Roth Conversions and Medicare: How to Convert Without Triggering IRMAA Surcharges

What Is a Roth Conversion?

A Roth conversion moves money from a traditional IRA or 401(k) into a Roth IRA. The converted amount is taxed as ordinary income in the year of the conversion, but all future growth and qualified withdrawals from the Roth account are tax-free. The strategy is popular among retirees who want to reduce future Required Minimum Distributions (RMDs), eliminate taxes on investment gains, and leave tax-free assets to heirs.

The problem for Medicare beneficiaries is that the converted amount increases your Modified Adjusted Gross Income (MAGI) for the year. And Medicare uses your MAGI to determine whether you owe Income-Related Monthly Adjustment Amounts (IRMAA) - surcharges that can add hundreds of dollars per month to your Part B and Part D premiums.

How Medicare IRMAA Works

IRMAA is an extra charge added to your standard Medicare Part B and Part D premiums if your income exceeds certain thresholds. The standard Part B premium for 2026 is $202.90 per month. If your MAGI is above the threshold, you pay the standard premium plus an IRMAA surcharge that ranges from $81.20 to $487.00 per month depending on your income tier.

Your MAGI for IRMAA purposes is your Adjusted Gross Income (AGI) plus tax-exempt interest income. This includes wages, Social Security benefits (the taxable portion), pension income, capital gains, dividends, interest, rental income, and Roth conversion amounts. Every dollar you convert from a traditional IRA to a Roth IRA adds a dollar to your MAGI.

The 2-Year Lookback Rule

Medicare does not use your current-year income to calculate IRMAA. Instead, it uses a 2-year lookback. Your 2024 tax return (filed in 2025) determines your 2026 IRMAA. Your 2026 tax return (filed in 2027) determines your 2028 IRMAA. This delay means that a Roth conversion you make today will not affect your Medicare premiums until two years later.

2026 IRMAA Brackets (Based on 2024 Income)

The following table shows the 2026 Part B IRMAA brackets. These are based on your 2024 Modified Adjusted Gross Income as reported on your tax return. The same income thresholds apply to Part D IRMAA surcharges.

Notice that the first IRMAA tier starts at just $1 above the threshold. There is no gradual phase-in - if your MAGI is $109,001 as a single filer, you pay the full $81.20/month surcharge ($974.40/year). This cliff effect makes precise income planning essential when doing Roth conversions.

Worked Example: $80,000 Roth Conversion

Let us walk through a realistic scenario. Susan is 66, single, and retired. Her baseline income sources for 2026 are:

• Social Security: $28,000/year (taxable portion: $23,800)

• Pension: $24,000/year

• Investment dividends and interest: $12,000/year

• Total baseline MAGI: $59,800

Susan wants to convert $80,000 from her traditional IRA to a Roth IRA in 2026. Her new MAGI would be $59,800 + $80,000 = $139,800. Looking at the 2026 brackets (which will apply to her 2028 premiums), $139,800 falls in the third tier ($137,001 – $171,000). Her 2028 Part B premium would jump from $202.90 to $405.80/month - an extra $202.90/month, or $2,434.80 per year.

Add the Part D IRMAA surcharge at the same tier ($46.20/month) and Susan pays an additional $3,009.60 in total Medicare surcharges in 2028 because of her 2026 Roth conversion.

Multi-Year Conversion Strategy

The most effective approach is to spread your Roth conversions across multiple tax years, converting just enough each year to stay below the IRMAA threshold. Here is how Susan could convert the same $80,000 without triggering any surcharges:

By splitting the conversion across two years, Susan converts the full $80,000 and pays zero IRMAA surcharges. The tradeoff is that the second $31,000 sits in the traditional IRA for one additional year, growing tax-deferred rather than tax-free. In most cases, the $3,009.60 in avoided surcharges far exceeds the tax benefit of one year of Roth growth on $31,000.

The formula is straightforward: take the IRMAA threshold for your filing status, subtract your baseline MAGI (all income sources except the conversion), and the difference is your maximum safe conversion amount for that year.

The Age 63 Planning Window

Because of the 2-year lookback, your income at age 63 is the first year that can trigger IRMAA (since Medicare eligibility begins at 65). This creates a valuable planning window: any Roth conversions you make before age 63 will never affect your Medicare premiums, regardless of the amount.

If you are between 59½ (when penalty-free IRA withdrawals begin) and 63, you have a window where you can do aggressive Roth conversions without any Medicare consequence. This is often called the Medicare gap years or the IRMAA-free window. For many retirees, this is the optimal time to do large conversions - especially if you have retired early and your income is temporarily low before Social Security and pensions begin.

• Age 59½ to 63: Convert aggressively - no IRMAA impact regardless of amount

• Age 63 to 65: Conversions will affect your first year of Medicare premiums - plan carefully

• Age 65+: Every conversion year affects premiums two years later - use the safe conversion formula

What You Cannot Appeal

Medicare allows you to appeal IRMAA surcharges using Form SSA-44 if you experienced a life-changing event that reduced your income. Qualifying events include marriage, divorce, death of a spouse, work stoppage, work reduction, loss of income-producing property, and loss of pension income.

A voluntary Roth conversion is not a life-changing event. If your MAGI exceeds the threshold because you chose to convert, you cannot appeal the resulting surcharge. The IRMAA is calculated automatically from your tax return, and Social Security will not grant an exception for voluntary financial decisions. This makes pre-conversion planning the only protection - once the conversion is on your tax return, the surcharge is locked in two years later.

When the Math Still Favors Converting

IRMAA surcharges are temporary - they last one year and are recalculated annually. A Roth conversion, on the other hand, eliminates taxes on that money permanently. In many cases, paying one year of IRMAA surcharges is still worth it if the long-term tax savings exceed the short-term premium increase.

Consider this: if you are in the 22% tax bracket and convert $100,000, you pay $22,000 in income tax now but eliminate all future taxes on that $100,000 plus its growth. If the conversion pushes you into the first IRMAA tier, you pay an extra $974.40 in Part B surcharges plus $174 in Part D surcharges - a total of $1,148.40. That is a small price compared to the tens of thousands in future tax savings, especially if the money will grow for 10 or more years in the Roth account.

The math gets less favorable at higher IRMAA tiers. At the top tier ($487/month Part B + $91/month Part D), you are paying $6,936 in extra annual premiums. At that level, you should carefully model whether the conversion still makes sense after accounting for the surcharge, or whether splitting across years produces a better net outcome.

Frequently Asked Questions