He Won $25,000 on a Scratch Ticket at 70. Medicare Treated It Like a Salary for a Year

A 70-year-old in Ohio posts on a retirement forum: he scratched a lottery ticket at a gas station on the way home, won $25,000, paid federal withholding on the spot, and figured that was the end of it. Two years later, a letter from the Social Security Administration arrived telling him his Medicare Part B premium was going up by roughly a thousand dollars for the year. He never earned a paycheck that year. Medicare treated the ticket like one anyway.

This is the mechanic every retiree with a one-time income spike needs to understand. A windfall you receive today can raise your Medicare premiums for a single year, two years from now, and then quietly fall off. If your income sits comfortably below the first IRMAA threshold and stays there, this article is not aimed at you. Only a relatively small share of people with Medicare Part B pay any income-related surcharge at all. But if your baseline income already puts you within striking distance of that first cliff, a scratch ticket, a Roth conversion, or a good year at the casino can push you over it.

How a Lottery Win Becomes “Salary” for Medicare

IRMAA (the Income-Related Monthly Adjustment Amount) is a surcharge added on top of your standard Part B and Part D premiums when your modified adjusted gross income clears certain thresholds. MAGI for this purpose means AGI (Form 1040, line 11) plus tax-exempt interest (line 2a). Gambling winnings, including lottery and scratch-ticket prizes, land in AGI as “other income.” Municipal bond interest that felt tax-free gets added back too. Social Security is largely a wash at this income level, since most of it is already taxable for higher earners.

Now the scenario. Our 70-year-old already had a pension of about $40,000, an RMD around $30,000, and taxable Social Security bringing his baseline MAGI near $95,000, comfortably under the first tier. Then the ticket hits for $25,000. His MAGI for the year lands near $120,000, straight into the first IRMAA bracket for individual filers: above $109,000 and up to $137,000. One critical feature of the IRMAA system makes this especially costly: it functions as a cliff rather than a graduated scale. Crossing a threshold by even one dollar triggers the full surcharge for the entire bracket, not just on the amount above the line.

The Two-Year Lookback and the Exact Damage

SSA uses a two-year lookback. Income reported on his 2026 tax return sets his 2028 Medicare premiums. In 2028, his Part B premium jumps from the standard $202.90 per month to $284.10, a surcharge of $81.20 per month. His Part D plan tacks on another $14.50 per month, paid directly to Medicare. Across twelve months, that comes to roughly $1,150 in extra premiums he would not otherwise owe.

Assuming his baseline income falls back below $109,000 in 2027, his 2029 premiums return to the standard rate. The surcharge lasts one year. But it lands as a lump expense on a fixed income. The 2026 Social Security COLA of 2.8% added roughly $56 per month for the average retired worker. That gain is more than consumed by a $95.70 monthly IRMAA bill in Part B and Part D combined, leaving the retiree net negative for the year despite the COLA. It is also worth noting that IRMAA income brackets are indexed to inflation each year, which means the thresholds shift annually and MAGI that clears a line comfortably in one year can breach it the next even when nothing changes but the index.

Why SSA-44 Will Not Save Him

Readers routinely ask whether they can appeal. SSA-44 is the IRMAA reconsideration form, and it works only for a specific list of life-changing events: marriage, divorce, death of a spouse, work stoppage or reduction, loss of income-producing property, loss of pension income, or an employer settlement payment. A lottery win, a Roth conversion, capital gains on a home sale, an inherited IRA distribution: none of these qualify. The form exists to reverse income drops caused by genuine life disruptions such as job loss, retirement, or the death of a spouse, not to offset a windfall that boosted income.

One nuance worth flagging involves filing status. If a spouse in a similar situation dies before the lookback year clears, the survivor files as a single filer the following year, and the single brackets are roughly half the joint ones. The same household income can newly trigger IRMAA or bump a tier without a single dollar changing.

What to Do

• Before cashing a large ticket, selling appreciated property, or executing a Roth conversion in a year you are already close to $109,000 in MAGI, model the two-year IRMAA cost against the after-tax benefit. Splitting the event across two calendar years can sometimes keep you under the cliff both times.
• When the IRMAA determination letter arrives, check which tax year it references. If SSA used a year older than what is on file, request an update using more recent tax returns.
• Budget for the surcharge as a one-year expense. It attaches to Part B and Part D premiums for twelve months and drops off if your income returns to baseline.

Editor’s note: This update refreshed the article to reflect confirmed 2026 figures, including the $202.90 standard Part B premium, the $284.10 first-tier IRMAA premium, the $14.50 Part D surcharge, and the 2.8% Social Security COLA. Context was added on IRMAA’s cliff-effect mechanism and the annual inflation indexing of income thresholds.

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