Social Security Ignores $70,000 401(k) Withdrawal in $24,480 Earnings Test

Q: Could crossing a secret 2026 income cliff by just one dollar trigger thousands in unexpected retirement surcharges?

Yes. In 2026, Medicare’s IRMAA rules create true income cliffs, so going over a threshold by even $1 can trigger the full higher premium tier for the entire year. For 2026, the first IRMAA threshold begins above $109,000 of modified adjusted gross income for single filers and above $218,000 for married couples filing jointly, using income from 2024. Below that, the standard Part B premium is $202.90 a month. At just $1 over, Part B jumps to $284.10, and Part D adds another $14.50 monthly surcharge. That is about $1,148 a year in extra Medicare costs for one person, or roughly $2,297 for a married couple if both are on Medicare. The same cliff effect repeats at each higher bracket. At the top 2026 tier, Part B reaches $689.90 a month and Part D adds $91. For a couple, that can mean many thousands of dollars a year more than the standard premium. That is separate from Social Security’s earnings test. A traditional 401(k) withdrawal does not count as earnings that reduce early Social Security benefits; only wages and net self-employment income do. But the withdrawal still counts toward IRS income calculations, which can make up to 85% of Social Security benefits taxable and can also push income over an IRMAA threshold. So the “secret cliff” is real: a large 401(k) withdrawal, Roth conversion, capital gain or other one-time income can produce no Social Security earnings-test cut, yet still cause sharply higher taxes and Medicare surcharges two years later.

2 articles · Updated · Yahoo Finance · Aug 18

$70,000 withdrawn from a traditional 401(k) does not count toward Social Security’s 2026 retirement earnings test, which would count only a retiree’s $10,000 in welding income.
The test applies before full retirement age and looks only at wages and net self-employment income, not IRA or 401(k) distributions, pensions, annuities, interest, dividends or capital gains.
The IRS treats that same $70,000 very differently: it enters provisional income calculations and can make up to 85% of Social Security benefits taxable at ordinary income rates.
Large retirement-account withdrawals can also trigger Medicare IRMAA surcharges with a two-year lag, meaning a 2026 distribution could raise Part B and Part D premiums in 2028.