A $1 increase in modified adjusted gross income above $109,000 triggers annual Medicare premium surcharges for retirees.
A retired teacher with a $1.1 million 403(b) plan and $48,000 state pension faces an unexpected $1,150 annual Medicare surcharge after crossing the $109,000 modified adjusted gross income threshold. The surcharge applies to Part B and Part D premiums, calculated using income from two years prior.
The retiree planned withdrawals of $36,000 annually from her 403(b), expecting total income of $84,000. However, factors like Roth conversions or Social Security benefits pushed her MAGI above the $109,000 IRMAA cliff, triggering the surcharge. CMS uses prior-year income data, limiting planning opportunities.
Financial advisors recommend pre-Medicare Roth conversions to reduce future required minimum distributions and keep MAGI below key thresholds.