70-Year-Old Federal Retiree With $1.1 Million Discovers One RMD Disqualified Him From the Hold-Harmless Rule
Most federal retirees assume the hold-harmless rule will protect their Social Security check from rising Medicare premiums, but a seven-figure TSP balance carries a hidden expiration date on that protection.
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A 70-year-old retired federal employee has a seemingly simple question: won’t his Social Security cost-of-living adjustment offset any Medicare Part B premium increase? Won’t the hold-harmless rule protect him? With roughly $1.1 million in his Thrift Savings Plan, a $40,000 FERS pension, and Social Security income, he assumed the same protection covering most retirees would apply to him.
It will. But only until he turns 73.
The Social Security hold-harmless provision caps the dollar increase in a beneficiary’s Part B premium at the dollar increase in their Social Security check from the annual COLA. In practice, your net Social Security deposit cannot fall from one year to the next simply because Medicare premiums outpaced your COLA. In 2026, the COLA landed at 2.8%, and the standard Part B premium settled at $202.90 per month, up $17.90 from the 2025 level of $185.00. For most beneficiaries, the hold-harmless rule absorbed that gap.
Two groups fall outside that protection: new enrollees, and anyone subject to an Income-Related Monthly Adjustment Amount (IRMAA). According to the Medicare Trustees Report, about 5.1 million beneficiaries paid Part B IRMAA surcharges in 2025, roughly 7% of all enrollees. That second exclusion is precisely the one that catches high-balance TSP holders.
The RMD at 73 That Changes the Math
Under current law, required minimum distributions from the TSP begin at age 73. The One Big Beautiful Bill Act, signed into law on July 4, 2025, left that rule entirely untouched. The moment the first RMD lands, the income picture shifts sharply.
His FERS pension runs about $40,000 annually. Add the taxable portion of his Social Security, then layer on a first-year RMD calculated against a $1.1 million balance. For a single filer, the first IRMAA tier begins when MAGI crosses $109,000. That RMD alone is likely to push him over that line.
Once he crosses it, Part B climbs from $202.90 to $284.10 per month. That $81.20 monthly surcharge adds up to roughly $1,148 in extra Part B costs for the year, before accounting for the Part D side. Part D adds another $14.50 monthly surcharge on top of whatever his drug plan charges. To put the cliff structure in sharper terms: crossing that first threshold by even one dollar triggers $1,052 in combined annual surcharges for Part B and Part D combined. There is no phase-in and no partial relief. If the RMD pushes him into the next IRMAA bracket (MAGI above $137,000 for a single filer), Part B totals $405.80 monthly and the Part D surcharge grows to $37.50. Each step is its own cliff.
Because he is now an IRMAA payer, hold-harmless no longer applies. Any future Part B increase lands in full, regardless of what his COLA delivers. The system also uses a two-year lookback: income earned in 2026 drives 2028 premiums. The 2028 IRMAA thresholds for single filers are projected to rise to approximately $114,000 to $116,000 as inflation indexing moves the brackets upward, but that shift offers only modest relief when an RMD from a seven-figure account is the driver. The income decisions made today surface in the premium bill the year after next.
The TSP-Specific Wrinkle
The TSP does not permit qualified charitable distributions, a detail that trips up many federal retirees. A QCD allows someone aged 70½ or older to send money directly from a traditional IRA to a qualified charity. The distribution is capped at $111,000 per person in 2026 and excluded entirely from MAGI, making it one of the most powerful tools available for trimming RMD-driven income before it crosses an IRMAA cliff. The catch: it works only from an IRA. TSP funds must first be rolled to a traditional IRA before a QCD becomes available.
One additional planning detail deserves attention. The One Big Beautiful Bill Act introduced a $6,000 senior bonus deduction for taxpayers age 65 and older, available for tax years 2025 through 2028. However, the deduction phases out for MAGI above $75,000 for single filers, meaning a retiree carrying a pension, Social Security, and an RMD will likely see little or none of that benefit. More importantly, the deduction reduces taxable income, not MAGI, so it does nothing to reduce Medicare surcharges even for retirees who fully qualify for it.
Roth conversions face the same friction as QCDs inside the TSP. In-plan Roth options within the TSP offer limited flexibility on conversion size, timing, and withholding. A traditional IRA gives full control over all three levers.
Three Actions Before 73
The first move is rolling a meaningful portion of the TSP to a traditional IRA. That single step unlocks QCDs at age 70½ and opens clean Roth conversion mechanics. Some balance can stay in the TSP if the G Fund plays a role in the fixed-income sleeve, but enough should move to execute the two steps that follow.
The second move is running partial Roth conversions between now and age 73. Every dollar converted at today’s rates is a dollar that will not sit in the traditional balance generating a future RMD. The practical target is filling the 22% or 24% federal bracket while staying below the $109,000 single-filer MAGI line. With the One Big Beautiful Bill Act having extended current income tax rates, those brackets remain in place through at least 2028, giving this retiree a confirmed runway for the strategy. A conversion that crosses the $109,000 IRMAA threshold may reduce future RMD taxes, but it also triggers the first-tier surcharge two years out.
The third move is modeling MAGI against IRMAA cliffs every October, before year-end decisions are locked in. A retiree who lands even $500 over a threshold pays the full tier surcharge for the entire year. When projected MAGI sits within roughly $10,000 of a cliff, the options are either to defer discretionary income (delay a capital gain, pause a Roth conversion) or to accelerate a deduction (a QCD from the IRA, bunched charitable giving) to stay below the line.
Hold-harmless is real protection, and it will do its job for most beneficiaries through most of their retirement. For the federal retiree with a seven-figure TSP, it is a floor with a built-in expiration date at age 73. What he does in the three years between 70 and 73 will determine whether he pays $202.90 a month or considerably more.
Editor’s note: This article was updated to reflect that approximately 5.1 million beneficiaries paid Part B IRMAA surcharges in 2025 (about 7% of all Part B enrollees, per the Medicare Trustees Report), that the One Big Beautiful Bill Act’s $6,000 senior bonus deduction phases out for single filers with MAGI above $75,000, and that projected 2028 IRMAA thresholds for single filers are expected to rise to approximately $114,000 to $116,000 as brackets are inflation-indexed annually.
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Carl Sullivan has been a Flywheel Publishing contributor since 2020, focusing mostly on personal finance, investing and technology. He started his journalism career covering mutual funds, banking and financial regulation in Washington.Carl is a contributing editor at Financial Advisor Magazine and previously served as managing editor at Financial Planning Magazine. He is a long-time manager of editorial teams covering a variety of topics including news, business and politics. He’s currently the North America Managing Editor for Flipboard and worked previously for Microsoft News and Newsweek.Carl loves exploring the world and lived in India for several years. Today, he resides in New York City’s Queens borough, where you can hear hundreds of different languages just by riding the subway.
