Newsroom · Moab
Annuities, Retirement Income & Medicare in Moab 2026
Annuities and pensions aren't Medicare products — but the income they pay you shows up in the same number Medicare uses to set your premium. Here's how retirement income and Medicare fit together in Grand County, in plain English.
The bottom line
- Medicare prices premiums off your income. Higher earners pay an IRMAA surcharge on Part B and Part D, decided by your MAGI (adjusted gross income plus tax-exempt interest) from two years earlier.
- Most retirement income counts toward MAGI — pensions, IRA/401(k) withdrawals and RMDs, capital gains, and the taxable part of annuity payments. Qualified Roth withdrawals don't.
- Annuity taxation varies: an annuity inside an IRA/401(k) is fully taxable, while a non-qualified annuity payment is part earnings (taxable), part return of principal (not) — a detail that matters for MAGI.
- The 2026 IRMAA surcharge starts above $109,000 single / $218,000 joint. Sequencing income can help you avoid bunching it over a threshold.
- Annuities are not Medicare products — this is education, not advice. We won't name products or quote returns; those belong with a licensed financial professional and your tax advisor.
Annuities, pensions, and the way you draw down savings are retirement-planning decisions, not Medicare decisions — but they meet Medicare at a single number: your modified adjusted gross income. That's the figure Social Security uses to decide whether you pay the income-related surcharge on your Medicare premiums. So the income you arrange for a comfortable retirement can, without anyone mentioning it, change what you pay for Part B and Part D. This guide explains the connection in plain English. It is education, not advice — we don't sell annuities in this article, name products, or quote rates or returns.
Read the full transcript
Annuities and pensions aren't Medicare products — but the income they pay you lands in the same number Medicare uses to set your premium. That number is your modified adjusted gross income. Higher earners pay an IRMAA surcharge on Part B and Part D, and Social Security decides using your income from two years back. For 2026, it starts above $109,000 single, or $218,000 joint. Most retirement income counts: pensions, withdrawals from an IRA or a workplace retirement plan, required minimum distributions, capital gains, and the taxable part of an annuity payment. Qualified Roth withdrawals don't count at all. Annuity taxation splits two ways. An annuity held inside a retirement account is generally fully taxable — every dollar reaches that number. An annuity bought with after-tax money is treated as part return of your own principal and part earnings, and generally only the earnings portion is taxed. Why it matters in Moab: a guaranteed income stream is steady by design, so it becomes part of your baseline income every year. Better to know where it puts you relative to those thresholds before it starts than to be surprised two years later. This is education, not advice — no products, no rates, no returns. Those belong with your financial and tax professionals. And as always, grab your free copy of Medicare Breakdown — The Alphabet Soup of Medicare. The link is right below this video. Then call Medicare on Main at 435-260-3200.
The one number that links income and Medicare
Medicare's standard 2026 Part B premium is $202.90 a month with a $283 deductible. Most people pay the standard amount — but higher-income beneficiaries pay an extra charge called the Income-Related Monthly Adjustment Amount (IRMAA), added to both Part B and Part D. Social Security decides who owes it by looking at your MAGI: your adjusted gross income plus any tax-exempt interest, from the tax return two years back. Your 2026 premium is set from your 2024 income; the income you take this year echoes forward.
Here's why that matters for retirement income. Nearly every dollar of taxable retirement income — a pension check, an IRA withdrawal, a required minimum distribution, a capital gain, the taxable slice of an annuity payment — flows into MAGI. So the choices that shape your retirement paycheck also shape the income base Medicare measures. Get them working together and you keep control of both.
What counts in MAGI — and what doesn't?
Because IRMAA turns on MAGI, it helps to see which common income sources feed it and which stay out. This is general tax treatment, not a substitute for your own return:
| Retirement income source | Counts toward MAGI / IRMAA? |
|---|---|
| Wages or self-employment income | Yes |
| Traditional IRA / 401(k) withdrawals and RMDs | Yes |
| Pension income (taxable portion) | Yes |
| Annuity held inside an IRA or 401(k) — payments are fully taxable | Yes |
| Non-qualified annuity — the earnings portion of each payment | Yes |
| Capital gains, including from selling property | Yes |
| Taxable portion of Social Security benefits | Yes |
| Tax-exempt municipal bond interest (added back into MAGI) | Yes |
| Non-qualified annuity — the return-of-principal portion of a payment | No |
| Qualified Roth IRA withdrawals | No |
| HSA withdrawals for qualified medical expenses | No |
MAGI definition per SSA; annuity and pension tax treatment per IRS Publication 575 — Pension and Annuity Income and IRS — Topic No. 410, Pensions and Annuities. General treatment only — confirm your specifics with your tax advisor.
