Medicare IRMAA Reduction Using QCDs and Account Sequencing Strategy — Lower Part B Premium Magi

Why Your Medicare Premium Jumps After Retirement

Medicare Part B premiums are not the same for everyone. If your modified adjusted gross income (MAGI) exceeds certain thresholds, you pay an Income-Related Monthly Adjustment Amount (IRMAA) on top of the standard premium. The strategy to lower Medicare Part B premium MAGI involves using Qualified Charitable Distributions (QCDs) and sequencing your retirement account withdrawals in a specific order to keep your reported income below the IRMAA surcharge limits.

Many retirees expect their expenses to drop after leaving the workforce, only to find their Medicare premiums rising instead. The culprit is often a single large income event in the lookback window — a Roth conversion, a capital gain from selling a home, or a Required Minimum Distribution (RMD) from a 401(k) rolled into an IRA.

The 2026 Medicare Part B standard premium is $202.90 per month per person.¹ For a married couple both on Medicare, that is $4,869.60 per year before any surcharges. IRMAA surcharges range from $74 to $395.60 per month depending on your MAGI tier.¹ A couple with a MAGI just $1 over the threshold can pay an extra $1,776 per year in surcharges for two years.

The problem is timing. Your 2026 premium is based on your 2024 tax return — the one you filed in 2025.¹ If you had a high-income year in 2024 due to a Roth conversion or a large RMD, you are locked into that surcharge for all of 2026. You cannot fix it by reducing income in 2025.

Understanding IRMAA Brackets and the MAGI Calculation

IRMAA brackets are adjusted annually for inflation, but the structure remains consistent. MAGI for IRMAA purposes is your Adjusted Gross Income (AGI) plus tax-exempt interest income. It includes Social Security benefits, pension income, RMDs, capital gains, dividends, and rental income.

Keeping MAGI below the first IRMAA threshold also helps you avoid the 3.8% net investment income tax (NIIT).² For a couple with $50,000 in investment income, that is an additional $1,900 in tax saved by staying under the $212,000 threshold.

How QCDs Lower Your Medicare MAGI Dollar-for-Dollar

A Qualified Charitable Distribution (QCD) allows IRA owners age 70½ or older to transfer up to $100,000 per year directly from their IRA to a qualified charity. The amount transferred is excluded from your taxable income entirely — it does not appear on your AGI at all.

This is different from taking an RMD, donating the cash, and claiming an itemized deduction. With a QCD, the money never counts as income. For IRMAA purposes, that is the critical distinction. A QCD reduces your MAGI dollar-for-dollar. The same amount taken as an RMD and donated as a charitable deduction still shows as income on your return, potentially pushing you into a higher IRMAA bracket.

Suppose a married couple has a MAGI of $225,000 before any charitable giving. They are $13,000 over the $212,000 IRMAA threshold¹. By executing a $13,000 QCD, they bring their MAGI to $212,000 and avoid the $74 per month surcharge for both spouses — saving $1,776 per year².

The Account Sequencing Framework: Roth First, Then QCDs

The most effective IRMAA reduction strategy follows a specific order of operations across a five-year window. The framework has three phases.

Phase 1: Pre-Medicare Roth Conversions (age 62–64). Before you enroll in Medicare, your income is not subject to IRMAA lookback. This is the window to convert traditional IRA funds to a Roth IRA at lower tax rates. Convert aggressively in these years because the income will age out of the lookback window by the time you reach age 65.

Phase 2: QCDs for RMD Years (age 70½+). Once you turn 70½, QCDs become available. If you are also subject to RMDs starting at age 73, use QCDs to satisfy your RMD requirement before taking any taxable distributions. This keeps your MAGI at the lowest possible level.

Phase 3: Taxable Account Spending. For living expenses beyond what QCDs and Roth withdrawals cover, draw from taxable brokerage accounts. Long-term capital gains are taxed at preferential rates but still count toward MAGI, so keep realized gains within the 0% capital gains bracket when possible¹.

Timing Roth Conversions Before Medicare Enrollment

Roth conversions executed in low-income years before Medicare enrollment can lower the baseline MAGI used for IRMAA calculation.³ The key is to complete conversions at least two full tax years before the year you enroll in Medicare.

Consider a retiree who turns 63 in 2025 and plans to enroll in Medicare at age 65 in 2027. Their 2027 premium will be based on their 2025 tax return. Suppose they convert a large sum — for example, $100,000 — from a traditional IRA to a Roth IRA in 2025. That conversion income appears on their 2025 return and could trigger IRMAA surcharges for 2027. If they instead convert in 2024, the income appears on their 2024 return, which determines their 2026 premium — not their 2027 premium.

The optimal approach is to convert in the years when your income is naturally low — for example, the year after you stop working but before you start Social Security or pensions. A typical retiree might have a MAGI of $60,000 in that gap year, leaving room to convert up to $46,000 and still stay under the $106,000 single IRMAA threshold.

Avoiding Common QCD Mistakes That Backfire on IRMAA

Three mistakes undo the IRMAA benefit of QCDs.

Mistake 1: Taking the RMD first, then donating. If you take your RMD in cash and later donate to charity, the RMD amount still counts as income. You must direct the IRA custodian to issue the QCD check directly to the charity before you take any other distribution from the IRA.

Mistake 2: Donating to a donor-advised fund (DAF). QCDs cannot go to DAFs, private foundations, or supporting organizations. Only public charities qualify. If you send a QCD to a DAF, the full amount is treated as a taxable distribution.

Mistake 3: Exceeding the $100,000 annual limit. The $100,000 QCD limit is per taxpayer. A married couple with separate IRAs can each do $100,000, but a single taxpayer cannot exceed $100,000 in total QCDs per year. Any excess is treated as a taxable distribution.

How to Appeal and Reset Your IRMAA Bracket

If your income dropped due to a life-changing event — retirement, divorce, death of a spouse, or loss of pension income — you can file an IRMAA appeal with the Social Security Administration. Beneficiaries paying IRMAA surcharges can file an appeal within seven months of receiving the initial IRMAA determination notice.⁴

The appeal form is SSA-44 (Medicare Income-Related Monthly Adjustment Amount — Life-Changing Event). You must provide documentation of the event and your estimated current-year income. For retirement appeals, a letter from your former employer confirming your retirement date and final salary is sufficient.

A successful appeal resets your premium to the standard rate for the remainder of the current year. You must reapply each year if your income remains low, because the lookback rule still applies to future years.

Your Next Step

Pull your most recent tax return and calculate your MAGI for the current lookback year. If you are within $20,000 of the next IRMAA threshold, identify your charitable giving for the year and redirect it through QCDs from your IRA. Contact your IRA custodian for the specific QCD distribution form — most require written instructions at least two weeks before the distribution date.