Key Takeaways
- Yes. A required minimum distribution (RMD) is taxable income, so a large one can move you into a higher tax bracket and lift your Medicare premiums.
- The Medicare piece is called IRMAA, the income-related monthly adjustment amount. It’s a surcharge stacked on your normal Part B and Part D premiums.
- IRMAA works like a cliff, not a slope. One extra dollar of income can cost a married couple $2,296.80 for the year at 2026 rates.
- Medicare looks back two years. Your 2026 return sets your 2028 premium, so decisions made this year show up on a bill two years out.
- The good news: the years between retiring and your first RMD are often the best planning years you’ll have. You just have to use them on purpose.
Yes, your RMDs can do both. An RMD is fully taxable when it leaves a traditional IRA or 401(k), so it stacks on your Social Security and your interest and dividends. If that total crosses certain lines, you pay a higher rate on the next dollar and a higher Medicare premium two years later.
Here’s the part most people miss. RMDs don’t stay flat. They grow almost every year, and the surcharge lands on a different bill at a different time. That’s why it feels like an ambush.
What is an RMD, and why does the IRS make you take one?
An RMD is the smallest amount you’re required to pull from your tax-deferred retirement accounts each year once you hit a certain age. For most people retiring today that’s 73.1 If you were born in 1960 or later, it’s 75.6
You spent 30 years funding a 401(k) and never paid a dime of tax on it. The government has been patient. RMDs are how it stops being patient. On our podcast I put it this way: an RMD is a tool the IRS has to create a taxable event and generate tax revenue. It isn’t a penalty. It’s a deadline.
The rule covers traditional IRAs, SEP and SIMPLE IRAs, 401(k)s, 403(b)s, and 457(b) plans, but not your Roth IRA while you’re alive.1
How do RMDs and Medicare premiums work together?
Your RMD raises your income, and Medicare charges higher-income people more. Above a set line you pay your normal premium plus a surcharge called IRMAA, on both Part B and your drug coverage.2 It hits roughly 8% of people with Part B.3
The income Medicare uses is your modified adjusted gross income: your adjusted gross income plus any tax-exempt interest.2 Your RMD lands squarely in that number.
Here’s the timing quirk that catches people. Medicare bills you off an old lab report. Social Security uses the most recent return the IRS has handed them, usually one from two years back, so your 2026 premium generally comes from your 2024 return.2 What you do this December doesn’t show up until 2028.
The standard 2026 Part B premium is $202.90 a month.3 For a married couple filing jointly, the first surcharge tier starts above $218,000 of MAGI on the return Medicare is using.3
| Modified adjusted gross income (married filing jointly) | Added to Part B, per person | Added to Part D, per person |
|---|---|---|
| $218,000 or less | $0.00 | $0.00 |
| Above $218,000 up to $274,000 | $81.20 | $14.50 |
| Above $274,000 up to $342,000 | $202.90 | $37.50 |
| Above $342,000 up to $410,000 | $324.60 | $60.40 |
| Above $410,000 and under $750,000 | $446.30 | $83.30 |
| $750,000 or more | $487.00 | $91.00 |
For a single filer, the same tiers begin at $109,000, $137,000, $171,000, $205,000, and $500,000.3
Now notice the shape of that table. Tax brackets work like buckets. You fill the 12% bucket, then the 22% bucket, and only the money that spills over gets taxed at the higher rate. IRMAA isn’t a bucket. It’s a cliff.
Go one dollar over $218,000 as a couple and you owe the full first tier. That’s $81.20 plus $14.50, each, every month. Multiply by two people and twelve months and one dollar of income just cost you $2,296.80.
This is one of the rare corners of the tax code where an extra dollar can leave you with less to spend. Technically IRMAA is a surcharge, not a tax. Call it what you want. It’s less money in your pocket.
Why do RMDs get bigger every year?
Your RMD is your balance on the prior December 31 divided by a life expectancy factor the IRS publishes.4 Two things drive it: how much you have, and how old you are.
Here’s the health version. A yearly physical checks the same things every time, but the numbers your doctor watches get stricter as you age. RMDs work the same way. Same account, same rule, but the slice the IRS pulls climbs with every birthday.
At 73 the factor is 26.5, or about 3.8% of the balance. By 80 it’s 20.2, or about 5.0%. By 85 it’s 16.0, or about 6.3%.4
That’s the escalation almost nobody sees coming. People plan for their first RMD and assume that’s the number. It’s the smallest number they’ll ever take.
What does an RMD and IRMAA surprise look like in real numbers?
Here’s a hypothetical couple. Illustrative figures, not a client, meant to show the mechanics. Both spouses just turned 73 with $3,000,000 in traditional IRAs. They collect $60,000 of Social Security, of which $51,000 is taxable, plus $25,000 from interest and dividends.
Their first RMD is $3,000,000 divided by 26.5, or $113,207.55. Add the taxable Social Security and the investment income and their MAGI is $189,207.55. Under the $218,000 line. No surcharge.
Now jump to age 80. To isolate what the age factor does, hold the balance flat at $3,000,000. That’s a simplifying assumption, not a projection, and no rate of return is assumed or implied. A real balance would move with the market, and so would the RMD.
So what’s the RMD at 80? A little higher? About the same?
It’s $148,514.85. That’s $35,307.30 more than at 73, with no change in the balance and none in their behavior. Their income is now $224,514.85, clearing $218,000 by $6,514.85, and the first IRMAA tier applies. Cost for the year: $2,296.80.
