Susan is 69, retired three years ago after running an elementary school, and until recently she thought her retirement math was settled. She draws a $64,000 state teacher pension, sits on a $980,000 403(b), and now receives a Social Security check that is larger than the one she penciled in during her planning years. Why? The Windfall Elimination Provision (WEP) and Government Pension Offset (GPO), which historically shrank Social Security benefits for public employees with non-covered pensions, were repealed under the Social Security Fairness Act. Educators who spent careers watching their projected benefits get chopped by roughly 60% or more suddenly saw the full amount land in their bank account.
That’s great, but it can trigger a Medicare premium hike. The extra Social Security, stacked on top of her pension and 403(b) withdrawals, pushed her modified adjusted gross income past the first IRMAA threshold. Her Part B premium jumped and her Part D premium got a surcharge.
This scenario is common among retired educators, nurses, firefighters, and municipal workers who had non-covered employment. The Bipartisan Policy Center estimated that roughly 2 million people were affected by WEP alone, and a large share of them also carry sizable 403(b) or 457(b) balances alongside a defined-benefit pension. Two guaranteed income streams plus a tax-deferred account is a lovely retirement. It is also a MAGI machine.
The IRMAA cliff for a single filer in 2026 sits at modified adjusted gross income above $109,000. Cross it by a dollar and the Part B premium moves from $202.90 per month to $284.10, with an additional $14.50 Part D surcharge. Go one tier higher and Part B jumps again to $405.80 monthly.
Susan’s pension does not pause, her Social Security cannot be paused without giving up income she is entitled to, and at age 73 the required minimum distributions from her 403(b) will start whether she needs the cash or not. The IRMAA problem she has today gets worse if nothing changes.
A Lever to Move the Outcome
The one variable Susan controls is the 403(b). Pension income is fixed. Social Security, post-Fairness Act, is fixed. That leaves the tax-deferred balance as the only place to shape MAGI in future years, and she has roughly four years before RMDs force the issue.
Two moves to consider:
- Roth conversions during the low-MAGI window, if her plan allows in-plan Roth conversions. Many 403(b) plans do; some do not. If hers does, converting measured slices of the 403(b) each year, sized precisely to stay under the next IRMAA tier, shrinks the future RMD base. A smaller pre-tax balance at 73 means smaller mandatory distributions and lower MAGI for the rest of her life. If the plan does not permit in-plan Roth conversions, a rollover to a traditional IRA followed by partial Roth conversions accomplishes the same goal.
- Qualified Charitable Distributions starting at age 70.5. QCDs let her send up to $105,000 per year directly from an IRA to charity, and the distribution never hits MAGI. For a retiree who already gives to her church or a scholarship fund, this is a way to satisfy future RMDs without inflating the income that determines her Medicare premium.
Timing matters. IRMAA uses a two-year lookback, so the premium she pays in 2026 reflects her 2024 return. Any discretionary 403(b) withdrawal, Roth conversion, or capital gain realized this year will show up on her Medicare bill in 2028. Plan for the tax year, not the calendar year.
What to Do This Month
Call the 403(b) plan administrator this week and ask two questions. Does the plan permit in-plan Roth conversions, and does it permit partial rollovers to an IRA for someone already separated from service? The answers determine whether the Roth-conversion runway is open inside the plan or requires a rollover.
If Susan’s total estate is modest and her charitable intent is real, the QCD path alone may carry most of the weight. If the 403(b) balance is projected to grow past $1.2 million before RMDs begin, Roth conversions do the heavy lifting.
Contact [email protected] for any questions or corrections.
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