RMD Planning Gone Wrong: Why a $3.23 Million 401(k) Doesn’t Protect You From Medicare Tax Creep

A 73-year-old widow with $3.23 million sitting in a traditional 401(k) opens her first Required Minimum Distribution notice in January 2026 and sees a withdrawal figure of roughly $122,000. She assumes the ordinary income tax hit is the whole story. The second bill arrives two years later in the form of Medicare surcharges, and over the balance of her retirement those surcharges quietly add up to about $42,000.

This is the RMD tax cascade almost nobody models before it hits. The math is public, the thresholds are published, and the trap still catches high-balance savers every year.

How a $122,000 RMD Becomes an IRMAA Problem

Start with the withdrawal itself. At age 73, the IRS Uniform Lifetime Table divisor is 26.5. A $3.23 million traditional 401(k) balance divided by 26.5 produces a first-year RMD of roughly $121,887, which we will round to $122,000. That money lands on the tax return as ordinary income whether she needs it or not.

Now stack the rest of her income. A late-husband survivor benefit of $45,000 in Social Security means 85%, or roughly $38,250, counts toward Modified Adjusted Gross Income. She also has $15,000 in taxable interest and dividends, pushing MAGI near $175,250.

That figure matters because the 2026 Medicare Part B Income-Related Monthly Adjustment Amount for a single filer with MAGI greater than $171,000 and less than or equal to $205,000 is $324.60 per month, on top of the $202.90 standard premium. The IRMAA surcharge alone runs $3,895 per year, and Part D adds another surcharge on top.

The Two-Year Lookback That Makes It Worse

IRMAA uses the tax return from two years prior. The 2026 RMD does not raise Medicare premiums until 2028. Most retirees discover the surcharge when the Social Security Administration mails an initial determination notice they were not expecting, and by then the triggering income year is closed.

Assume the widow lives to her actuarial life expectancy of roughly 84. That leaves about 11 years of RMDs, each large enough to keep her in the same IRMAA tier as the portfolio compounds against a rising divisor. Eleven years of $3,895 in Part B surcharges alone totals $42,847. Layer in Part D IRMAA and the number pushes past $50,000. That is real money set against a $78,535 average annual household budget.

Why the Trap Is Wider in 2026

Two forces are quietly compressing the safety margin. Core PCE has climbed from 126.43 in July 2025 to 130.08 in May 2026, and the 2.8% Social Security COLA for 2026 lifted nominal benefits without moving IRMAA thresholds proportionally. Meanwhile the household savings rate has fallen from 6.2% in early 2024 to 3.9% in early 2026, meaning fewer retirees have taxable brokerage cash to spend down instead of tapping the 401(k). The pull toward the pre-tax account, and toward IRMAA, is stronger than it was two years ago.

Three Moves That Actually Change the Number

1. Run your MAGI projection before you take the RMD. Add the RMD, 85% of Social Security, and any interest, dividends, or capital gains. If the total lands within $5,000 of a bracket edge (the single-filer cliffs sit at $109,000, $137,000, $171,000, $205,000 and $500,000), even a small tax-loss harvest or timing shift can drop you a full tier and save $1,500 to $2,000 in that year alone.
2. Use a Qualified Charitable Distribution to shrink the taxable RMD. A retiree age 70.5 or older can direct up to $108,000 per person in 2026 straight from the IRA to a qualified charity. It satisfies the RMD, never hits AGI, and is the single cleanest tool for staying under an IRMAA cliff if you already plan to give.
3. Do partial Roth conversions in the gap years between 65 and 73. Converting $50,000 to $80,000 annually while filling out the 22% or 24% bracket shrinks the future RMD base and pulls MAGI down permanently. If MAGI ever crosses the first IRMAA threshold, a fee-only advisor typically pays for themselves in one avoided year.

The 4.57% yield currently available on 10-year Treasuries makes the cost of tax-inefficient withdrawals easier to see. Money surrendered to an avoidable IRMAA surcharge is money that could have been earning a real return in a taxable ladder. The RMD is mandatory. The Medicare bill on top of it is avoidable.

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