I Withdrew $85k from My 401(k) This Year But It Increased My Medicare Premiums. Is This Permanent?

A large 401(k) withdrawal can increase more than your tax bill. If the withdrawal raises your Medicare modified adjusted gross income, it could also trigger an Income-Related Monthly Adjustment Amount, or IRMAA, that increases your Medicare Part B and Part D premiums. Medicare uses a two-year lookback to calculate these surcharges, so a withdrawal taken this year may affect your premiums two years from now. Whether an $85,000 401(k) withdrawal changes your Medicare costs depends on your total income, filing status and where you fall within the IRMAA brackets.

If you’re planning a large retirement account withdrawal, a financial advisor can help you evaluate how it may affect your taxes, Medicare premiums and broader retirement income strategy.

What Are Medicare Premiums?

There are four parts of Medicare, each with its own premium structure. Under Medicare Parts A and C, your premiums are generally not affected by household income.

Medicare Part A is what most people think of as “classic” Medicare. It covers hospital treatment, many types of doctors’ visits and other inpatient care. For most people, it has no monthly premiums. In the rare case that you do pay Part A premiums, it’s based on your work history rather than your household income.

Medicare Part C is a public/private partnership, in which you can use your Medicare coverage to help pay for private insurance. These plans almost always have monthly premiums, but the exact coverage depends on the plan you choose.

Under Medicare Parts B and D, you generally pay a premium based on the specific plan in which you are enrolled. These premiums can then be adjusted based on your household income.

Medicare Part B mainly covers outpatient treatment, personal doctors’ care and medical devices. For most households, this requires a base $202.90 per month premium (effective as of 2026), adjusted based on your income. ¹

Medicare Part D mainly covers prescription medicine. For most households, it requires a monthly premium. The exact amount varies based on the Medicare Part D plan you choose, but you might also have an adjustment based on your household income.

How Do Premium Adjustments (IRMAAs) Work?

The adjustments to your Part B and Part D premiums are called IRMAAs. In all cases, the IRMAA increases your Medicare premium by a specific amount based on your household income. This increase applies for the entire year.

Medicare premium adjustments are based on your Modified Adjusted Gross Income (MAGI). This means that Medicare starts by using your Adjusted Gross Income (your income reduced by any above-the-line tax deductions, but not reduced by your standard deduction). Then it modifies that AGI based on specific qualifications to create a Modified Adjusted Gross Income. Here, the MAGI is your adjusted gross income plus all tax-exempt interest.

In 2026, Part B IRMAAs begin at incomes above $109 individual/$218,000 joint. (Remember, this is based on your income for tax year 2024). Below this threshold, you’d pay $202.90 per month in Part B premiums. Above this level, your monthly premiums increase. This is a tiered scale, with premiums increasing to $284.10 per month at $109,000 individual/$218,000 joint and increasing as high as $689.90 for households with incomes above $500,000 individual/$750,000 joint.

Medicare calculates this adjustment based on a two-year lookback period. This means that for any given year, your Medicare premiums are based on your household income from two years ago. So, for example, in 2026, your Medicare premiums will be determined by the adjusted gross income you claimed on your taxes in 2024. In 2027, your income and portfolio withdrawals from 2025 will determine your Medicare premiums.

A financial advisor can help you keep up with Medicare rules and any changes that may come up.

Will Your Withdrawal Affect Your Premiums?

Here, you’ve withdrawn $85,000 from your retirement plan and are worried about how this will affect your Medicare premiums. To answer this, we actually have to look at a few different questions.

First, as a threshold matter, premium hikes are never permanent. They’re based on your annual household income from year to year. As your income fluctuates, your premiums will fluctuate as well. If you withdraw enough in one year to push your income into a new Medicare bracket, you can manage that by withdrawing less in future years.

Second, if your premiums increased this year, then your current withdrawal had nothing to do with it. Remember, the income adjustment is based on a two-year lookback. So any money you took out this year won’t affect your premiums for two more tax seasons. If your premiums increased this year, it’s because of withdrawals you took two years ago.

To see if this will continue, then, you need to look at your withdrawals over the past few years. If you have kept withdrawing roughly the same amount of money, then your premiums will likely stay high for another two years. You can reduce them going forward by managing your income next year.

Finally, your current $85,000 withdrawal cannot affect your Medicare premiums this year. Depending on your income, this withdrawal might impact your premiums two years from now. If your $85,000 withdrawal was standard, then it will probably not affect your premiums. You will pay the same rates you historically have if you withdraw the same amounts you historically have.

Beyond that, the IRMAA calculation is based on your entire income. This includes Social Security and other portfolio withdrawals. An additional $85,000 is highly likely to push an individual into a new tier of premiums, and will likely increase premiums for a married couple too. For example, say that you ordinarily have $150,000 of income. As an individual you would pay $405.80 per month in 2026 at that rate of income. An additional $85,000 would push your income to $235,000, bumping you up two whole tiers to $649.20 per month.

This won’t necessarily be permanent. It will affect you for an entire year however, as long as you return your income and withdrawals to normal next year, it will be a one-year blip. 

Consider speaking with a fiduciary financial advisor if you have questions about how Medicare premiums fit best into your retirement income strategy.

Bottom Line

Medicare Part B and Part D premiums can rise when your income exceeds certain IRMAA thresholds. A large 401(k) withdrawal may push you into a higher premium tier, but the effect is not immediate because Medicare generally looks at your income from two years earlier. The increase also is not necessarily permanent. If your income falls in a later year, your Medicare premiums may fall as well, which is why coordinating retirement withdrawals with taxes and Medicare brackets can help manage long-term costs.

Tips on Medicare Savings

• We’ve talked about how your Medicare costs can go up, now let’s look at the other side of that equation. Here’s how to help your Medicare costs go down… potentially way down. 
• A financial advisor can help you build a comprehensive retirement plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Keep an emergency fund on hand in case you run into unexpected expenses. An emergency fund should be liquid — in an account that isn’t at risk of significant fluctuation like the stock market. The tradeoff is that the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.
• Are you a financial advisor looking to grow your business? SmartAsset AMP helps advisors connect with leads and offers marketing automation solutions so you can spend more time making conversions. Learn more about SmartAsset AMP.

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