RMD Tax Trap: How $122,000 in 401(k) Withdrawals Can Cost You $42,000 in IRMAA Surcharges Alone

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Margaret turned 75 in March and took her first required minimum distribution from a $3 million traditional 401(k). Using the IRS Uniform Lifetime Table divisor of 24.6 for age 75, that first RMD ran roughly $122,000. She had budgeted for the federal income tax. She had not budgeted for the Medicare premium surcharges the same withdrawal will trigger two years later, or the ones already locked in for the two RMDs that follow.

The cliff her CPA never mentioned

Margaret’s husband is also Medicare-eligible. Between his pension, both Social Security checks, dividends on a sizable taxable brokerage account, and her new RMD stacked on top, their projected modified adjusted gross income clears the top joint IRMAA tier. For 2026, that tier kicks in for couples at modified adjusted gross income at or above $750,000, and the consequences are absolute.

In that bracket, each spouse pays an extra $487 per month in Part B IRMAA, bringing the total Part B premium to $689.90. Layer on the Part D income-related adjustment of $91 per month at that same tier, and each spouse is paying $578 per month in surcharges. For the household, that is $1,156 per month, or $13,872 a year, on top of the standard premium everyone already pays.

Why three RMDs equal three IRMAA years

The 2-year lookback is what makes this an ambush. The $122,000 RMD Margaret took this year sets her 2028 Medicare premiums. The age 76 RMD next year, using divisor 23.7 on a portfolio that grew, drives 2029 premiums. The age 77 RMD, divisor 22.9, drives 2030 premiums. Three withdrawals, three full years at the top household IRMAA, and the surcharge tab lands at roughly $42,000 before a single federal income tax dollar is counted.

The bill does not stop at Medicare. Each RMD dollar runs through the 2026 federal brackets, where joint filers enter the 24% rate above $211,400 and the 32% rate above $403,550. With 85% of Social Security pulled into taxable income, the effective marginal rate on the last RMD dollars can sit near 40%. IRMAA is the surprise. The bracket compression is the punchline.

Why the brackets matter more than the rates

IRMAA tiers are cliffs. One dollar over the threshold reprices Medicare for the entire calendar year, for both spouses. Dropping from the top tier into the next one down ($410,000 to $750,000) saves the couple roughly $2,800 a year in combined IRMAA. That makes income management between November and December the highest-paid hour of work a 75-year-old can do.

Three moves that change the number

1. Use a qualified charitable distribution to shave the RMD before it lands in MAGI. A QCD sends money directly from the IRA to a qualified charity, satisfying part of the RMD without adding a dollar to taxable income. The 2026 QCD limit is $111,000 per person. For Margaret, even a $40,000 QCD pulls reported income below the top IRMAA cliff and recovers the surcharge for the year it affects.
2. Treat the next Roth conversion window as a one-time opportunity. Once RMDs begin, every converted dollar stacks on top of forced income and the lookback still bites. As Suze Orman bluntly puts it, RMDs are only avoidable inside a current employer’s 401(k) for those still working past 72. Margaret’s conversion runway closed; her grandchildren’s has not.
3. Re-run the MAGI projection every November. If projected joint income sits within $25,000 of the next IRMAA cliff, accelerate deductible medical expenses, defer realized gains, or layer a QCD on top of the RMD to drop a tier. The break-even on professional advice flips fast: at the top tier, every $1,000 of MAGI reduction is worth roughly $30 in saved IRMAA.

Margaret cannot undo the 2026 RMD. She can keep 2027 and 2028 from compounding the bill. If projected household MAGI exceeds the first joint IRMAA threshold of $218,000, the planning math alone justifies a fee-only advisor who specializes in retirement-income sequencing. The surcharges are the price of not knowing the brackets existed.

The post RMD Tax Trap: How $122,000 in 401(k) Withdrawals Can Cost You $42,000 in IRMAA Surcharges Alone appeared first on 24/7 Wall St..