How IRA Withdrawals Can Affect Your Taxes and Medicare Premiums
By Andrew Joski, NSSA®
Founder of Joski Financial
Published September 14, 2026
A withdrawal from a traditional IRA may affect more than the tax owed on that distribution.
It can also push part of your income into a higher tax bracket, cause more of your Social Security to become taxable, and potentially increase your Medicare premiums two years later.
This ripple effect is why retirement-account withdrawals should be coordinated with the rest of your income plan.
Traditional IRA Withdrawals Are Generally Taxable
Money withdrawn from a traditional IRA is generally taxed as ordinary income unless the account contains after-tax contributions.
A distribution is added to other income you may receive from:
Employment
Pensions
Social Security
Interest and dividends
Capital gains
Rental properties
Other retirement accounts
The important question is not simply whether the distribution is taxable. It is how that additional income interacts with everything else on your tax return.
A Withdrawal May Reach a Higher Tax Bracket
The federal tax system uses graduated brackets. Different portions of your taxable income can be taxed at different rates.
If your other income already places you near the top of a bracket, an IRA withdrawal could push part of the distribution into the next one.
This does not mean all your income becomes subject to the higher rate. Generally, only the portion falling within the higher bracket is taxed at that rate.
However, the distribution may also trigger other costs that make its total effect larger than expected.
More of Your Social Security May Become Taxable
Social Security benefits are not automatically tax-free.
The IRS uses a calculation involving one-half of your Social Security benefits, other income, and certain tax-exempt interest. As that total increases, a greater portion of your benefits may become taxable.
Depending on your income, as much as 85% of your Social Security may be included in taxable income.
That does not mean Social Security is taxed at an 85% rate. It means up to 85% of the benefit may be subject to your applicable income-tax rate.
The ripple effect can look like this:
You withdraw money from a traditional IRA.
The withdrawal increases your income.
The higher income causes more Social Security to become taxable.
Your taxable income rises by more than the IRA withdrawal alone.
This interaction is sometimes called the Social Security “tax torpedo.”
The Withdrawal Could Increase Medicare Premiums
Higher income may also affect your Medicare Part B and Part D costs.
Medicare uses an Income-Related Monthly Adjustment Amount, commonly called IRMAA, for beneficiaries whose income exceeds certain thresholds.
IRMAA can add an extra monthly amount to:
Medicare Part B premiums
Medicare Part D prescription-drug premiums
For this calculation, Medicare generally uses modified adjusted gross income, which includes adjusted gross income plus tax-exempt interest.
The thresholds and premium amounts can change annually.
Medicare Generally Looks Back Two Years
One of the most confusing parts of IRMAA is the timing.
Medicare generally uses income reported on your federal tax return from two years earlier. A large IRA withdrawal taken this year could therefore affect your Medicare premiums approximately two years later.
That delay makes the connection easy to miss.
Someone may take a large distribution to replace a vehicle, remodel a home, pay off debt, or help a family member. Two years later, the one-time increase in income may result in higher Medicare premiums.
A Simple Example
Consider a single retiree receiving:
$70,000 from a pension
$40,000 in Social Security benefits
An additional $80,000 traditional IRA withdrawal
The retiree may initially focus on the tax owed directly on the $80,000 distribution.
But the withdrawal could have several effects:
The taxable IRA distribution is added to ordinary income.
Part of the income may enter a higher tax bracket.
More of the Social Security benefit may become taxable.
Income may cross one or more Medicare IRMAA thresholds.
Medicare premiums may increase two years later.
The actual result depends on filing status, deductions, other income, tax-exempt interest, and the Medicare thresholds applicable to the relevant year.
The point is not that the withdrawal is necessarily a mistake. It is that the total cost may be greater than the tax on the distribution alone.
IRMAA Can Create a Threshold Effect
Income-tax brackets are generally marginal. Crossing into a higher bracket does not cause all previous income to be taxed at the higher rate.
IRMAA operates differently.
Once income crosses a threshold, the corresponding Medicare adjustment generally applies for that premium year. A relatively small amount of additional income could move someone into the next IRMAA tier.
This makes income planning especially important for people already close to a threshold.
Could You Spread the Withdrawal Across Tax Years?
If the expense is known in advance, you may be able to evaluate distributing the income over more than one year.
Instead of withdrawing the entire amount in December, someone might consider taking one portion in December and another in January.
That is not automatically better. The result depends on income, deductions, tax brackets, Medicare thresholds, and investment considerations in both years.
However, examining multiple tax years can reveal options that are missed when each withdrawal is considered independently.
Could You Use More Than One Account?
The result may also change depending on which account provides the money.
Potential sources include:
Bank savings
Taxable brokerage accounts
Traditional IRAs
Roth IRAs
Workplace retirement accounts
A combination of accounts
A qualified Roth IRA withdrawal generally does not increase adjusted gross income. Taking money from savings may represent funds that have already been taxed. Selling from a brokerage account may create a capital gain rather than making the entire withdrawal taxable.
Each option has tradeoffs. The largest account is not necessarily the best account to use.
Roth Conversions Can Create the Same Immediate Effect
A Roth conversion moves money from a traditional retirement account into a Roth account.
Although you do not receive spending money, the taxable portion of the conversion is generally included in income for that year. It may therefore affect:
Your tax bracket
Social Security taxation
Medicare IRMAA
State income taxes
The potential long-term benefit is that converted assets may later qualify for tax-free withdrawals. A conversion also reduces the traditional account balance, which could lower future required minimum distributions.
A Roth conversion should therefore be evaluated over several years—not solely by this year’s tax bill.
Should You Avoid Large IRA Withdrawals?
Not necessarily.
A large withdrawal may be appropriate to:
Cover healthcare expenses
Replace a vehicle
Complete necessary home repairs
Reduce high-interest debt
Fund an important goal
Complete a planned Roth conversion
The objective is not to avoid taxes or Medicare adjustments at all costs. It is to understand the consequences before choosing the amount, account, and timing.
Sometimes the best decision is still to take the distribution. Planning helps prevent the resulting tax bill and Medicare adjustment from becoming surprises.
Questions to Ask Before Withdrawing
Before taking a significant IRA distribution, consider:
How much of the distribution will be taxable?
What other income will I receive this year?
Could the withdrawal reach a higher tax bracket?
Will it make more Social Security taxable?
Could it cross an IRMAA threshold?
Would splitting it between two years help?
Could another account provide some of the money?
How will it affect future required minimum distributions?
IRA withdrawals should not be evaluated in isolation. Their timing can affect taxes, Social Security, Medicare premiums, and the long-term retirement plan.
The goal is not to eliminate every tax. It is to make the decision intentionally—with a clear understanding of both its immediate and future effects.
About Andrew Joski
Andrew Joski, NSSA®, is the founder of Joski Financial, an Idaho-registered investment adviser serving individuals and families in Boise, Meridian, Star, and throughout Idaho. He helps clients coordinate retirement-account withdrawals with their income, investments, Social Security, taxes, and Medicare considerations.
Considering a significant retirement-account withdrawal?
Schedule an introductory conversation with Joski Financial.
This material is provided for educational and informational purposes only and should not be considered individualized investment, tax, legal, insurance, or Medicare advice. Tax and Medicare rules, thresholds, and premiums may change. Consult the appropriate qualified professionals before implementing a strategy. Current information should be verified through the IRS, Medicare, or the Social Security Administration.
