He Will Retire at 62 and Draw $120,000 a Year From His 401(k) Until Social Security Starts at 67. The Years He Is 63 and 64 Will Determine His First Two Medicare Premiums Above $284.10 a Month

A 62-year-old leaves his job with a large traditional 401(k) and a simple plan. He will draw $120,000 a year to live on, then start Social Security at 67. He sees ages 63 and 64 as silent bridge years. Medicare will use income from those years to calculate his first two premium bills, something he may not have anticipated.

Most retirees never face this. The Centers for Medicare & Medicaid Services (CMS) says income-related surcharges affect roughly 8% of people with Medicare Part B. A single filer with income at or below $109,000, or a joint filer at or below $218,000, pays the standard $202.90 monthly Part B premium in 2026. He is above that line.

Why Ages 63 and 64 Still Count

Social Security sets IRMAA from the most recent federal tax return the IRS provides, which usually means income from two years earlier. Tax year 2024 sets 2026 premiums. Say our retiree turns 62 in 2026. His 401(k) withdrawals in 2027 (age 63) set his 2029 premiums at 65, and his 2028 withdrawals (age 64) set his 2030 premiums at 66.

SSA measures modified adjusted gross income (MAGI), which it defines as your total adjusted gross income and tax-exempt interest income. Every dollar he takes out from a traditional 401(k) lands in AGI. Interest from municipal bonds he views tax-free also gets added back.

What a $120,000 Withdrawal Could Do

If he has no other income, a $120,000 withdrawal puts a single filer $11,000 over the first limit. Under 2026 rules, that drops him into the first IRMAA level: $284.10 a month for Part B, plus a $14.50 monthly Part D surcharge if he signs up for drug coverage.

Using 2026 rates, his combined Part B and Part D surcharges would total $1,148.40 annually, or $2,296.80 over two years, assuming he has both types of coverage. He has $17,000 of room before the second level. CMS updates premiums and brackets every year, so nobody knows the actual 2029 and 2030 numbers yet. Use these figures to judge the scale of the cost. If he were married and filing jointly, the same $120,000 would fall well under the joint limit and cause no surcharge. (Among the Medicare line items that catch retirees off guard is IRMAA, and we mapped the rest in a free guide here: Medicare’s Hidden Bills.)

Spending Money Is Different From Reporting Income

IRMAA prices the income he reports. He can still spend $120,000 at 63 and report much less if some of that money comes from sources that stay out of AGI:

• Cash savings: Pulling money from a bank or money market account creates no income. Only the interest it earns counts.
• Qualified Roth withdrawals: The IRS treats qualified Roth distributions as tax-free distributions, so they stay out of AGI.
• Taxable brokerage sales: Only the realized gain lands in AGI.

Here is the rough math. He takes $109,000 from the 401(k) and covers the other $11,000 from cash or Roth money. Under the 2026 income limit, his MAGI would stay low enough to avoid the surcharge, assuming he has no other taxable income. The pressure returns at 67. Once Social Security starts, the taxable share of his benefit adds to MAGI, and income at 67 sets his premiums at 69.

Three Decisions Before He Turns 65

1. Project MAGI for 2027 and 2028 now. Add up 401(k) draws, interest, dividends, capital gains and tax-exempt interest. Going one dollar over a limit triggers the full surcharge for that level, so he should move any excess to cash or Roth sources before December 31 of each lookback year.
2. Use the year Medicare never prices. Income at 62 sets premiums at 64, before he enrolls. If 62 is 2026, he has until December 31 to take extra from the 401(k) and bank the after-tax cash for 63 and 64. The cost: that extra income lands in a higher federal bracket this year. He should consider the added tax against the $1,148.40 annual surcharge it could avoid.
3. Know the limits of Form SSA-44. Social Security may lower IRMAA after qualifying life changes, including retirement, reduced working hours, divorce or the death of a spouse. His retirement at 62 could qualify, but his continuing $120,000 withdrawals may leave his income too high for relief. The withdrawals themselves don’t qualify. If he files an amended tax return that lowers his reported income, he can also ask Social Security to review his premium determination.

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