Medicare Advisor Match

403(b) and 457(b) Withdrawals: How They Affect Medicare Premiums

Every dollar you withdraw from a traditional 403(b) or 457(b) account counts as ordinary income — and that income flows directly into the MAGI number that sets your Medicare Part B and Part D surcharges. Teachers, school administrators, hospital employees, nonprofit workers, and state/local government employees are often surprised to discover they owe IRMAA on top of their pension. This guide explains why, and what you can still do about it.

The stacking problem. A $52,000 annual pension from a state teachers' retirement system doesn't trigger IRMAA alone for a single filer ($109,000 threshold). Add 85% of a $28,000 Social Security benefit ($23,800) and MAGI reaches $75,800 — still fine. But add $40,000 from a 403(b) supplemental plan and MAGI is $115,800 — into Tier 1, paying an extra $1,148/year in Medicare surcharges. Nothing unusual happened. The teacher simply funded a 403(b) for decades and now takes withdrawals in retirement.1

How 403(b) and 457(b) distributions count for IRMAA

IRMAA MAGI = your AGI (Form 1040, Line 11) plus tax-exempt interest (Line 2a). Traditional 403(b) and 457(b) withdrawals are fully ordinary income. They flow into AGI in full and raise IRMAA MAGI dollar-for-dollar.

Plan type IRMAA MAGI treatment
Traditional 403(b) 100% taxable ordinary income — counts fully for MAGI2
Roth 403(b) — qualified distributions Tax-free — excluded from MAGI (age 59½+ and 5-year rule met)
Governmental 457(b) 100% taxable ordinary income when distributed — counts fully3
Non-governmental 457(b) — nonprofit/tax-exempt employer Taxable as ordinary income when distributed — counts fully
457(f) supplemental/SERP Taxed at vesting — raises IRMAA MAGI in the vesting year

The Medicare two-year look-back means your 2026 Part B and Part D premiums are based on your 2024 MAGI. A large 403(b) distribution you took in 2024 — perhaps to pay off a mortgage, fund a vacation home, or cover unexpected medical costs — shows up in your Medicare premiums two years later, in 2026.

2026 IRMAA brackets at a glance

Based on 2024 MAGI. Surcharges are per person; both spouses on Medicare each pay independently.

2024 MAGI — Single 2024 MAGI — Married (MFJ) Annual IRMAA extra/person
≤$109,000≤$218,000$0
$109,001–$137,000$218,001–$274,000+$1,148/yr
$137,001–$171,000$274,001–$342,000+$2,885/yr
$171,001–$205,000$342,001–$410,000+$4,620/yr
$205,001–$499,999$410,001–$749,999+$6,355/yr
≥$500,000≥$750,000+$6,936/yr

Source: SSA POMS HI 01101.020, 2026 IRMAA brackets. Part B base premium $202.90/month ($2,434.80/yr) applies at all tiers and is not included in the annual IRMAA extra figure above.

IRMAA estimator: 403(b)/457(b) + pension + Social Security

Assumes 85% of Social Security benefits are taxable — accurate for most retirees in the IRMAA range. Your actual SS taxability may differ; use your prior-year 1040 Line 5b for a precise figure. This is an estimate, not tax advice.

Worked example: Karen, retired teacher

Karen is 67, single, and retired after 30 years teaching in a public school district. Her income:

Estimated MAGI: $54,000 + $22,100 + $45,000 = $121,100 — Tier 1. She pays an extra $1,148/year in IRMAA surcharges on top of the $2,434.80 standard Part B premium.

Her advisor models a reduction: if Karen drops her annual 403(b) withdrawal to $30,000, estimated MAGI falls to $106,100 — under the $109,000 single threshold. She funds the $15,000 gap from her taxable brokerage account. Result: $1,148/year in IRMAA eliminated. Over a 15-year retirement, that's roughly $17,220 in cumulative savings — before accounting for the time value of the preserved Medicare premium spending.

