How One RMD Mistake Triggers a $690 Medicare Bill

When you’re in the process of saving for retirement, it can be tempting to put your money into a traditional IRA or 401(k). These accounts give you a tax break on contributions, allowing you to legally shield income from the IRS.

But traditional IRAs and 401(k)s come with consequences down the line. Once you’re retired, you’ll pay taxes on the money you withdraw from these accounts. And once you turn 73 or 75, depending on your year of birth, you’ll be forced to start taking required minimum distributions (RMDs).

But RMDs can do more than increase your tax bill. They can also make your Medicare premiums much more expensive than expected.

Beware this big RMD trap

The frustrating thing about RMDs is that they could force you into a larger tax bill — even if you don’t need the money you’re withdrawing. But it’s important to recognize that raising your taxable income substantially via RMDs could leave you paying a lot more for Medicare.

If your income climbs high enough, you could face surcharges on your Medicare premiums known as income-related monthly adjustment amounts, or IRMAAs. IRMAAs are based on your adjusted gross income (AGI) from two years prior. And they could make both Parts B and D more expensive.

In 2026, the standard monthly premium for Medicare Part B is $202.90. But thanks to IRMAAs, Medicare Part B premiums can reach as high as $689.90 per month for higher-income enrollees. And premiums that steep could deal your finances a major blow, even if you have a strong income.

Ways to avoid a big hit

The good news is that with careful planning, you may be able to avoid pushing yourself into the highest IRMAA tier. One of the most effective strategies for reducing your AGI is to do a qualified charitable distribution (QCD).

A QCD allows you to send money directly from your IRA to a qualified charity. The distribution can count toward satisfying your RMD, but the amount transferred generally isn’t included in your taxable income.

Another strategy is doing Roth conversions before RMDs begin. By converting a traditional retirement account to a Roth IRA over several years, you can reduce the size of your future RMDs or potentially eliminate them altogether, making it easier to stay below IRMAA thresholds in retirement.

However, Roth conversions require careful planning. The amount you convert is generally taxable in the year of the conversion. If you convert too much at once, you could actually increase your income enough to trigger an IRMAA surcharge for a future year. That’s why many retirees spread conversions over multiple years instead of making one large conversion all at once.

A little planning could help you avoid a much bigger Medicare bill

RMDs are unavoidable for many retirees. But the financial consequences don’t have to catch you by surprise. If you plan ahead, you may find that there are strategies you can use to avoid paying a massive amount of money for Medicare each month. And if you do get stuck paying IRMAAs and your income has decreased, you can look into filing an appeal.

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