I’m 67 years old and withdrew $85K from my 401(k) to help my son make a mortgage down payment — but then my Medicare premiums went up. Will they stay higher forever?

Here’s how this works: The government monitors your taxable income — and retirement account distributions are part of that.

Depending on the amount you withdraw, part of your income could land in a higher marginal tax bracket — and no, your neighborhood IRS agent doesn’t care whether you’ve stopped working.

Income thresholds extend to Medicare, too. Exceeding a certain modified adjusted gross income can cause a spike in your premiums. That means you could end up paying for that withdrawal more than once.

But is there a way to ensure it doesn’t happen again?

The answer depends on how savvy you are with your finances.

The math and the aftermath

Let's say you collect a monthly Social Security check of $1,925, the average for retired workers as of November 2024 — which comes to $23,100 annually.

Since you're still in your 60s, you aren't yet required to withdraw money out of your retirement accounts each year.

So if that $23,100 is your only income — and it's enough to live on — and you file as a single, individual taxpayer, you won’t pay any federal taxes. The IRS only starts claiming tax on Social Security when 50% of your benefit for the year and any other income combined totals more than $25,000.

But if you pull out $85,000 for that down payment for your son, things change. The IRS formula for taxing Social Security would add half of your benefit to the $85,000, which comes to $96,550. That means you’d exceed the $34,000 threshold where up to 85% of your benefits will be taxed. Ouch.

Now see if you can follow this, non-accountants: 85% of $23,100 means $19,635 of your Social Security benefits is taxable, which added to your $85,000 withdrawal gives us $104,635 of taxable income for the year.

That means you’ll pay marginal tax rates until you hit the 24% tax bracket for incomes over $100,525. And that income level would trigger a surcharge on your Medicare premium for that tax year.

And now, the Medicare adjustment

A large cash infusion can change your Medicare income status to the point where you’ll pay an income-related monthly adjustment amount (IRMAA).

Medicare Part B and D premiums are calculated based on individual tax return numbers, and at below $103,000, the monthly premium for Part B comes to $174.70 in 2024, with no extra charge for Part D.

But since you’re now over that number, your monthly premium would jump to $244.60, plus an extra $12.90 for Part D.