FRIDAY, SEPTEMBER 18, 2026

THE RETIREMENT PAYCHECK - PART 3 OF 4

Imagine withdrawing an additional $20,000 from your IRA.

You know you'll owe income tax on the distribution, so you plan accordingly.

But what if that withdrawal also affects something you weren't thinking about? Your Medicare premiums.

This is one reason retirement tax planning isn't simply about asking, "How much tax will I owe this year?"

The better question may be: "What else could this income affect?"

Retirement Creates Different Tax Decisions

During your working years, much of your tax situation is dictated by your paycheck.

Retirement can provide considerably more flexibility.

You may have money in traditional IRAs, Roth IRAs, taxable investment accounts, bank accounts and other assets. Each can have different tax characteristics.

Choosing where your retirement paycheck comes from can therefore influence your taxable income.

That's why simply withdrawing money from whichever account is most convenient isn't always the best strategy.

Medicare Adds Another Layer

Higher-income Medicare beneficiaries can pay an Income-Related Monthly Adjustment Amount, commonly called IRMAA, in addition to their regular Medicare Part B and Part D costs.

One particularly important feature of IRMAA is the lookback period. Medicare generally determines these surcharges using tax information from two years earlier.

For example, 2026 Medicare income-related premiums generally use income reported on your 2024 federal tax return.

For 2026, the standard Medicare Part B premium is $202.90 per month. Income-related adjustments begin above modified adjusted gross income of $109,000 for individual filers and $218,000 for married couples filing jointly.

Crossing an IRMAA threshold can therefore increase healthcare costs in addition to the income tax generated by the additional income.

This Is Where Tax Planning Becomes Valuable

Suppose someone retires at 62 but doesn't have required minimum distributions yet. Their taxable income may temporarily fall.

Those years could potentially provide opportunities for strategies such as Roth conversions or intentionally recognizing income while the taxpayer is in a lower tax bracket.

But those decisions shouldn't be made in isolation.

A Roth conversion may create a long-term tax benefit while simultaneously increasing current taxable income. Depending upon age and circumstances, that income could eventually influence Medicare premiums.

Planning means looking at both sides of the equation.

Don't Focus Only on Paying the Least Tax Today

Nobody enjoys paying taxes. But minimizing this year's tax bill isn't necessarily the same thing as minimizing taxes throughout retirement.

Sometimes deliberately paying tax today could potentially reduce taxes later. Other times, deferring income may be preferable.

The objective should be to understand the trade-offs before making the decision.

Retirement creates something your working years may not have offered: greater control over when some of your income is recognized.

Used thoughtfully, that flexibility can become an important part of your retirement strategy.

Next Friday, we'll put the pieces together and address one of the questions retirees ask us most often: Which accounts should I spend first?