The two "No" rows in the annuity and Roth lines are where a lot of the planning lives. Qualified Roth withdrawals don't add to MAGI at all, and for a non-qualified annuity, the part of each payment that's simply returning your own principal generally isn't taxed — so it doesn't lift the number Medicare measures. Only the earnings portion does.
How annuity income is taxed — in concept
We won't quote rates, returns, or products — annuities aren't Medicare, and the specifics belong with a licensed professional. But the tax concept is what matters for Medicare, and it's straightforward:
- An annuity held inside an IRA or 401(k) (a "qualified" annuity): payments are generally fully taxable as they come out, because the money going in was pre-tax. Every dollar lands in MAGI.
- An annuity bought with after-tax money (a "non-qualified" annuity): each payment is treated as part return of your original principal and part earnings. Under the IRS exclusion ratio (Pub. 575), the principal portion generally isn't taxed and the earnings portion is — so only part of the payment reaches MAGI.
- A deferred annuity still growing: earnings generally aren't taxed until you withdraw them, so the income — and its effect on MAGI — lands in the year you take it, not before.
The reason this is worth understanding before you're on Medicare: a guaranteed-income stream is steady and predictable — that's the appeal — but when it's taxable, it counts toward MAGI every year you receive it. It becomes part of your baseline income, so it's better to know where it puts you relative to the $109,000/$218,000 thresholds before it starts than to be surprised two years later.
Sorting out retirement income and Medicare in Moab?
We'll explain the Medicare side in plain English — how MAGI, the two-year lookback, and the 2026 IRMAA thresholds shape your Part B and Part D costs — and coordinate with your financial and tax advisors on the rest. Free, local, no pressure, from our office at 880 S Main St.
Talk it through →Sequencing income around the IRMAA thresholds
"Sequencing" just means deciding which accounts to draw from, and when. It's a financial-planning exercise best done with your advisors — but here's the shape of it, with Medicare in view:
- Know where the lines are. The 2026 IRMAA surcharge begins above $109,000 (single) or $218,000 (joint) in MAGI, then steps up in tiers. Those lines are separate from your income-tax brackets and worth respecting on their own.
- Watch for bunching. Stacking a large annuity payout, an RMD, and a capital gain into the same year can spike your MAGI over a threshold for that year — and the surcharge follows two years later. Spreading income can keep you under.
- Use the accounts that don't count. Qualified Roth withdrawals and the return-of-principal part of a non-qualified annuity don't add to MAGI, so they can fund spending in a year you're trying to stay under a line.
- Plan the guaranteed-income floor deliberately. A steady annuity income stream is predictable — a strength — but it raises your baseline MAGI every year, so factor it in before layering other taxable income on top.
- Coordinate the calendars. Your financial professional and tax advisor run the income and tax math; we translate what it means for your Medicare premiums. Together beats separately.
Retirement income planning in Grand County
Moab and Grand County have a lot of retirees who built their nest egg the self-made way — small business owners, tradespeople, and folks whose income rose and fell with a seasonal, tourism-driven economy. For many of them, predictable income in retirement is the whole goal, which is why guaranteed-income tools come up in conversation. The Medicare angle is simply this: when that income is taxable, it counts toward the MAGI that sets your Part B and Part D premiums two years on. And because Grand County is rural — your nearest specialist may be across the state line in Grand Junction — the plan that fits your health and providers deserves the same care as the plan that fits your budget. Here's the local chronic-condition picture that should shape those coverage choices:
Chronic-condition rates among Grand County adults
Source: CDC PLACES, 2023 — via the Medicare On Main Data Desk. Model-based prevalence among Grand County adults, 2023.
One 2026 number to keep in the picture while you plan income: your out-of-pocket costs for covered Part D drugs are capped at $2,100 for the year. If you manage any of the conditions above, the plan's drug formulary — not just its premium — is where the real money is. Match coverage to your medications, and coordinate your income with the IRMAA calendar so a good year doesn't cost you twice.
How we know all this: the Medicare On Main Data Desk builds every article on public data — here, the 2026 Part B premium and deductible from CMS.gov, the IRMAA thresholds, MAGI definition, and two-year-lookback rule from SSA, the tax treatment of pensions and annuities from IRS Topic 410 and Publication 575, and Grand County health figures from CDC PLACES (2023). Annuities and other retirement-income products are not Medicare and not something we quote here; this is education, not advice. Confirm income and tax questions with a licensed financial professional and your tax advisor, and confirm your plan, costs, and eligibility with a licensed agent or Medicare.gov. We take no payment from any carrier to feature a plan.
