Key Takeaways
- A hypothetical single 73-year-old with $1 million in a 457(b) and an $80,000 pension must withdraw $37,736 under the IRS’s required minimum distribution rules.
- That lifts their income to $117,736, past Medicare’s $109,000 single line, which at 2026 rates adds an $81.20 monthly Part B surcharge, or $974.40 a year, two years later.
- The numbers come from a real listener’s question on The Clark Howard Podcast, from someone who plans to withdraw only about $10,000 a year.
- With the money rolled into an IRA, sending $8,736 of the withdrawal to charity as a qualified charitable distribution would hold that income at the line.
A Nevada sheriff’s detective has a retirement setup most people would trade for. The detective is one year from retiring after 30 years at a county sheriff’s office, with about $1 million in a 457(b) plan and a pension of about $80,000 a year. The plan is to pull only about $10,000 a year from the account.
Wes Moss read out the detective’s question on the Oct. 29 episode of The Clark Howard Podcast: should the whole $1 million go into stocks? “As I see it, my pension will be my bond fund,” the detective wrote.
That’s a fair investing question. But the IRS has its own number for that account, and it’s a lot bigger than $10,000. In time, that number can add a line to the Medicare bill, too.
To see how, let’s take a hypothetical single 73-year-old with the detective’s two figures: $1 million in a 457(b) and an $80,000 pension. The detective’s age, marital status and Social Security never came up on the show, so the rest is my assumption. This person is single, draws no Social Security, and owes tax on every dollar of the pension and the 457(b).
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$37,736, whether you need it or not
The IRS says withdrawals from traditional IRAs and workplace plans must start at 73. The first is due by April 1 of the year after you turn 73, and every one after that by Dec. 31.
You don’t pick the amount. Under IRS Publication 590-B, you divide last Dec. 31’s balance by the figure for your age on the Uniform Lifetime Table, which is 26.5 at 73.
For our hypothetical retiree, $1 million ÷ 26.5 = $37,736. That’s nearly four times the $10,000 a year the detective plans to take out.
The divisor also shrinks every year, to 25.5 at 74 and 24.6 at 75. Even if the balance held at exactly $1 million, the required withdrawal at 74 would be $39,216.
The bill shows up two years later
Medicare charges higher earners a surcharge on top of the Part B premium, known as IRMAA. It’s set by modified adjusted gross income on your tax return from two years before. Under CMS’s 2026 figures, a single filer above $109,000 pays an extra $81.20 a month, and above $137,000, an extra $202.90.
With no other income, our retiree’s math runs like this:
- $80,000 pension + $37,736 required withdrawal = $117,736
- That’s $8,736 over the $109,000 line, inside the first band
- $81.20 a month × 12 = $974.40 a year
The withdrawal at 73 goes on that year’s return, so the surcharge hits the premium two years later, at 75. (That’s Part B alone. Part D carries its own surcharge, which this math leaves out.)
And it’s a cliff. The surcharge starts on the first dollar above $109,000, so being $8,736 over costs the same $81.20 a month as income all the way up to $137,000. That makes the $8,736 worth chasing.
A gift to charity can hold the line
For anyone who gives to charity anyway, the fix is a qualified charitable distribution. The IRS lets an IRA owner 70½ or older send money straight from the IRA to a charity tax-free, and the gift counts toward that year’s required withdrawal.
The catch is in the name: it has to come from an IRA. So the 457(b) money gets rolled into an IRA first. With that done, sending $8,736 of the $37,736 to charity changes the picture:
| Metric | Take it all as cash | Send $8,736 to charity |
|---|---|---|
| Pension | $80,000 | $80,000 |
| Required withdrawal | $37,736 | $37,736 |
| Withdrawal counted as income | $37,736 | $29,000 |
| Income for Medicare | $117,736 | $109,000 |
| Part B surcharge (2026 rates) | $81.20 a month | None |
At exactly $109,000, our retiree sits on the line without crossing it, because CMS’s first band starts above $109,000. That leaves no room at all, since a few dollars of bank interest would push the return over. So I’d give a bit more than $8,736 if the budget allows.
Timing matters too. (Pro tip: do the rollover before the year you turn 73, so the first required withdrawal can come from the IRA.) Waiting until April 1 of the following year for that first withdrawal is allowed, but it puts two required withdrawals on one return, and that means an even bigger jump past the line.
Plan it well before 73
Moss’s answer to the detective was to go ahead with stocks. He said that “if you’ve got a pension that’s 80 grand a year, and I divide that by, let’s call it 5%, that’s the equivalent of $1.6 million sitting in bonds.”
I agree with him on the investing, and it makes the planning matter more. My read: a balance invested all in stocks for the years before 73 has room to grow, and the required withdrawal grows right along with it.
My take: with a big pension and a big 457(b), the required withdrawal decides the Medicare bill as much as the spending plan does. For anyone charitable, a gift straight from an IRA is the cleanest way I know to keep it in check.
Of course, this retiree draws no Social Security. Most retirees do, and those benefits would land on top of the $117,736 and push it further past the line, possibly into the $137,000 band. And Medicare resets its bands and surcharges every year. The $81.20 is 2026’s figure, and the year that counts is the one two years after the withdrawal.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