The cliff problem. IRMAA is not a marginal system. Karen at $109,500 MAGI pays the full Tier 1 surcharge ($1,148/yr). Karen at $108,900 pays nothing. A $600 difference in 403(b) withdrawals creates a $1,148/year premium gap. This is why advisors run the math two years out, not in the year the Medicare bill arrives.

The QCD workaround: 403(b) to IRA rollover

Qualified charitable distributions (QCDs) are the most powerful IRMAA lever for retirees age 70½ and older. A QCD directs up to $111,000/person (2026) from an IRA directly to a qualified charity — it satisfies RMD obligations and never appears in AGI, reducing IRMAA MAGI dollar-for-dollar.4

The catch: QCDs can only be made from individual retirement accounts (IRAs) — not directly from 403(b) or governmental 457(b) plans. But there is a workaround:

  1. Roll over your 403(b) or governmental 457(b) to a traditional IRA.
  2. Once the funds are in the IRA, you can make QCDs from that account.
  3. A QCD reduces your IRMAA MAGI without triggering the distribution as taxable income — unlike a regular withdrawal followed by a charitable deduction.

Non-governmental 457(b) exception: Non-governmental 457(b) plans (offered by hospitals, universities, and other tax-exempt nonprofits) cannot be rolled over to an IRA. Funds in these plans can only be transferred to another non-governmental 457(b) plan. QCDs are therefore not available from this account type — a meaningful planning constraint for healthcare employees.

Roth 403(b): the IRMAA-free path

Qualified distributions from a Roth 403(b) are excluded from MAGI entirely. If you are still working and your plan offers a Roth 403(b) option, contributing there rather than to the traditional 403(b) reduces your future IRMAA exposure — at the cost of paying taxes on contributions now rather than later.

Under SECURE 2.0 (§325, effective 2024), Roth 403(b) accounts are no longer subject to required minimum distributions during the account owner's lifetime — the same treatment Roth IRAs have always had. This makes the Roth 403(b) even more valuable for IRMAA management: qualified distributions are MAGI-free, and there is no forced distribution that could push you into a higher bracket.5

Five strategies to manage IRMAA with 403(b)/457(b) income

  1. Calibrate annual withdrawals to the bracket cliff. Model your MAGI two years forward. If your pension + Social Security puts you at $90,000, you can take up to ~$19,000 from your 403(b) while staying under the $109,000 single threshold. Systematic, calibrated withdrawals beat irregular large distributions that accidentally cross tiers.
  2. Roth 403(b) contributions during your final working years. If your employer offers a Roth 403(b) option and you have remaining contribution room, front-loading Roth contributions in your 60s — while still earning — reduces the pre-tax pool that will generate taxable distributions in retirement. The 2026 403(b) contribution limit is $24,500 base, with a $8,000 catch-up at age 50+ (and a $11,250 super catch-up at ages 60–63).6
  3. Pre-65 Roth conversion window. The two-year look-back means MAGI from age 62–63 does not affect Medicare premiums at age 65. If you retire early and have a period of lower income before Medicare starts, rolling 403(b) funds to a traditional IRA and then converting to a Roth IRA during this window is the cleanest lifetime IRMAA lever. You pay tax once; qualified Roth distributions are excluded from MAGI forever.
  4. QCD strategy via IRA rollover (age 70½+). Roll your 403(b) — or your governmental 457(b) — to a traditional IRA. Then use QCDs to direct up to $111,000/year (2026) to charity. This satisfies charitable giving goals, excludes the charitable amount from MAGI, and can offset pension + Social Security income that you cannot otherwise shelter.
  5. SSA-44 appeal for the retirement year. If you retired in 2024 (or in 2025), your retirement is a qualifying life-changing event for an SSA-44 appeal. SSA can use your current-year estimated income rather than the 2024 MAGI that appears on your Medicare determination letter. A recently retired teacher who earned $95,000 in 2024 (salary + final sick-leave payout) but expects $72,000 in retirement income has a strong SSA-44 case. The appeal is worth filing even if the income reduction is modest: saving $1,148–$2,885/year is real money.1

