Can RMDs Increase Medicare Premiums

For retirees, Required Minimum Distributions (RMDs) are an inevitable part of managing tax-advantaged retirement accounts, such as traditional IRAs and 401(k)s. While many focus on the tax implications of RMDs, fewer realize their potential impact on Medicare costs, Can RMDs increase Medicare premiums? More specifically, the Medicare Part B and Part D premiums. Understanding this connection can help retirees better plan their withdrawals and avoid increases in healthcare costs.

What Are RMDs

RMDs are mandatory withdrawals that individuals must take from their traditional retirement accounts starting at age 73 (as of 2024, per the SECURE 2.0 Act). The IRS determines the required withdrawal amount based on account balance and life expectancy. Because RMDs are considered taxable income, they can push retirees into higher income brackets, which can affect their Medicare premiums.

IRMAA’s (Income-Related Monthly Adjustment Amount)

Medicare Part B (medical insurance) and Part D (prescription drug coverage) premiums are income-based. This means higher-income individuals pay more due to the IRMAA. IRMAAs apply when modified adjusted gross income (MAGI) exceeds certain thresholds, as reported on tax returns from two years prior. In other words, RMDs taken in 2024 could impact Medicare premiums in 2026.

Can RMDs Increase Medicare Premiums

Because RMDs increase taxable income, they may push retirees above the IRMAA thresholds. This can lead to higher Medicare costs. For example:

In 2025, individuals with a MAGI over $106,000 (or $212,000 for married couples filing jointly) pay more than the standard Medicare Part B premium.

• In 2025, the base Part B premium is $185.00 per month, however those subject to IRMAA could pay as much as $594 per month depending on income.
• Similarly, Part D enrollees face IRMAA surcharges ranging from $12.90 to $81 per month, based on income.

Please note: taking large RMDs in a single year may increase Medicare costs, potentially taking away from retirement savings.

How to Lessen RMD Impact on Medicare Premiums

1. Qualified Charitable Distributions: Individuals over 70½ can donate up to $100,000 per year to a qualified charity from their IRA. This reduces taxable income without affecting RMD obligations.
2. Roth Conversions: Converting funds from a traditional IRA to a Roth IRA before RMD age can lower future RMD amounts. Roth withdrawals are not taxable or included in MAGI.
3. Strategic Withdrawals: Spreading withdrawals over multiple years or taking early withdrawals before RMDs begin can help manage taxable income levels.
4. Filing for IRMAA Appeals: If a significant life change (such as retirement, divorce, or loss of income) affects MAGI, individuals can request an IRMAA reduction.

Learn how to file an IRMAA appeal

While RMDs are an unavoidable part of retirement planning, their impact on Medicare costs must be considered. Understanding IRMAA thresholds and carefully planning withdrawals can help retirees control their Medicare premium costs. By using tax-efficient withdrawal strategies, retirees can minimize unnecessary healthcare expenses and maximize retirement savings.