a lot to make sure appropriate taxes and surcharges are paid,” Reyna said.
How can you avoid this situation?
While it’s too late for Maryann, there is one way she could have avoided this issue. Acting sooner.
“Age 63 is the first year in which someone would want to pay close attention to their MAGI to throttle distributions if they were looking to mitigate the surcharges,” Cornell said. “For early retirees, Roth conversions prior to age 63 can make sense. This is when IRMAA is a non-factor given the age of the individual.”
If you are worried about hitting the IRMAA thresholds, or otherwise want to limit taxes in retirement, it’s worth talking to a financial advisor about Roth conversions when you’re in your late 50s or early 60s.
It’s not right for everyone, but if Maryann had made that move, she could withdraw as much from her Roths as she wants right now.
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Christy Bieber has 15 years of experience as a personal finance and legal writer. She has written for many publications including Forbes, Kilplinger, CNN, WSJ, Credit Karma, Insurify and more.