Decision framework

Your situation Priority action
Pension + SS already near IRMAA threshold, 403(b) pushes you over Calibrate 403(b) withdrawals below the threshold; supplement from taxable accounts
Still working, ages 60–63, plan offers Roth 403(b) Max super catch-up into Roth 403(b) to reduce future IRMAA exposure
Retiring this year with income higher than future years File SSA-44 using qualifying retirement event to reduce current-year IRMAA
Age 70½+, charitably inclined, have 403(b) or governmental 457(b) Roll over to IRA; deploy QCDs up to $111,000/year to offset MAGI
Retiring at 62–63 with low income before Medicare starts at 65 Roll 403(b) to IRA; execute Roth conversions during the two-year pre-Medicare window
Non-governmental 457(b) from hospital or university employer Cannot rollover to IRA; QCD not available; focus on installment elections and income smoothing

What an advisor models that you can't easily do on your own

Running a single year's IRMAA estimate is straightforward. The harder problem is the 10–25-year projection: what does your pension + Social Security + RMD + 403(b) income look like at age 70, 75, 80 — and how do you minimize lifetime IRMAA while keeping enough withdrawal flexibility for emergencies, travel, and healthcare costs?

An advisor who specializes in Medicare and retirement income builds a distribution ladder: which accounts to draw first, in what order, and in what amounts, to stay under IRMAA thresholds across your full retirement. For 403(b) and 457(b) holders with defined benefit pensions, there is usually a narrow window between retiring and collecting Social Security (or RMDs beginning at 73) when meaningful Roth conversion or strategic drawdown is possible. That window is the leverage point — but only if you model it before you reach it.

Talk to a Medicare planning specialist

If your 403(b) or 457(b) distributions are pushing you into IRMAA territory — or you're not sure whether they will — a fee-only advisor can model your specific income stack and identify whether calibrated withdrawals, a Roth conversion window, or a QCD strategy makes sense for your situation.

Sources

  1. SSA POMS HI 01101.020 — IRMAA Sliding Scale Tables: authoritative 2026 IRMAA bracket thresholds and Part B/D surcharge amounts; SSA-44 qualifying life-changing events including retirement. Verified June 2026.
  2. IRS — 403(b) Retirement Plans: IRC §402(a) governs taxability of 403(b) plan distributions as ordinary income. Contributions on a pre-tax basis reduce current-year income; distributions in retirement are fully taxable.
  3. IRS — IRC 457(b) Deferred Compensation Plans: governmental 457(b) distributions are includible in gross income in the year of distribution per IRC §457(a); eligible rollover to IRAs per IRC §457(e)(16). Non-governmental 457(b) plans cannot be rolled to an IRA.
  4. IRS — Qualified Charitable Distributions: IRC §408(d)(8) restricts QCDs to individual retirement accounts (IRAs) — not 403(b), 401(k), or other employer plans. 2026 QCD annual limit is $111,000 per person, inflation-indexed under SECURE 2.0.
  5. SECURE 2.0 Act, §325 (2022): effective 2024, eliminated lifetime required minimum distributions from designated Roth accounts in employer plans (Roth 401(k) and Roth 403(b)), aligning treatment with Roth IRAs.
  6. IRS — 403(b) Contribution Limits: 2026 elective deferral limit $24,500; age-50+ catch-up $8,000; ages 60–63 SECURE 2.0 super catch-up $11,250. Employer contributions count toward the $69,000 total addition limit.

Values verified as of June 2026. IRMAA brackets per SSA POMS HI 01101.020. QCD limits per IRS Notice 2025-67. Contribution limits per IRS Rev. Proc. 2025-67. Consult a licensed advisor for guidance specific to your situation.

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Content is for informational purposes only and does not constitute financial, tax, legal, or investment advice.