Frequently asked questions
Does annuity income affect my Medicare premium?
It can, depending on how the annuity is taxed. Medicare charges higher-income beneficiaries an income-related surcharge (IRMAA) on Part B and Part D, and it decides who pays by looking at your MAGI — your adjusted gross income plus any tax-exempt interest — from two years earlier. Taxable annuity income raises MAGI: payments from an annuity held inside an IRA or 401(k) are fully taxable, and for a non-qualified annuity the earnings portion of each payment is taxable while the return of your original principal generally is not (IRS Pub. 575). If taxable income pushes your MAGI over the 2026 thresholds of $109,000 single or $218,000 joint, the surcharge applies. Annuities are not Medicare products — this is education, and the tax details belong with your tax advisor.
What is MAGI and why does Medicare use it?
MAGI — modified adjusted gross income — is your adjusted gross income plus any tax-exempt interest (for example, municipal bond interest). Social Security uses it to decide whether you owe the IRMAA surcharge on Medicare Part B and Part D. Because nearly every source of retirement income except qualified Roth withdrawals and the return-of-principal part of a non-qualified annuity flows into MAGI, how and when you take income each year is what moves you across an IRMAA threshold. It's measured on a two-year delay, so your 2026 premium reflects your 2024 income.
How does guaranteed retirement income fit with Medicare planning?
A guaranteed-income annuity is designed to pay a steady stream you can't outlive — a predictable floor under your budget. For Medicare planning the key point is that when those payments are taxable, they count toward MAGI every year they're received, so they raise the income base the IRMAA thresholds are measured against. That's not a reason to avoid guaranteed income — predictability is exactly why many retirees value it — but it's a reason to coordinate it with your other income so a good year doesn't quietly nudge you over a threshold. Whether an annuity fits your plan is a question for a licensed financial professional and your tax advisor, not a Medicare decision.
Can I sequence my retirement income to keep Medicare costs down?
Sequencing — choosing which accounts to draw from, and when — is one lever retirees use. Because qualified Roth withdrawals don't count in MAGI and traditional-account withdrawals do, the mix you pull in a given year changes the MAGI the IRMAA thresholds see two years later. Some retirees smooth taxable income across years to avoid bunching it into one year that spikes over a threshold; others coordinate the year a large annuity payout or RMD lands. The standard 2026 Part B premium is $202.90 a month, and the surcharge above the thresholds is added on top — so the planning is worth real dollars. Run the specifics with your tax advisor and financial professional; we can explain the Medicare side.
Does Medicare cover long-term care if I outlive my savings?
No — Medicare and Medigap do not pay for long-term custodial care (help with everyday activities like bathing, dressing, or eating), per Medicare.gov. Medicare covers limited skilled care after a qualifying hospital stay, not ongoing custodial care. That gap is one reason some retirees look at guaranteed-income or other planning tools to protect against outliving their money and to cover care costs Medicare won't. Those are not Medicare products and we won't quote figures on them here — they're worth reviewing with a licensed professional. What we can do is make sure your Medicare coverage itself fits your health and budget.
Does Medicare On Main sell annuities?
This article is Medicare education, not an annuity pitch — we won't name products, quote rates, or promise returns. Brian Penner is an independent, licensed Medicare advisor with more than 22 years of experience, focused on helping Grand County residents choose Medicare coverage that fits, paid by the carriers and not by you. We do not offer every plan available in your area. For guaranteed-income or annuity questions, and for the tax side of how income affects your Medicare premium, we'll point you to a licensed financial professional and your tax advisor.
Sources
- CMS: 2026 Medicare Parts A & B Premiums and Deductibles — 2026 Part B premium ($202.90) and deductible ($283).
- SSA — Medicare premiums: Rules for higher-income beneficiaries — the 2026 IRMAA thresholds ($109,000 single / $218,000 joint), the MAGI definition, and the two-year lookback.
- IRS — Topic No. 410, Pensions and Annuities · IRS Publication 575 — Pension and Annuity Income — how pensions and annuities are taxed (the exclusion ratio for non-qualified annuities).
- CMS: Final CY 2026 Part D Redesign Program Instructions · Medicare.gov: How much does Medicare drug coverage cost? — the 2026 $2,100 cap on out-of-pocket costs for covered Part D drugs.
- SSA.gov — Medicare (premiums and enrollment) — how Medicare premiums and enrollment work.
- CDC PLACES: Local Data for Better Health, County 2023 — Grand County chronic-condition prevalence (2023).