64-Year-Old Retired Teacher With $1.1M 403(b) and State Pension Triggers Higher IRMAA Tier

A retired math teacher in her mid-60s with a seven-figure 403(b) did everything right. She kept her withdrawals modest, lived below her means, and built what looked like a predictable retirement income. Then an unexpected bill arrived from Medicare.

Consider a 64-year-old who retired from a public school system with a $48,000 state pension and $1.1 million in a 403(b). She mapped out a conservative drawdown of $36,000 per year from the 403(b), bringing her ordinary income before Social Security to roughly $84,000. Comfortable, well under the top brackets, and seemingly nowhere near any income cliffs.

Then she enrolled in Medicare and discovered an Income-Related Monthly Adjustment Amount (IRMAA) surcharge on both her Part B and Part D premiums. The trigger was modified adjusted gross income (MAGI) from two years earlier, when a Roth conversion, a taxable account distribution, or the addition of Social Security benefits had pushed her past a threshold she never tracked.

On Suze Orman’s podcast, a 61-year-old retired educator raised the same core question: when and how to move money from a 403(b) to a Roth without creating a tax problem. Orman’s answer focused heavily on whether the pension alone covered living expenses, because “money that you withdraw from a traditional IRA counts towards income to calculate if you’re going to pay tax on your Social Security or not. That is money that is used to calculate what your Medicare B premiums are going to be, and they will be higher because of that.”

Why the IRMAA Cliff Matters More Than the Tax Bracket

The federal tax code is gradual by design. Under the 2026 brackets, the 22% rate kicks in at $50,400 of taxable income for single filers, and the 24% rate does not begin until $105,700. One extra dollar of income above a bracket boundary costs only a few cents of marginal tax.

IRMAA works differently. It is a cliff, not a slope. One dollar over $109,000 in MAGI bumps Part B from the standard $202.90 per month to $284.10, and Part D adds a $14.50 monthly surcharge on top of that. The result is roughly $1,150 in extra annual premium triggered by crossing the line by a single dollar. Because Medicare uses MAGI from two years prior, 2026 income will appear in the 2028 premium calculation. By the time the bill arrives, the planning window has already closed.

The math for this teacher is tight. A pension of $48,000 plus a $36,000 403(b) draw produces $84,000 in ordinary income. Add Social Security, and even 85% of a $30,000 benefit lands MAGI right at the threshold. One year of larger 403(b) withdrawals, a capital gain from rebalancing a taxable account, or a modest Roth conversion can push her over.

Worth noting for those approaching 65: the One Big Beautiful Bill Act, signed into law in July 2025, created a temporary $6,000 senior bonus deduction for taxpayers aged 65 and older, in addition to the standard deduction. For a single filer, it phases out above $75,000 in income. A 64-year-old planning her first year of Medicare enrollment should factor this into her MAGI projections, since the deduction applies to taxable income but not to the MAGI calculation that drives IRMAA.

The WEP and GPO Questions

State-pension teachers historically had Social Security benefits reduced or eliminated by the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). The Bipartisan Policy Center noted that roughly 28% of state and local public employees, about 6.5 million people, work in jobs not covered by Social Security.

The Social Security Fairness Act, signed into law on January 5, 2025, permanently repealed both WEP and GPO, restoring fuller benefits for roughly 3.2 million teachers, police officers, firefighters, and other public workers. The repeal is retroactive to January 2024, and the SSA moved faster than expected: by July 7, 2025, the agency had completed sending over 3.1 million payments totaling $17 billion, five months ahead of its original schedule. For teachers whose cases have already been processed, the benefit adjustment is no longer pending. It is settled.

That matters for IRMAA planning. A retired teacher now collecting a larger Social Security check than she expected before the repeal will see more of that benefit become taxable, which pushes her closer to the $109,000 threshold. Anyone who has not yet verified their updated benefit amount through SSA.gov should do so before finalizing a withdrawal or conversion plan.

Three Moves That Could Change the Outcome

1. Bracket-fill Roth conversions before Medicare enrollment. Between retirement and age 65, there is a clean window to convert chunks of the 403(b) at the 22% rate, stopping well below the IRMAA line. With the 24% bracket starting at $105,700 and the IRMAA cliff at $109,000, Medicare effectively sets the conversion ceiling. Every dollar moved now is a dollar that will not inflate future required minimum distributions or future MAGI.
2. Time the 403(b) withdrawals around the two-year lookback. If a larger one-time withdrawal becomes necessary, concentrating it in a year that does not feed a future IRMAA calculation can make a meaningful difference in premiums two years out.
3. Verify the Social Security benefit before locking in a claiming age. Given the Fairness Act, any benefit estimate received before January 2025 almost certainly understates the current post-repeal entitlement. The claiming strategy and its resulting MAGI profile should be modeled against the actual updated figure from SSA.gov.

The Federal Reserve has held its target range for the federal funds rate at 3.5% to 3.75%, a level confirmed at the July 2026 FOMC meeting and down from its prior peak. Bond yields inside the 403(b) are correspondingly softer, which weakens the case for leaving the balance untouched and strengthens the argument for disciplined Roth conversion now.

What to Do This Quarter

Pull last year’s tax return and add the projected 403(b) draw, taxable interest, and any Social Security income to estimate this year’s MAGI. If the total lands within $10,000 of $109,000, the options are worth examining carefully. The most common mistake retirees make is optimizing the income tax return while ignoring the Medicare return. The two are linked through MAGI, and IRMAA punishes overshooting the threshold by a single dollar exactly as much as it punishes overshooting it by a thousand.

Editor’s note: This article was updated to reflect that the SSA completed sending over 3.1 million payments totaling $17 billion under the Social Security Fairness Act by July 7, 2025, five months ahead of schedule, and to add context on the One Big Beautiful Bill Act’s new $6,000 senior bonus deduction for taxpayers aged 65 and older and its interaction with MAGI planning.

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