This post, authored by Claudia Mott, originally appeared on

Q. Does 401(k) income count against your Medicare premium?
— Unsure

A. The calculation of Medicare premiums is important to understand.

Let’s start with the basics.

Medicare insurance is divided into three primary sections.

Part A, hospital insurance, is free and covers hospital stays, care in a nursing facility and some home health care, said Claudia Mott, a certified financial planner with Epona Financial Solutions in Basking Ridge.

Part B, medical insurance, provides coverage for doctor’s visits and outpatient care, she said.

The premium — $148.50 per month for 2021 — is often deducted from the subscriber’s Social Security check.

Prescription drug coverage is provided under Part D.

“Each Medicare participant has a plan premium which is an out-of-pocket cost,” Mott said. “However, these basic costs apply to those who fall below certain income thresholds. A single person can have modified adjusted gross income of up to $88,000, while a married couple can earn up to twice that or $176,000.”

That’s when we come to IRMAA, short for “income-related monthly adjusted amount.”

This is a surcharge that is applied to both Medicare Part B and Part D insurance premiums when income exceeds the thresholds.

“There are a number of breakpoints that determine how much the surcharge will be using modified adjusted gross income (MAGI) from your income tax return two years prior to the current year,” she said. “For 2021, the 2019 tax year is being used. For Medicare purposes, modified adjusted gross income is defined as total adjusted gross income plus tax-exempt interest income.”

Now to your question. How is a retirement plan distribution considered when it comes to income?

The distributions taken from a retirement account such as a traditional IRA, 401(k), 403(b) or 457 Plan are treated as taxable income if the contribution was made with pre-tax dollars, Mott said.

“This would be reported on Form 1041 and would be included in the calculation of adjusted-gross income and would therefore be included in the calculation of the IRMAA surcharge,” she said.

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This story was originally published on April 16, 2021. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.

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