Have a Large 401(k) and Approaching Medicare? Make Sure You Avoid This $1,783 Annual IRMAA Trap

The Couple, the Cliff, and the $200,000 Spend

A married couple, both 65, sits on $2.4 million in a traditional 401(k), $750,000 in a Roth IRA, and $400,000 in a taxable brokerage. They plan to spend $200,000 a year and delay Social Security until 70. The retirement math looks tidy until the first withdrawal hits the Medicare premium worksheet two years later.

The trap sits in the Income-Related Monthly Adjustment Amount, or IRMAA, which uses a two-year lookback on modified adjusted gross income to set Medicare Part B and Part D premiums. For 2026, the first IRMAA tier for married filing jointly begins at roughly $218,000 of MAGI. Cross it by one dollar and both spouses carry surcharges for a full calendar year.

The Drawdown Sequence That Keeps You Under

Here is the sequence affluent retirees actually use. Pull $200,000 from the traditional 401(k). That puts MAGI at $200,000, safely below the $218,000 cliff. After federal tax with the standard deduction and the 22% and 24% brackets stacked, the couple nets roughly $170,000 in spendable cash.

The $30,000 shortfall against the $200,000 lifestyle target comes from the Roth IRA. Roth withdrawals do not count toward MAGI, which is the entire reason the account exists in this plan. The couple hits the spending number and stays on the cheap side of the first surcharge.

The annual savings look modest. Roughly $1,783 per couple per year in avoided premiums. Stretched across two spouses over a 25-year retirement, the cumulative IRMAA avoided lands near $45,000, and that figure ignores the higher tiers a household typically hits once required minimum distributions begin.

Why the Brokerage Is the Wrong Gap Filler

The intuitive move is to pull the $30,000 from the $400,000 brokerage at long-term capital gains rates. The math punishes that choice. Realized capital gains flow straight into MAGI and push the couple toward the IRMAA line. Roth withdrawals stay invisible to MAGI, which is why they fill the gap while the brokerage waits for a year when MAGI has slack and 0% LTCG is genuinely in reach.

Gap Years Are Conversion Gold

Between now and age 70, when Social Security turns on, and again until RMDs begin, this couple occupies their lowest-MAGI window of the entire retirement. Bracket-filling Roth conversions during those years shrink the traditional balance that will otherwise force a seven-figure RMD into a higher IRMAA tier later. The two-year lookback means a conversion in 2026 raises 2028 premiums, so the schedule has to be deliberate.

The macro backdrop sharpens the case for funding the Roth bridge from short-duration Treasuries rather than equity sales. The federal funds rate sits just under 4%, with the 2-year Treasury near 4% and the 10-year around 4.5%. Core PCE rose 0.7% in March 2026, keeping real purchasing power under pressure and arguing for income that arrives without triggering capital-gain inclusion in MAGI.

Three Moves to Make This Quarter

1. Map your MAGI ceiling against the first IRMAA tier. Confirm the 2026 joint filer threshold at roughly $218,000, subtract unavoidable income (interest, dividends, any pension), and treat the remainder as your hard 401(k) withdrawal budget for the year. Single filers cross at roughly half that figure.
2. Designate the Roth as the MAGI-free spigot. Spending above the 401(k) ceiling comes from the Roth, never from the brokerage in a year where capital-gain realization would breach the tier. The brokerage gets liquidated only in years with confirmed MAGI headroom.
3. Run bracket-filling conversions in every gap year. Until RMDs begin, convert just enough each December to top off the 24% bracket. Model the two-year lookback so a conversion this year does not blindside you on premiums two years out.

The annual $1,783 understates the stakes. The real payoff is preventing a $1.5M-plus traditional balance from compounding into RMDs that vault both spouses into the third or fourth IRMAA tier, where surcharges run several hundred dollars per person per month. Sequence now, or pay the cliff for the next 25 years.