$500,000 in a 401(k) and $100,000 in Cash: Spending the Wrong One First Can Raise Your Medicare Premium Two Years Later

A retiree with $500,000 in a 401(k) and $100,000 in cash faces more than an investment decision, because a taxable withdrawal can affect Medicare premiums two years later – Shutterstock

A retiree with $500,000 in a 401(k) and another $100,000 sitting in cash has more than a simple spending choice. Taking money from the 401(k) can increase taxable income, and that income can affect Medicare premiums two years later.

The timing matters because Social Security generally uses federal tax return information from two years earlier to determine Medicare’s income-related monthly adjustment amount, or IRMAA. For example, 2026 Medicare premiums generally use 2024 tax information.