A couple in their sixties steps away from work a year before Medicare kicks in. Both are about 64, healthy, and tired. They have roughly $1.2 million in a traditional IRA and a plan that feels reasonable: cover the gap year out of that IRA, slide onto Medicare at 65, and start Social Security when the timing makes sense. They run the numbers and feel comfortably under the $218,000 joint income line that triggers higher Medicare premiums. Then a letter arrives two years later announcing a premium surcharge that hit them out of nowhere.
Variations of this scenario show up routinely in retirement forums. Someone retires at age 64, pulls a chunk from a pretax account to cover living costs and health insurance until Medicare starts, and only later learns that the bridge year becomes the one that prices their Medicare premiums.
The Two-Year Lookback Nobody Mentions
Medicare premiums are set using modified adjusted gross income (MAGI) from two tax years prior. So the income reported on the bridge-year return, when this couple is 64, is the income Social Security uses to price their Part B and Part D premiums once they are 66. That single fact drives almost everything else.
The surcharge, called the Income-Related Monthly Adjustment Amount (IRMAA), works as a cliff rather than a slope, and it is unforgiving: one dollar over a tier triggers the full surcharge for the year. For 2026, joint filers stay at the standard $202.90 monthly Part B premium as long as MAGI sits at or below $218,000. Cross into the next tier and the total Part B premium jumps to $284.10 per month per spouse. At the top tier, joint filers pay $689.90 per month each for Part B alone, with a separate Part D surcharge layered on top.
Traditional IRA withdrawals are fully taxable ordinary income, and every dollar flows straight into MAGI. If the couple pulls enough from the IRA to cover a year of living expenses, health insurance, and a cushion, and one of them also starts Social Security mid-year, the taxable portion of those benefits stacks on top. A household that felt safely under $218,000 on paper can land just over the line, and the cliff does the rest.
Where the Bridge Year Touches Everything Else
The same MAGI spike has a second edge before Medicare begins. Pre-65 health coverage through the Affordable Care Act marketplace is income-tested, and subsidy phase-outs start well below the IRMAA threshold. A couple safely under $218,000 can still watch premium tax credits shrink or disappear during the bridge months.
Inflation adds a quiet third squeeze. The 2026 Social Security cost-of-living adjustment (COLA) came in at 2.8%, which helps benefits keep pace, but IRMAA brackets and Part B premiums move on their own schedule. A surcharge locked in by one bad income year does not soften just because the next COLA is modest.
Sourcing the Bridge More Carefully
The fix is less about cutting spending and more about choosing which bucket the money comes from. Roth withdrawals, basis from a taxable brokerage account, cash savings, and health savings account dollars do not inflate MAGI the way a traditional IRA distribution does. Mixing sources during the bridge year can keep reported income under a tier even when total spending stays the same.
Two more details matter. Starting Social Security in the bridge year adds taxable income at exactly the wrong moment, so delaying the claim until after the income picture settles is worth modeling. And if a one-time spike still pushes them over, Form SSA-44 lets retirees appeal an IRMAA surcharge after a qualifying life-changing event such as work stoppage, which is precisely what retirement is.
Running a rough MAGI projection for the bridge year, with every income source counted, is the cheapest insurance available against a surcharge that lingers for a full twelve months. Every household’s mix of accounts, ages, and timing is different, and small shifts in when income lands can change the answer more than people expect.
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