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 the responsible thing. She kept her withdrawals modest, lived below her means, and assumed her income was predictable. Then an unexpected bill arrived from Medicare.

Let’s assume our 64-year-old 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 attached to her Part B and Part D premiums. The trigger was modified adjusted gross income (MAGI) from two years earlier, when a Roth conversion, a strong taxable account distribution, or the addition of Social Security benefits pushed her across a single threshold she never tracked.

On Suze Orman’s podcast, a 61-year-old retired educator recently asked the same underlying question: When and how to move money from a 403(b) to a Roth without creating a tax problem. Orman’s answer leaned 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. Under the 2026 brackets, 22% kicks in at $50,400 of taxable income for single filers, and 24% does not start until $105,700. One extra dollar of income costs a few cents of marginal tax.

IRMAA is a cliff. One dollar over $109,000 in MAGI bumps Part B from the standard $202.90 per month to $284.10, and Part D adds another $14.50 monthly surcharge. That is roughly $1,150 of extra annual premium triggered by being one dollar over. Medicare uses MAGI from two years prior, so the 2028 premium reflects 2026 income. By the time the bill arrives, the planning window has closed.

A pension of $48,000 plus a $36,000 403(b) draw equals $84,000. Add Social Security and even 85% of a $30,000 benefit lands MAGI right at the threshold. A single year of stronger 403(b) withdrawals, a capital gain from rebalancing a taxable account, or a modest Roth conversion can push her over.

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 changed the operating rules, and a retired teacher’s actual benefit depends on her state and how the repeal has been implemented.

If she now collects a larger Social Security check than expected pre-repeal, more of it is taxable, and more of it pushes her toward the IRMAA line.

Three Moves That Could Change the Outcome

1. Bracket-fill Roth conversions before Medicare enrollment. Between retirement and age 65, she has 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 in 2026 and the IRMAA cliff at $109,000, Medicare sets the conversion ceiling here. Every dollar moved now is a dollar that will not inflate future RMDs and future MAGI.
2. Time the 403(b) withdrawals around the two-year lookback. If she needs a larger one-time withdrawal, bunching it into a year that does not feed a future IRMAA calculation matters.
3. Verify the Social Security benefit before locking in a claiming age. Given the Fairness Act, the benefit estimate she received years ago may understate her current entitlement. Claiming strategy and the resulting MAGI profile should be modeled with the actual post-repeal number.

The Federal Reserve’s current 3.75% target rate, down 0.75 percentage points over the past year, gives her one more reason to act sooner. Bond yields inside the 403(b) are drifting lower, which weakens the case for leaving the balance untouched.

What to Do This Quarter

Pull last year’s tax return and add the projected 403(b) draw, taxable interest, and any Social Security to estimate this year’s MAGI. If the number lands within $10,000 of $109,000, look at your options. The most common mistake is optimizing the tax return and ignoring the Medicare return. The two are linked through MAGI, and IRMAA punishes overshooting the line by a single dollar the same as overshooting it by a thousand.