A $60,000 Annuity Payout Pushed a Retired Couple Over the Medicare IRMAA Line Two Years Later

The Letter That Showed Up Two Years Late

A married couple, both about 66 and newly on Medicare, opened their Social Security statements in late 2025 and found an unwelcome surprise. Their Medicare Part B premiums for 2026 would be hundreds of dollars higher than the standard rate, deducted straight from each of their monthly benefit checks. Nothing about their current income had changed. The culprit was a decision they had already forgotten about: a roughly $60,000 annuity payout they took in 2024.

This scenario shows up on retirement forums often. Someone cashes out a deferred annuity, uses the money for a roof or a car or a one-time gift to the kids, files their taxes, and moves on. Two years later, Medicare sends a notice citing a tax return that feels like ancient history. A forum contributor recently described it as getting a speeding ticket from a road trip two summers ago, and they couldn’t be more right.

Why Annuity Money Trips the Wire

The Income-Related Monthly Adjustment Amount, or IRMAA, is the surcharge Medicare adds to Part B and Part D premiums when someone’s income crosses certain lines. As Suze Orman put it on her Women & Money podcast, “IRMAA is based on your modified adjusted gross income (MAGI) from two years prior. So they’re always looking back two years.” That is why 2026 premiums are set from the 2024 tax return.

The taxable piece of an annuity payout counts toward that income figure. The nuance worth getting right: in a non-qualified annuity bought with after-tax money, only the gain above your original principal is taxable. In a qualified annuity held inside an IRA or 401(k), the full distribution usually is. So a $60,000 check might add anywhere from $20,000 to the full $60,000 to that year’s MAGI, depending on which type the couple owned.

How a Joint Return Becomes Two Separate Bills

For a married couple filing jointly, IRMAA does not kick in until MAGI tops $218,000. Below that line, each spouse pays the standard 2026 Part B premium of about $203 a month. Cross it, and the surcharges step up in tiers. A couple landing in the first IRMAA bracket pays an extra roughly $81 per month each, boosting the total to about $284. Push into the second tier, between $274,000 and $342,000, and each spouse pays about $406.

This is the part that catches people off guard: IRMAA is assessed per person. Both spouses on Medicare get the surcharge applied to their own premium. One income event, two bills, every month for a full year. There is also a Part D surcharge stacked on top, which begins at about $15 a month per spouse at the first tier.

The Rest of the Retirement Picture

An annuity payout rarely arrives alone. It often lands in the same year as Social Security benefits, maybe a required minimum distribution (RMD), and investment income. Each of those pieces feeds the same modified adjusted gross income line that IRMAA reads. The annuity just has to be the straw that lifts the total above the threshold.

The one-year nature of the hit matters too. If income drops back to normal in 2025, the IRMAA surcharge falls off in 2027. The damage is temporary, but it is real money while it lasts: for this couple, easily $2,000 or more across the two of them in extra premiums for the year.

What to Think Through Before You Cash Out

If a payout is on the horizon, a few moves can soften the landing:

1. Spread the income. Annuitizing into smaller annual payments, instead of one lump, can keep modified adjusted gross income under the joint threshold each year.
2. Mind the calendar. Avoid stacking the payout on a year that already includes large capital gains, Roth conversions, or required minimum distributions.
3. Know what SSA-44 covers. That form lets you appeal IRMAA after a qualifying life-changing event such as retirement or the death of a spouse. Choosing to cash out an annuity is not on the list.

The hardest part of IRMAA to undo is the surprise itself. By the time the premium notice arrives, the tax return that caused it is two years gone. A quick conversation with a tax preparer in the year of the payout, not the year of the bill, is usually what separates the couples who get hit from the ones who see it coming.