How Your 401(k) Is Quietly Adding $3,500 a Year to Your Medicare Premium

A 65-year-old single retiree with $1.4 million in a traditional 401(k) sets up what looks like a comfortable income plan. She pulls $90,000 a year from the 401(k), adds a small pension and a brokerage dividend stream, and lands at a modified adjusted gross income near $175,000. Her tax bill is manageable. Her Medicare bill is the surprise.

That MAGI puts her squarely in the third IRMAA tier for 2026, the bracket covering single filers with income between $171,000 and $205,000 based on the 2024 return she filed last spring. The income test runs on a two-year lookback, which is the part most retirees miss until the letter from Social Security arrives.

What the surcharge actually costs

The standard Part B premium in 2026 is $202.90 a month, a nearly 10% jump from 2025. Her tier 3 IRMAA loads another $324.60 a month onto Part B and $60.40 a month onto Part D, for a total premium add-on of about $385 a month, or roughly $4,600 a year. If her MAGI had landed in tier 2 instead (between $137,000 and $171,000), the combined Part B surcharge would have been $202.90 and the Part D surcharge $37.50 per month, or roughly $2,900 a year combined. The midpoint of that range, where most readers in this profile actually land, is the $3,500 figure in the headline.

The numbers compound a problem retirees are already feeling. The Part B premium rose from $185 in 2025 to $202.90 in 2026, a 10% increase that pushes the base annual cost above $2,400. Add an IRMAA surcharge and that figure climbs well past $6,000 before a retiree has paid for a single doctor visit or prescription. Premiums are running ahead of the general cost-of-living adjustment most Social Security recipients received for 2026.

Why a single year of income two years ago controls today’s premium

The mechanic that quietly does the damage is the lookback. Social Security uses the most recent tax return information available from the IRS, which is almost always two years stale. A retiree who took a one-time income event at 63 — a Roth conversion, the sale of a vacation property, an inherited IRA distribution, or a final-year bonus — will see the IRMAA bill arrive at 65 with no warning. The high-income year is gone. The surcharge is not.

It gets worse where it interacts with other rules. Pulling another $5,000 from the 401(k) to cover the higher Medicare bill increases MAGI, which can push more Social Security benefits into the taxable column, which raises MAGI again. A retiree in the 22% federal bracket who triggers both the IRMAA cliff and Social Security taxation is looking at an effective marginal rate close to 40 cents on the next dollar withdrawn. That feedback loop is one of the most expensive planning blind spots in retirement income design.

Three moves that change the math

1. Run Roth conversions before the 63rd birthday, not after. The two-year lookback means a conversion done at 62 lands on the return that controls Medicare premiums at 64, before Part B even starts. A conversion at 63 or 64 controls premiums at 65 and 66, the most expensive years to get this wrong. Model the conversion against the next IRMAA threshold, not just the next federal bracket.
2. File Form SSA-44 if income legitimately drops. Retirement itself is a qualifying life-changing event under the rules. So is the death of a spouse, divorce, marriage, or loss of income-producing property. The form takes one page and can erase the surcharge for the year. Most people who qualify never file it.
3. Use qualified charitable distributions starting at age 70.5. In 2026, the maximum QCD is $111,000 per person, increased from $108,000 in 2025. A QCD sends that money directly from an IRA to a charity, satisfying the RMD requirement while keeping the dollars out of MAGI entirely, which means they never enter the IRMAA calculation. The One Big Beautiful Bill Act’s restrictions on itemized charitable deductions make QCDs even more attractive in 2026 for charitably inclined retirees. For this group, the QCD remains the cleanest single tool available for holding premiums at the lowest tier.

The IRMAA letter is a price tag attached to a return filed two years ago, paid in monthly installments out of a Social Security check. Part B premiums as a share of annual Social Security benefits will reach an all-time high of 9.4% in 2026. Fixed-income households cannot afford to hand back $3,500 to $4,600 a year for a tier they could have planned around. The planning window closes the day a high-income tax return gets filed. After that, it is just arithmetic.

Editor’s note: This article was updated to reflect the confirmed 2026 standard Medicare Part B premium of $202.90 per month (up nearly 10% from $185 in 2025), the corrected IRMAA tier labels for single filers (the $171,000 to $205,000 bracket is tier 3, not tier 4), the precise tier 3 surcharge amounts of $324.60 for Part B and $60.40 for Part D, and the increased 2026 QCD limit of $111,000 per person (up from $108,000). Context on the One Big Beautiful Bill Act’s effect on charitable deductions and QCD planning was also added.

Contact [email protected] for any questions or corrections.