One note on the math. The thresholds and the standard premium get adjusted annually, so the real line at 80 will very likely sit higher than $218,000. We held everything at 2026 figures to keep it clean. The direction is the point. Your required withdrawal climbs every year while your divisor shrinks.
What can you do about RMDs and Medicare premiums before age 73?
Quite a lot, and this is the encouraging part! The stretch between the day you stop working and the day your first RMD lands is usually the lowest-income window of your adult life, and the only one where you’re fully in control.
A few general levers worth understanding:
Roth conversions. Moving money from a traditional IRA to a Roth means paying the tax now, in a year you can plan around, instead of later in a year you can’t. It also shrinks the balance future RMDs are calculated on, and Roth IRAs have no RMDs during your lifetime.1
The limits matter as much as the benefits. A conversion can’t be undone, the tax is due that year, and paying it from the converted money shrinks what lands in the Roth. It adds to that year’s income, which can raise the taxable share of your Social Security and trigger a surcharge two years later. Five-year rules apply before earnings come out tax free, and the whole case rests on an assumption about future tax rates that may prove wrong.
Qualified charitable distributions. From age 70½ you can send money straight from your IRA to a qualified charity. It counts toward your RMD, and because it’s excluded from income, it doesn’t lift your MAGI.5 The annual limit is indexed for inflation.7
The limits are specific. QCDs come only from IRAs, never an employer plan, and the recipient must be a qualifying public charity, so donor-advised funds and most private foundations don’t count. There’s an annual per-person cap, you can’t also deduct the same gift, and deductible IRA contributions after 70½ reduce what qualifies.
Sequencing and timing. Which account you draw from, in what order, changes your taxable income every year without changing what you spend. And if you’re near a threshold in December, small timing shifts can decide whether you pay the surcharge at all.
Now, my own view. You never want to let the tax tail or the IRMAA tail wag the investment dog. What you do want is to evaluate and make informed decisions.
Sometimes we plan across the decades remaining and look at how to keep as many dollars in your pocket as possible. That can mean a Roth conversion that lowers future RMDs. Here’s what surprises people. Sometimes a conversion big enough to trigger a surcharge today still models out to a lower projected lifetime tax bill than dodging it does. In plenty of other cases it doesn’t. It depends on your tax rates now and later, your time horizon, your balances, your spending, and what tax law does next. It has to be modeled, not assumed.
So I wouldn’t call a surcharge good or bad on its own. What you don’t want is to decide without knowing this exists and then hope it works out. Decisions made with the math in front of you tend to hold up better than decisions made without it.
Frequently Asked Questions
Do RMDs and Medicare premiums always move together?
Not always, but often. IRMAA is based on your total modified adjusted gross income, and for most retirees with large tax-deferred balances, the RMD is the biggest single piece of that number. If your RMD grows and nothing else changes, your IRMAA risk grows with it.
Does a Roth conversion raise my Medicare premiums?
It can. A conversion is taxable income in the year you do it, so it counts toward the MAGI Medicare uses two years later. That’s a real cost to weigh against the future tax and RMD savings, not a reason to avoid conversions outright.
What happens if I miss my RMD, and when is the first one due?
Your first RMD is generally due by April 1 of the year after you turn 73, and every one after that by December 31. Waiting until April 1 means two distributions in one calendar year, which stacks income and can be the very thing that triggers a surcharge. Miss one and you may owe a 25% excise tax on what you should have taken, dropping to 10% if you fix it within two years, reported on Form 5329.1
What if my income already dropped?
You may not be stuck with a surcharge based on an old return. Social Security will reconsider for a short list of events. Retiring or cutting your hours. The death of a spouse. Marriage or divorce. Losing income-producing property to a disaster or something else outside your control.2 You report it on Form SSA-44.2 Relief isn’t automatic. You have to qualify and document it.
Educational content only. Not personalized investment, tax, or legal advice. The example above is hypothetical and does not represent any actual client, account, or result.
Ready to see how this plays out for you?
The math above is general education. Your version depends on your balances, your ages, your Social Security timing, and what your income looks like between now and 73.
Grab the free eBook. The Retirement Tax Bomb covers how tax-deferred accounts build a future tax bill and the levers that defuse it.
Run your own numbers. Try our tax bracket calculator and retirement withdrawal calculator.
Or just talk it through. Book a QuickFit call. Short, no pressure, just to see whether we’re a fit.
More on how we approach tax planning, our RMD episode on The Fiscal Physical Podcast, and our post on whether Roth conversions are still worth it in 2026.
This article is for educational purposes only. It is not personalized investment, tax, or legal advice, and it is not a recommendation to buy, sell, or hold any security or to pursue any particular strategy. The couple described is hypothetical and illustrative. They are not a client, the figures are not drawn from any actual account, and the example is not a projection or estimate of investment performance. The balance in the example is held constant as a simplifying assumption; no rate of return is assumed or implied. The $2,296.80 figure assumes both spouses are enrolled in Part B and Part D. Nothing here is a guarantee or assurance of any tax savings, premium reduction, or other result. Tax rules, Medicare premiums, and IRMAA thresholds change, and future law may differ materially from current law. Figures cited are 2026 amounts and were current as of publication. Alchemy Wealth Management does not provide tax or legal advice. Please consult a qualified tax or legal professional about your own situation.