I Withdrew $95k from My Retirement Plan This Year But It Put Me in a Higher

SmartAsset and Yahoo Finance LLC may earn commission or revenue through links in the content below.

When you make significant withdrawals from your retirement plan, like withdrawing $95,000 in a single year, you can inadvertently push yourself into a higher tax bracket and trigger an increase in your Medicare premiums through the Income-Related Monthly Adjustment Amount (IRMAA). Here’s an in-depth look at how this happens and what you can do about it.

IRMAA isn’t something most people have to deal with, but it is familiar territory to financial advisors. You can use this free tool to match with a financial advisor if you have questions about IRMAA, Medicare or taxes in retirement.

IRMAA is an additional charge added to your Medicare Part B and Part D premiums based on your Modified Adjusted Gross Income (MAGI). Your MAGI includes income from various sources, such as retirement account withdrawals, which can lead to higher premiums if it exceeds certain thresholds.

Example:

Withdrawal Amount: $95,000
Previous MAGI: Let’s say it was $80,000, which didn’t require an IRMAA surcharge.
New MAGI: After the withdrawal, your MAGI for the year increases to $175,000.
Impact: For 2025, based on your 2023 income, you might find yourself in an IRMAA bracket where, for example, your Part B premium could increase from $185.00 to $285.00 per month, and your Part D premium might go up from $30.00 to $70.00 per month.

This increase is not based on current income but rather on the MAGI from two years prior, which means the effect of your withdrawal shows up in your Medicare premiums with a two-year lag.

No, the increase in Medicare premiums due to IRMAA is not permanent. It is based on your MAGI from two years earlier, so if your income drops in subsequent years, your IRMAA adjustments will reflect that. A financial advisor can help you determine your tax burdens and Medicare premiums. You can also reference the tables below to estimate your own Medicare premiums.

Single Filers:

MAGI (2022)	Part B Premium	Part D Premium Adjustment
$103,000 or less	$174.70	$0.00
$103,001 – $129,000	$244.60	$12.90
$129,001 – $161,000	$349.40	$33.30
$161,001 – $193,000	$454.20	$53.80
$193,001 – $500,000	$559.00	$74.20
$500,001+	$594.00	$81.00

Married Filing Jointly:

MAGI (2022)	Part B Premium	Part D Premium Adjustment
$206,000 or less	$174.70	$0.00
$206,001 – $258,000	$244.60	$12.90
$258,001 – $322,000	$349.40	$33.30
$322,001 – $386,000	$454.20	$53.80
$386,001 – $750,000	$559.00	$74.20
$750,001+	$594.00	$81.00

Single Filers:

MAGI (2023)	Part B Premium	Part D Premium Adjustment
$106,000 or less	$185.00	$0.00
$106,001 – $130,000	$259.00	$12.90
$130,001 – $161,000	$369.10	$33.30
$161,001 – $193,000	$479.20	$53.80
$193,001 – $500,000	$589.30	$74.20
$500,001+	$628.90	$81.00

Married Filing Jointly:

MAGI (2023)	Part B Premium	Part D Premium Adjustment
$212,000 or less	$185.00	$0.00
$212,001 – $260,000	$259.00	$12.90
$260,001 – $322,000	$369.10	$33.30
$322,001 – $386,000	$479.20	$53.80
$386,001 – $750,000	$589.30	$74.20
$750,001+	$628.90	$81.00

Knowing this, you should remember that Medicare premiums, including IRMAA, are re-evaluated every year. If your income decreases, your premiums can revert to lower levels in future years. Otherwise, if you experience a significant life event that reduces your income or if you believe your IRMAA determination was incorrect, you can appeal using Form SSA-44. Life events could include retirement, the death of a spouse, divorce, or loss of income-producing property.

Tax planning: Before making large withdrawals, consult with a financial advisor to understand the tax implications. Spreading withdrawals over multiple years can help avoid pushing you into a higher IRMAA bracket in any single year.
Charitable contributions: If you’re over 70½, you can make Qualified Charitable Distributions (QCDs) from your IRA, which do not count towards your MAGI for IRMAA calculations but can fulfill your Required Minimum Distribution (RMD) requirements.
Roth conversions: Consider converting traditional IRA funds to a Roth IRA in years where your income might already be high, to manage future income levels and thus IRMAA.
Review your income sources: Be mindful of other income sources like Social Security or dividends that might contribute to your MAGI.

Consider speaking with a financial advisor for guidance on Medicare premiums and other retirement planning matters.

While withdrawing $95,000 from your retirement plan might increase your Medicare premiums via IRMAA, this increase is temporary and based on income from two years prior. By planning your withdrawals strategically and understanding the appeal process, you can navigate these increases effectively. Always consider speaking with a financial planner to tailor strategies to your specific financial situation.

Remember, the key is not avoiding the withdrawal but managing it in a way that balances your current financial needs with your future Medicare costs. This ensures you can maintain your quality of life without the burden of permanently higher premiums.

A financial advisor can inform you about strategies for avoiding or reducing IRMAA surcharges. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Few retirement plans can be considered complete without a solid estimate of your likely Social Security benefits. SmartAsset’s Social Security Calculator can provide that quickly and easily based on your income, birth year and your age when you plan to begin receiving benefits. Plus, the estimated amount is adjusted to reflect likely inflation.
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.

The post I Withdrew $95k from My Retirement Plan This Year But It Put Me in a Higher Tax Bracket and Increased My Medicare Premiums. Is the Increase Permanent? appeared first on SmartReads by SmartAsset.

EMEA Tribune is not involved in this news article, it is taken from our partners and or from the News Agencies. Copyright and Credit go to the News Agencies, email news@emeatribune.com Follow our WhatsApp verified Channel