I Inherited $500,000. My Advisor Didn’t Mention the IRMAA Trap. Here’s What It Cost.

If you’re enrolled in Medicare and have just inherited an IRA, a large withdrawal could raise your premiums. Taking too much money may increase what you pay two years later. Inherited traditional IRA distributions are generally taxable, so the amount you withdraw can affect both your current tax bill and future Medicare costs.

The Medicare Threshold That Can Raise Your Premiums

Higher income Medicare beneficiaries pay a larger share of Medicare costs through the income related monthly adjustment amount (IRMAA). It applies to Part B, which covers doctor visits, outpatient care and other medical services, and Part D, which covers prescription drugs. IRMAA is added to your regular premiums when your modified adjusted gross income (MAGI) exceeds the limit for your filing status.

The Social Security Administration generally uses tax information from two years earlier to determine whether IRMAA applies. Medicare premiums for a given year are typically based on income reported two years before. If that tax information is unavailable, SSA may use data from three years earlier. ¹ This means a large inherited IRA withdrawal could raise your Medicare costs well after you take the distribution.

IRMAA is calculated using income tiers based on your MAGI and tax filing status. As your income crosses each threshold, the amount added to your Part B and Part D premiums increases. Distributions from an inherited traditional IRA are generally taxable as ordinary income, so a large withdrawal can raise your MAGI enough to move you into a higher tier.

If you inherit a $500,000 traditional IRA, taking a large distribution in one year could increase your Medicare premiums in addition to the income tax you owe on the withdrawal. How much more you pay depends on your income, filing status and the IRMAA tier you reach.

A financial advisor can help you plan inherited IRA withdrawals around these thresholds to limit higher Medicare costs.

How an Inheritance Withdrawal Could Tax You Twice

For a simplified example, let’s assume that you are married filing jointly with $160,000 of taxable income before taking an inherited IRA distribution. A lump sum withdrawal of $500,000 would raise your total taxable income to $660,000.

The table breaks down how that amount would be taxed under the 2026 federal brackets: ²

Without the inherited IRA distribution, your federal income tax would be $24,624. Taking the full $500,000 in one year would add $143,915 to your bill.

IRMAA generally uses income from two years earlier to determine Medicare premiums. In this example, let’s keep your MAGI at $660,000 and apply the 2026 schedule. That puts you in the tier above $410,000 and below $750,000 for married couples filing jointly. ³

At $660,000 of MAGI, each spouse would pay an additional $446.30 per month for Part B and $83.30 for Part D under the 2026 schedule. Together, those surcharges would total $12,710.40 annually.

Using the 2026 rates in this example, the $143,915 in additional federal income tax and $12,710 in IRMAA would total $156,625 before state taxes or other tax effects. If you take the distribution in 2026, the higher income would generally affect Medicare premiums in 2028, based on the IRMAA thresholds and amounts in effect at that time.

Smaller Withdrawals Could Reduce Taxes and IRMAA

Spreading inherited IRA distributions over several years can help you stay below higher tax brackets and IRMAA thresholds. A single large withdrawal risks triggering each one at once. How much you take annually should account for your other taxable income, the next IRMAA tier and any required distributions tied to the account.

A financial advisor can help you build a withdrawal schedule that manages your tax bill and Medicare costs while still meeting inherited IRA rules.

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