Key Points
When you withdraw money from a 401(k), you are likely aware that you must consider how it affects your tax rate. A very large withdrawal could push you into a higher tax bracket by raising your household income. Withdrawing too much from your account risks draining it if you leave insufficient investments.
Another risk exists: a sizable 401(k) draw could cost you as much as an extra $487 per month for a year. This happens because of a rule that many people overlook, and it can be a painful surprise financially.
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This rule means a big 401(k) withdrawal could cost you $487 a month
The rules you need to know about when it comes to a large 401(k) withdrawal pertain to the cost of Medicare premiums. Many seniors receive health coverage through Medicare after turning 65, and some components have premiums that seniors must pay. In 2026, for instance, the standard premium for Medicare Part B is $202.90 per month.
However, an Income‑Related Monthly Adjustment Amount (IRMAA) is added to your Medicare Part B premiums once your modified adjusted gross income (MAGI) goes above a certain threshold. Distributions from most retirement plans, including your 401(k), can push your MAGI above that amount.
While qualified withdrawals from a Roth IRA or Roth 401(k) are not part of your MAGI, withdrawals from most retirement plans do count. Your MAGI from two years prior is reviewed when setting your Medicare premiums for the year, so a large withdrawal any time at age 63 or later could result in your taxable income climbing above the threshold where you have to pay extra.
The specifics of your additional premium amount vary based on your MAGI. However, if you are a single tax filer with a MAGI of $500,000 per year or a married joint filer with an income of $750,000, your Medicare Part B premiums jump to $689.90.
That’s an extra $487 in monthly Part B premiums you would have to pay.
How to plan for large 401(k) withdrawals as a retiree
Premiums do not just rise once your income hits $500,000 or $750,000. IRMAA kicks in at a much lower income level: Anything above $109,000 for a single filer or $218,000 for a married joint filer triggers higher Part B premiums.
There may not be anything you can do about this if you must make a distribution. But you should consider this when you build your retirement plan.
For example, you could space your distributions out over two years to avoid one large withdrawal that pushes you above the threshold where premiums increase. Another option is to take larger draws now or perform Roth conversions before turning 63, since that is the first year your income matters for Medicare calculations.
Being aware of the IRMAA rule is the first key step in crafting a strategic plan, so make sure you understand these thresholds as you look ahead.
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