How to Keep Medicare Premiums at the Base Rate for Life With a $1.2 Million 401(k)
Once required distributions begin, a $1.2 million 401(k) can quietly push a retiree past a Medicare threshold that costs thousands of dollars a year in extra premiums, but the window to prevent it closes years before retirement begins.
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A $1.2 million traditional 401(k) can trigger the Medicare income surcharge through higher Part B and Part D premiums once required distributions begin.
The standard 2026 Part B premium is $202.90 a month for single filers with modified adjusted gross income (MAGI) at or below $109,000 and joint filers at or below $218,000. Above those lines, you pay an income-related monthly adjustment amount (IRMAA). About 8% of Part B enrollees pay it.
Your Premium Comes From a Tax Return Filed Two Years Earlier
Medicare sets premiums from the tax return filed two years earlier, so 2026 premiums reflect 2024 income. A Roth conversion at 63 raises your premium at 65, when it cannot be undone.
The lookback matters because premiums keep climbing. The Part B premium is expected to rise in 2027, and the 2027 Social Security cost-of-living adjustment is tracking toward 3.3%. A larger benefit check increases the taxable share of Social Security, going straight into MAGI.
One Dollar Over the Line Costs You a Full Year
IRMAA works like a cliff. An individual at the threshold pays the standard Part B premium. One dollar more and the premium jumps to $284.10, with a $14.50 Part D surcharge. That single dollar costs about $1,148 a year per person, or roughly $2,297 for a married couple.
Each tier above costs more. Above $137,000 single, Part B rises to $405.80 a month, and the top tier hits $689.90. Keeping income a few thousand dollars below a line is one of the best-paying tax moves a retiree can make (we mapped out IRMAA and the other premium traps Medicare quietly hands retirees in a free guide here).
Why $1.2 Million Is Headed for the First Tier
At age 73, the IRS Uniform Lifetime Table divisor is 26.5. Applied to $1.2 million, that gives a first required minimum distribution (RMD) of about $45,283. In practice, it is rarely the only income on the return.
Your RMDs begin at 73 if you were born 1951 through 1959 and 75 if you were born 1960 or later. The divisor shrinks every year, requiring larger withdrawals.
Add up to 85% of Social Security becoming taxable, plus bond interest with the 10-year Treasury near 5.3%, and an individual can pass $109,000 without one discretionary withdrawal.
Shrink the Account Before Medicare Starts Counting
Move money out of the traditional account in years when it costs the least. Because of the lookback, income before age 63 never affects a Medicare premium. That makes the years up to 63 ideal for large Roth conversions, taxed only at ordinary income rates.
From 63 until RMDs start, keep converting but stop each year just under the first threshold. The goal is a traditional balance small enough that future RMDs, Social Security, and investment income stay under the first tier for life. After a rollover to an IRA, qualified charitable distributions also count toward your RMD without being taxable.
Three Events That Can Break the Plan
- A large capital gain. Selling a concentrated stock position adds the full gain to MAGI for that year, even if reinvested.
- A home sale. Any gain above the exclusion counts as income and can move you up a tier for a full year.
- A surviving spouse filing single. The threshold falls from $218,000 to $109,000. Household income usually drops much less because the survivor keeps the larger Social Security check and inherits the entire 401(k).
If income falls after retirement or a spouse’s death, Social Security can make a new IRMAA determination, and IRMAA decisions can be appealed. A capital gain or home sale does not qualify for relief.
Watch This Number Every December
Track MAGI of $109,000 if single or $218,000 if filing jointly. These are the 2026 lines, reset each year.
- Every December, before you complete any conversion or sale, estimate your full-year MAGI, including tax-exempt interest. Leave a buffer of a few thousand dollars below the line.
- Model your RMDs under a single filing status now, so you can see how a survivor’s premiums would change.
- Check the new thresholds each November when CMS publishes them, and adjust next year’s conversion amount to fit.
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Jake has been been working in financial media for almost 15 years. He focuses on all things personal finance for 24/7 Wall St. with high hopes to educate and entertain. Most recently, Jake spent 12 years working various roles at The Motley Fool. He started copy editing fool.com content, worked on premium and marketing campaigns, and helped launch The Ascent, a personal finance brand.
His work has been featured on platforms like MSN, Yahoo Finance, USA Today, and more. He's written about credit cards, social security, ETFs, savings accounts, and just about anything else you can imagine when thinking about money. Jake love to cook, play golf, and tell people he's never had a cavity. (It's true!)
