A 75 Year Old With $3 Million in a 401(k) Discovers Three Years of RMDs Will Cost Her $42,000 in Medicare Surcharges Alone

Margaret turned 75 last fall, sits on a $3 million traditional 401(k), and is two years into required minimum distributions. She did everything the textbooks said. The thank-you note from Medicare arrived this spring: a Part B and Part D bill priced for the upper rungs of the income ladder. Over three RMD years, the surcharges alone are on track to total roughly $42,000 for her household.

That warning is one many retirees on finance forums have echoed: max out a 401(k) pretax and you will pay elevated taxes on every conversion, plus extra on Medicare. The arithmetic is what Margaret is now living through.

How a $3 Million Balance Forces a $200,000 Income Year

The Uniform Lifetime Table divisor at age 75 is 24.6. On a $3 million traditional balance, that produces a required withdrawal of $121,951 for the year. Layer in $48,000 in Social Security and $30,000 in dividends from a taxable brokerage account, and Margaret’s modified adjusted gross income lands near $200,000. Her lifestyle stayed the same; the IRS changed the math for her.

That MAGI puts her inside IRMAA Tier 3 for single filers in 2026, which covers MAGI between $171,001 and $205,000. The Part B surcharge at that tier is $324.60 per month and the Part D surcharge is $60.40 per month. Combined, that is $385 a month, or $4,620 a year, on top of the standard $202.90 Part B base premium. For a married couple where both spouses are on Medicare, every surcharge tier applies to each person, so the annual household cost doubles immediately.

Why the Surcharge Compounds Toward $42,000

The headline number reflects what happens as the RMD grows across a household. Each year the divisor shrinks (23.7 at age 76, 22.9 at 77), and a portfolio earning anything close to its long-run average refills the balance faster than withdrawals empty it. The RMD percentage marches higher, and MAGI drifts toward the next bracket. Tier 4 for single filers, which covers MAGI between $205,001 and $499,999, carries a $446.30 monthly Part B surcharge and an $83.30 Part D surcharge, totaling $529.60 per month ($6,355 per year per person). For two Medicare-enrolled spouses, that is nearly $12,710 annually in surcharges alone. Two years at Tier 3 plus a third year creeping into Tier 4, applied to both household members, is how the cumulative bill reaches toward $42,000.

One nuance most retirees miss: IRMAA uses a two-year lookback. The premium Margaret pays in 2026 is set by her 2024 return. Decisions made today set the surcharge for 2028. That is why pre-73 Roth conversion windows matter so much, and why scrambling to fix this in the year RMDs begin is already two years too late.

The Four Levers That Actually Work at 75

The Form SSA-44 appeal exists for “life-changing events” such as job loss, divorce, or the death of a spouse. A predictable RMD is not on the list, so that door is closed.

1. Roll a slice to an IRA, then use QCDs. Qualified charitable distributions go directly from an IRA to a 501(c)(3), satisfy the RMD, and never hit MAGI. The 2026 QCD limit is $111,000 per person. QCDs do not work from a 401(k), which is why a partial rollover into a traditional IRA is the first move for charitably inclined retirees sitting in a workplace plan. The One Big Beautiful Bill Act, signed in 2025, restricts itemized charitable deductions for high earners starting in 2026, making the QCD route more valuable than ever for MAGI management.
2. Harvest losses in the taxable account. The $30,000 dividend stream can be partially offset by realized losses, trimming MAGI by up to $3,000 against ordinary income plus unlimited offset against realized capital gains. In a year that threatens the next IRMAA cliff, even $5,000 of MAGI reduction can save the full annual surcharge.
3. Bunch charitable giving into one high-RMD year. Pairing a large donor-advised fund contribution with the RMD year pulls the itemized deduction above the standard, cutting taxable income while QCDs handle the MAGI side.
4. Map the next two years of MAGI against the brackets today. Because of the lookback, the planning horizon for 2028 premiums is right now. The CMS 2026 IRMAA tables at cms.gov and IRS Publication 590-B are the source documents worth keeping current.

For Margaret, the lesson is that a $3 million 401(k) comes bundled with a tax structure and a Medicare invoice attached. With the CPI-U now at 335.1 and running at 4.2% year-over-year as of May 2026, well above the Fed’s 2% target, that $42,000 is not being inflated away. It is real money, and the planning to avoid the next round of it starts in the tax year currently underway.

Editor’s note: This article corrects the 2026 IRMAA tier assignment for a single filer with roughly $200,000 in MAGI from Tier 4 to Tier 3, updates the corresponding Part B and Part D monthly surcharge figures to $324.60 and $60.40 respectively, revises the Tier 4 and Tier 5 surcharge amounts to reflect current CMS data, updates the CPI-U index level to 335.1 and the annual inflation rate to 4.2%, and adds context on how the One Big Beautiful Bill Act’s new charitable deduction limits further strengthen the case for qualified charitable distributions in 2026.

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