She Moved $350,000 Into an Annuity at 70. Her $2,100 Monthly Check Stayed the Same. Everything Else Changed.

A 70-year-old retiree moved $350,000 from a traditional IRA into a single-premium immediate annuity, trading market risk for a guaranteed monthly deposit of $2,100. That check arrives on the same day each month, in the same amount, for as long as the contract runs. The deposit is the one fixed point in her financial life. Her federal tax bill, Medicare premium, and the taxable share of her Social Security benefit all moved once the transaction closed.

Why the Check Is Fixed but the Tax Bill Is Not

Annuitization converts a lump sum into a stream of payments, and once you make that election it is generally irrevocable. When the lump sum comes from a traditional IRA, every dollar of every payment is treated as ordinary income. The money was never taxed on the way in, so there is no return-of-principal exclusion the way there would be with a nonqualified annuity. That $2,100 lands on her 1099-R each year at full value, stacking on top of Social Security, any pension income, and whatever other IRA withdrawals she takes.

The mechanics are straightforward: a traditional retirement account grows tax-deferred, and every dollar that comes out is taxed as ordinary income in the year it arrives. An annuity funded from that account delivers the same money on a fixed schedule rather than through ad hoc withdrawals, but the tax character does not change. The income is real, it hits the tax return, and it affects two other line items that many retirees overlook entirely.

How IRMAA Reaches Back Two Years

IRMAA stands for the Income-Related Monthly Adjustment Amount, the surcharge Medicare adds to Part B and Part D premiums when modified adjusted gross income crosses certain thresholds. The standard 2026 Part B premium is $202.90 per month, and IRMAA affects roughly 7% to 8% of people enrolled in Part B. The first surcharge tier for 2026 begins above $109,000 in MAGI for a single filer, or $218,000 for a joint return. Cross that line and the total Part B premium rises to $284.10 per month, with an additional $14.50 added to Part D.

The trap is the two-year lookback. Medicare uses the tax return from two years prior to set the current year’s premium. A retiree who annuitizes in 2026 may not feel the IRMAA consequence until 2028, when the bracket-setting return catches up. By then, the annuitization is done and the income is locked in permanently. IRMAA is redetermined each year, and you can appeal after a qualifying life-changing event such as the death of a spouse, divorce, or work stoppage, using Form SSA-44. A large IRA-to-annuity transfer is not, by itself, a qualifying life-changing event, which is one of several IRMAA quirks covered in a free Medicare guide.

Social Security Squeeze From Annuity Income

Provisional income is the IRS formula that governs how much of a Social Security benefit is taxable. It adds adjusted gross income, nontaxable interest, and half of Social Security benefits together. Once provisional income crosses the lower thresholds for single or joint filers, part of the benefit becomes taxable. Above the upper thresholds, as much as 85% of the benefit is subject to tax. The $2,100 monthly annuity payment counts in full toward that calculation. A benefit that was mostly tax-free before annuitization can shift to mostly taxable afterward, with no change in any other aspect of the retiree’s financial picture.

What Fixed Really Means in a High-Inflation Environment

That monthly check is locked in for life. It will never get a cost-of-living bump. The Consumer Price Index for All Urban Consumers stood at 333.918 as of July 2026, according to the Bureau of Labor Statistics, with headline inflation running at 3.4% year over year. Current estimates for the 2027 Social Security cost-of-living adjustment are clustering at 3.5% to 3.6%, according to the Senior Citizens League, independent analyst Mary Johnson, and AARP, which would make it the largest COLA since 2023. Social Security will go up next January. The annuity will not budge.

Insurers priced that contract using prevailing interest rates, specifically benchmarks like the 10-year Treasury yield, which sat at 4.64% on August 25, 2026, the day before this article published. That level made the initial payout look appealing compared with the low-rate environment of prior years. Since then, Treasury yields have climbed further toward multi-year highs above 5%, a move that benefits new annuity buyers but does nothing for anyone already locked into an older contract. A fixed payment that looks adequate in year one faces real erosion if inflation persists at current rates into the decade ahead.

What She Could Have Done Differently

• Partial annuitization. Moving a portion of the IRA rather than the full $350,000 would have produced a smaller guaranteed check and left assets available for Roth conversions, charitable distributions, or emergency spending.
• Timing around IRMAA brackets. Modeling the two-year lookback before signing and spreading taxable income across calendar years can keep MAGI below the next surcharge tier.
• Using non-IRA money. Funding an annuity with taxable savings creates a payment that is partly a nontaxable return of principal, reducing the pressure on IRMAA and on the Social Security provisional-income calculation.

The check will keep arriving as promised. The remaining variability sits in the tax return, the Medicare premium, and the taxable share of Social Security. Those are the elements the annuity contract cannot fix.

Editor’s note: The CPI-U figure for July 2026 has been corrected to 333.918 from the Bureau of Labor Statistics, and the 2027 Social Security COLA projection has been updated to reflect the current consensus range of 3.5% to 3.6% from TSCL, Mary Johnson, and AARP, up from the 3.1% estimate cited at publication. Post-publication context on the rise in Treasury yields since late August 2026 has also been added.

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