Retirees Risk Lower 2026 Social Security Checks Despite 2.8% COLA

Q: Beyond benefit cuts, what hidden Medicare costs can surprise you if you continue working in retirement?

The biggest hidden Medicare cost is IRMAA, the income-related surcharge that raises Medicare Part B and Part D premiums when your income is too high. For retirees who keep working, higher wages can push modified adjusted gross income above Medicare thresholds. In 2026, surcharges generally begin above $109,000 for single filers and $218,000 for married couples filing jointly. The surprise is that Medicare uses a two-year lookback, so 2026 premiums are based on 2024 income. That means a strong working year, a bonus, capital gains, IRA withdrawals, or a Roth conversion can trigger higher premiums two years later, even if income has since fallen. The other shock is the “cliff” effect. Going over a threshold by even $1 can move someone into a higher premium tier. The added cost can be substantial for both spouses in a couple, and Part D surcharges are paid on top of the drug plan premium. Working longer can also raise the taxable share of Social Security benefits, which increases overall retirement costs. And if someone stays in Original Medicare, Part B has no annual out-of-pocket maximum, so the standard 20% coinsurance can become expensive in a bad health year. Retirees can reduce the risk by managing MAGI carefully, timing Roth conversions and large withdrawals, watching capital gains, and using qualified charitable distributions if eligible. If income later drops because of retirement or reduced work, they may ask Social Security to reconsider IRMAA using Form SSA-44.

Q: How can a strategic charitable donation from your IRA actually lower your future Medicare premiums?

A charitable gift made directly from your IRA to a qualified charity can lower future Medicare premiums if it is done as a Qualified Charitable Distribution, or QCD. The reason is simple: a QCD reduces the income Medicare uses to set its surcharges. Medicare Part B and Part D premiums rise when your modified adjusted gross income, or MAGI, crosses IRMAA thresholds. Those surcharges are based on income from two years earlier. So a lower MAGI in 2026 can mean lower Medicare premiums in 2028. A QCD works because the money goes straight from your IRA custodian to an eligible 501(c)(3) charity and is excluded from taxable income. That matters more than taking an IRA withdrawal and then donating cash, because a normal withdrawal still raises your MAGI even if you later claim a charitable deduction. A QCD avoids that income hit altogether. This can be especially valuable once required minimum distributions begin. A QCD can count toward your RMD while keeping that amount out of AGI and MAGI, helping prevent an RMD from pushing you over an IRMAA “cliff,” where even $1 above a threshold can trigger much higher premiums. The strategy is available starting at age 70½. For 2026, up to $111,000 per person can be given this way. The transfer must go directly to the charity; donor-advised funds and private foundations generally do not qualify. For retirees near an IRMAA cutoff, a well-timed QCD can save not just income tax, but also hundreds or thousands in Medicare surcharges later.

3 articles · Updated · FinanceBuzz · Jul 12

A 2.8% 2026 cost-of-living increase may still leave retirees with smaller-than-expected Social Security deposits once withholding, taxes and Medicare deductions are applied.
For workers claiming before full retirement age, the Earnings test can cut checks after $24,480 in wages in 2026, with SSA withholding $1 for every $2 above the limit; the threshold rises to $65,160 for those reaching FRA.
Federal taxes can also shrink net benefits because up to 50% of benefits become taxable above $25,000 in combined income for singles and up to 85% above $34,000; the joint-filer thresholds are $32,000 and $44,000.
Medicare Part B and Part D surcharges for 2026 will be based on 2024 income, so retirees who crossed IRMAA brackets could see larger premium deductions from their checks.
SSA overpayment recoveries, earnings-record errors and unprocessed life changes can further reduce payments, making advance reviews of SSA records, tax exposure and Medicare notices critical.