Margaret retired from a hospital nursing career at 66 with a defined-benefit pension of about $55,000, a 403(b) and IRA worth roughly $780,000, a taxable brokerage account, and a Social Security benefit near $30,000. She timed her Part B enrollment perfectly, chose Original Medicare with a Plan G supplement, and never missed a deadline. This spring, her Social Security statement showed a new deduction line she had never seen before. Her Part B premium had jumped from the standard rate to something much larger, and her Part D plan tacked on its own surcharge. She had crossed an IRMAA threshold two years earlier without knowing it.
Only about 8% of Medicare Part B enrollees pay any IRMAA surcharge. But Margaret’s situation is common among single retirees with a mid-career pension plus a healthy 403(b).
How the Tier 2 Cliff Works
IRMAA uses a two-year income lookback. The premium Margaret pays in 2026 keys off her 2024 tax return: adjusted gross income from Form 1040 line 11, plus tax-exempt interest from line 2a. Municipal bond income that felt tax-free still counts. The brackets are cliffs. One dollar over a threshold moves a beneficiary into the next tier for the entire year.
For a single filer in 2026, the tiers look like this:
| 2024 MAGI (single) | Part B surcharge (monthly) | Total Part B premium |
|---|---|---|
| $109,000 or less | $0.00 | $202.90 |
| $109,001 to $137,000 | $81.20 | $284.10 |
| $137,001 to $171,000 (Tier 2) | $202.90 | $405.80 |
| $171,001 to $205,000 | $324.60 | $527.50 |
Margaret’s 2024 tax return showed her $55,000 pension, the taxable portion of her Social Security (roughly 85% of the benefit), and a $60,000 IRA withdrawal she took to renovate her kitchen and pay off her car. Add it up and her MAGI cleared $137,000 by a few thousand dollars. That single step into Tier 2 replaced her standard $202.90 Part B premium with $405.80 per month, and layered a Part D IRMAA surcharge on top of her drug plan premium. On an annual basis, the Part B piece alone runs into the low four figures. Had she stayed under $137,000, she would have paid the lower Tier 1 surcharge of $81.20 per month instead.
Married couples get roughly double the single-filer brackets. When one spouse dies, the survivor files single the following year, and the same household income can trigger IRMAA or jump a tier without anything else changing. Margaret is already single, so she lives inside those tighter brackets every year. A pension that would sit comfortably under the joint threshold pushes a single filer close to Tier 1 before any IRA withdrawal is added.
What Margaret Can Do Now
The 2024 return is closed. The 2025 return determines her 2027 premium, and 2026 income determines 2028. Both are still in play.
- Manage Withdrawals to the Cliff. Model this year’s projected MAGI against the $137,000 Tier 2 line and the $109,000 Tier 1 line. A large one-time purchase funded with a taxable IRA draw can cost more in IRMAA surcharges over the next two years than the interest on a short bridge loan.
- Plan for QCDs Once RMDs Begin. Required minimum distributions start at age 73 for Margaret. Qualified charitable distributions from an IRA (available at 70½) satisfy RMDs without adding to MAGI, so a charitably inclined retiree can shave IRMAA exposure at the same time.
If projected MAGI sits within about $20,000 of the next tier, a fee-only advisor who models Medicare surcharges alongside tax brackets can price whether a partial Roth conversion in a lower-income year saves money against the two-year IRMAA hit it creates. Margaret should consider drawing from the taxable brokerage first and keeping the 403(b) spigot barely cracked until the pension-plus-Social-Security math is back under the Tier 1 line.
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