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 very top of the income ladder. Over the next three RMD years, the surcharges alone are on track to total roughly $42,000.

This is not a hypothetical. One retiree on r/Fire put it bluntly in a recent thread titled Medicare part B and D IRMAA be careful: “Be careful maxing 401k pretax. You will pay high taxes converting and charged extra on Medicare. So folks learn from my mistake ROTH ROTH ROTH.” The arithmetic behind that warning 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 squarely inside IRMAA tier 4 for single filers, which covers MAGI between $193,000 and $500,000 in 2026. The surcharge on top of the roughly $203 standard Part B premium is $487 per month for Part B and another $77 for Part D. Combined, that is $564 a month, or $6,768 a year, on top of base premiums.

Why the Surcharge Compounds Toward $42,000

The headline number reflects what happens as the RMD grows. Each year the divisor shrinks (23.7 at 76, 22.9 at 77), and a portfolio earning anything close to its long-run average refills the balance faster than withdrawals empty it. Margaret’s RMD percentage marches higher, and her MAGI drifts toward the next bracket. Tier 5, which begins at $500,000 of MAGI, carries a $730 monthly surcharge, or $8,760 a year. Two years of tier 4 plus a year that pushes into tier 5 territory, multiplied across both spouses-equivalent premium lines and base inflation, is how the cumulative bill stacks 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” like 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 an IRA is the first move for charitably inclined retirees sitting in a workplace plan.
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 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 printing.

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 now at 332.4 and running near the Fed’s 2% target, that $42,000 will not be inflated away. It is real money, and the planning to avoid the next round of it starts in the tax year currently underway.