Are You Making These 3 IRMAA Mistakes? How Your 401(k) Rollover Can Spike Your 2026 Medicare Premiums
- Angelique Solomon
- May 22
- 5 min read
Hey there! If you’re nearing 65 or already navigating the world of Medicare in 2026, you’ve probably realized that retirement isn’t just about picking a beach and a hobby. It’s about managing the "moving parts" of your finances.
One of the biggest "gotchas" in retirement planning is something called IRMAA. It sounds like a long-lost aunt, but it’s actually a surcharge that can make your Medicare premiums skyrocket. And here’s the kicker: a move you make with your 401(k) today could be the very thing that triggers a massive bill two years from now.
At Solomon Estate and Wealth Planning, we see folks work hard to save for decades, only to lose thousands of dollars to unnecessary surcharges because they didn't see the IRMAA train coming. Let’s break down how this works and, more importantly, how you can avoid the three biggest mistakes that lead to an IRMAA spike.
What is IRMAA and Why Does 2024 Matter for 2026?
IRMAA stands for Income-Related Monthly Adjustment Amount. In plain English, it’s an extra charge added to your Medicare Part B (medical insurance) and Part D (prescription drug coverage) premiums if your income exceeds certain thresholds.
Medicare isn't "one price fits all." The government looks at your Modified Adjusted Gross Income (MAGI) to determine if you should pay the standard rate or a higher, surcharged rate.
The 2-Year Look-Back Rule
This is where people get tripped up. Social Security uses your tax returns from two years ago to determine your premiums for the current year.
Your 2024 income determines your 2026 Medicare premiums.
Your 2025 income determines your 2027 premiums.
If you did a massive 401(k) rollover or a Roth conversion back in 2024 without a plan, you might be opening your mail right now in 2026 and seeing a premium that’s double or even triple what you expected.
The 401(k) Rollover Connection
You might be thinking, "Wait, a rollover isn't 'income,' it's just moving my own money!"
You’re partially right. A direct rollover (where the money goes from your 401(k) provider straight to an IRA) typically isn't a taxable event. However, there are several ways a 401(k) move can count as income, and that’s when the IRMAA monster wakes up.
If you’re confused about the basics of moving your funds, you might want to check out our guide on 401k rollover rules 101 to avoid the basic pitfalls before we get into the heavy IRMAA stuff.
Mistake #1: Choosing an Indirect Rollover
This is arguably the most expensive "oops" in the retirement playbook. An indirect rollover is when the 401(k) provider cuts a check directly to you. You then have 60 days to deposit that money into a new IRA.
The Problem: By law, the 401(k) provider is usually required to withhold 20% for federal taxes on an indirect rollover.
If you have $100,000 in your 401(k), they send you $80,000 and send $20,000 to the IRS. To complete a "tax-free" rollover, you have to deposit the full $100,000 into your new IRA within 60 days. That means you have to find $20,000 of your own cash to make up for the withholding until you get it back as a tax refund the following year.
If you don't replace that 20%, the IRS treats that $20,000 as a distribution. It becomes taxable income. That "income" gets added to your MAGI, potentially pushing you over the IRMAA threshold for 2026.
The Solomon Fix: Always opt for a direct, trustee-to-trustee rollover. No tax withholding, no "income" reported to the IRS, and no IRMAA spike. We always tell our clients: a direct rollover is still your best bet to keep things clean and simple.
Mistake #2: The "One-Year Hero" Roth Conversion
Roth IRAs are fantastic because they offer tax-free growth and tax-free withdrawals. Many people decide to roll their traditional 401(k) into a Roth IRA (a Roth conversion) to simplify their lives.
However, a Roth conversion is a taxable event. The entire amount you convert is added to your income for that year.
The Scenario: Imagine a married couple in 2024. Their normal income (pensions, Social Security, some dividends) is $180,000. For 2026, the first IRMAA threshold for a married couple is roughly $218,000.
They decide to be "heroes" and convert their entire $150,000 401(k) to a Roth IRA in one go.
Total Income: $180,000 + $150,000 = $330,000.
This puts them well over the $218,000 threshold and likely into the third or fourth IRMAA tier.
In 2026, both spouses will be hit with significantly higher Medicare Part B and Part D premiums. This mistake could cost them an extra $4,000 to $8,000 in premiums for the year!
The Solomon Fix: We help you "fill the bracket." Instead of converting everything in one year, we look at where the IRMAA tiers are and convert just enough to stay under the limit. It takes longer, but it saves a fortune in premiums. There are secrets to Roth 401k rollovers that can change the way you look at your RMDs and IRMAA.
Mistake #3: Ignoring "Provisional Income" and Threshold Blindness
Many retirees think their income is lower than it actually is because they don't realize what Medicare counts as "income" for IRMAA.
MAGI for Medicare purposes includes:
Your Adjusted Gross Income (AGI).
Tax-exempt interest (like those "tax-free" municipal bonds you bought).
Certain foreign income.
The mistake here is doing a 401(k) withdrawal or rollover-to-cash to buy an RV or pay off a mortgage, thinking, "I'm retired, my tax bracket is low!" without realizing that even a small bump can trigger the next IRMAA tier.
Remember, IRMAA is a cliff. If you are $1 over the threshold, you pay the full surcharge for the entire year. There is no pro-rating.
The Solomon Fix: We provide a professional Medicare consultation to look at your specific numbers. We help you project your MAGI so you aren't guessing where that "cliff" is. Understanding the difference between Medicare Supplement and Advantage is important, but if your income isn't managed, you'll pay too much for either one!
How Solomon Estate and Wealth Planning Navigates the 2026 Landscape
Navigating the intersection of tax law and Medicare rules is like walking through a minefield. One wrong step in 2024 or 2025 leads to an explosion in your 2026 or 2027 budget.
When you work with us, we don't just look at your 401(k) in a vacuum. We look at:
Timing: Is this the right year to move money, or should we wait?
Account Sourcing: Should we take money from your 401(k), your brokerage account, or a Roth account to keep your MAGI low?
Direct Transfers: Ensuring that your money moves safely from point A to point B without the IRS taking an unnecessary cut.
We believe in retirement income planning that accounts for the "hidden" costs like IRMAA. Your retirement should be about enjoying your wealth, not worrying about whether your Medicare premium is going to double next month.
Final Thoughts: Don't Let a Rollover Ruin Your 2026
The rules for Medicare and 401(k)s are constantly changing. What worked for your neighbors five years ago might not be the best strategy for you today in 2026.
If you're planning a major financial move, or if you've recently left your job and need to handle an old 401(k), let’s talk first. A quick Medicare consultation before you turn 65 (or even after!) can save you more money than most people realize.
Give us a call at (334) 459-8264. Let’s make sure your 401(k) rollover is a step toward freedom, not a step toward a higher tax bill.
Disclaimer: We do not offer every plan available in your area. Any information provided is limited to those plans we do offer. Please contact Medicare.gov or 1-800-MEDICARE for information on all available options.
This information is for educational purposes only and does not constitute investment, legal, or tax advice. Please consult with a qualified professional regarding your individual situation.
NPN: 20332097 States: AL, FL, GA, SC, VA, TX, OHIO Designations: L&H Phone: (334) 459-8264 Website:https://www.angeliquebenefits.com/
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