A retired school principal recently discovered that a pension payout and a 403(b) withdrawal taken in the same year quietly combined to push her income into a higher Medicare premium bracket. The letter announcing the higher premium didn't arrive until two years later, long after the withdrawals were already spent.
That surcharge has a name: the income-related monthly adjustment amount, or IRMAA. It isn't a penalty for doing anything wrong. It's a formula that looks at your tax return from two years ago and raises your Medicare Part B and Part D premiums if your income crossed a set threshold that year, even for one year only.
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How Two Withdrawals in One Year Add Up
IRMAA looks at your modified adjusted gross income, which is your adjusted gross income plus any tax-exempt interest, from the tax return filed two years before the current premium year. A pension payout by itself might sit comfortably under the threshold. Add a 403(b) or 401(k) withdrawal in that same calendar year, and the combined total can cross into a higher bracket, even though neither withdrawal alone would have.
The brackets step up in tiers, and each tier adds a set surcharge to both Part B and Part D premiums. Crossing into the next tier by even a small amount adds the full increase for that tier, not a partial amount, which is what catches people off guard.
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Enter your expected income from each source for the year in question. The total is what matters for IRMAA, not any single source alone.
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What to Do If the Higher Premium Already Arrived
A higher premium notice isn't automatically final. Social Security lets you request a lower IRMAA if a specific life-changing event caused the income spike, including retirement or a reduction in work hours, and the withdrawal itself doesn't count as a life-changing event on its own. If the pension and withdrawal happened because you retired that year, the retirement itself may qualify.
The appeal form asks for the life-changing event and your more current income estimate. It doesn't erase a withdrawal you already took, but it can correct a premium based on income that no longer reflects your situation.
If the withdrawal was part of a larger tax-planning decision, Should You Do a Roth Conversion Before You Retire? covers the same IRMAA risk from a different angle.
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Check each step off as you complete it.
Confirm the current income cutoffs on Medicare.gov before deciding the size or timing of a withdrawal.
Splitting a payout across two tax years can keep both years under a bracket threshold.
If the higher premium arrives and a life-changing event applies, file Form SSA-44 rather than assuming it's permanent.
Save your numbers and next steps so you're ready before you call anyone.
Time Withdrawals Before You Take Them, Not After
The cleanest fix is spacing large withdrawals across different tax years so no single year's income crosses a bracket unnecessarily. That means checking the current year's bracket thresholds before a pension payout, a required minimum distribution, or a discretionary withdrawal, not after the 1099 forms arrive the following January.
If a single large withdrawal is unavoidable, such as a one-time pension buyout, ask a tax preparer whether spreading it across two years, or offsetting it with a lower-income year elsewhere, keeps the two-years-out premium closer to where it already sits.
