Roth Conversions and Medicare IRMAA: When Paying More Tax Now Can Backfire

By: Alex Bridges, CFP®, EA, ChFC®, RICP®

Many people in their early 60s have recently retired and have more saved in pre-tax 401(k)s and IRAs than in any other account. For them, the years between the last paycheck and the first required minimum distribution can be a valuable window for Roth conversions. Living in Texas, with no state income tax, can make the math look even better.

There is a federal cost, though, that many people don’t notice until a letter from the Social Security Administration arrives. That cost is IRMAA, the income-related surcharge on Medicare premiums. In my experience, the problem is rarely the Roth conversion itself. It is usually the size and the timing.

Who is this article written for?

This article is written mainly for married couples between roughly 60 and 70 who are retired or close to it. Most of their savings sit in tax-deferred accounts, and they are considering partial Roth conversions over several years. It also applies to single retirees and recently widowed spouses, who face lower Medicare income thresholds.

If you are years away from Medicare, IRMAA will probably not affect your conversion decisions yet. If you are 63 or older, it usually should.

What is IRMAA, in plain English?

IRMAA stands for Income-Related Monthly Adjustment Amount. It is a surcharge added to the standard Medicare Part B and Part D premiums when your income exceeds certain thresholds. The surcharge is authorized by Section 1839(i) of the Social Security Act for Part B and Section 1860D-13(a)(7) for Part D. The Social Security Administration determines it under its regulations at 20 CFR Part 418.

According to the Centers for Medicare & Medicaid Services 2026 fact sheet, the standard Part B premium for 2026 is $202.90 per month. Surcharges begin when modified adjusted gross income exceeds $109,000 for single filers or $218,000 for joint filers. At the highest tier, the total Part B premium reaches $689.90 per month per person, before any Part D surcharge.

What income does Medicare actually look at?

For IRMAA purposes, modified adjusted gross income (MAGI) is your adjusted gross income plus tax-exempt interest, as defined in Section 1839(i)(4) of the Social Security Act. This is not the same MAGI used for Roth IRA contribution limits or ACA premium tax credits. That catches people off guard.

The taxable amount of a Roth conversion is included in gross income under IRC Section 408A(d)(3), as explained in IRS Publication 590-A. Any after-tax basis you have is tracked on IRS Form 8606. Dollar for dollar, the taxable part of the conversion raises the income Medicare will look at.

Why does a Roth conversion at 63 affect Medicare premiums at 65?

IRMAA uses a two-year lookback. Under the Social Security Administration’s rules, your premiums for a given year are generally based on the federal tax return you filed two years earlier. Your 2026 premiums, for example, were based on your 2024 return.

For conversions, this means a conversion completed in 2026 generally sets your premiums for 2028. If you plan to enroll in Medicare at 65, the income on your return for the year you turn 63 is usually the first year that counts.

I often hear, “I’m not on Medicare yet, so IRMAA doesn’t apply to me.” That is only true before about age 63.

How does the IRMAA “cliff” make a conversion more expensive than expected?

Income tax brackets are marginal. Only the dollars above a threshold are taxed at the higher rate. IRMAA tiers work differently. Exceeding a threshold by even one dollar triggers the full surcharge for that tier for the entire year.

Here is a hypothetical illustration using the 2026 CMS figures. A married couple, both on Medicare, has joint MAGI that lands $1,000 above the $218,000 threshold. The first-tier Part B premium is $284.10 per month, which is $81.20 above the standard premium. For two people over twelve months, that is $1,948.80 in additional Part B premiums alone, before Part D surcharges.

In that hypothetical, the last $1,000 converted would cost more in Medicare premiums than the conversion amount itself, on top of the income tax. This is the kind of result I mean by a conversion that “backfires.”

Does the surcharge apply to both spouses?

Yes. For married couples filing jointly, each spouse enrolled in Medicare is assessed based on the couple’s combined MAGI. A conversion that crosses a threshold can therefore raise two premiums, not one.

A Roth conversion means paying tax today in exchange for tax-free growth and withdrawals later. That trade-off can still make sense with IRMAA in the picture. In my experience, it tends to go wrong in a handful of predictable situations:

• Overshooting a threshold by a small amount. Converting just a little past an IRMAA tier can add a full year of surcharges for a modest amount of additional conversion.
• Converting at a rate that isn’t lower than your expected future rate. Once IRMAA is added, the effective cost of converting can exceed the tax rate you would likely pay on those dollars later.
• Stacking a conversion on top of other one-time income. Large capital gains, a business sale, deferred compensation, or a home sale gain beyond the exclusion can push a year’s income higher than expected.
• Paying the conversion tax out of the IRA itself. Withholding from the converted amount means less money reaches the Roth. It may also mean converting more to accomplish the same goal.
• Ignoring ripple effects elsewhere on the return. Conversion income can increase the taxable portion of Social Security under IRC Section 86, explained in IRS Publication 915. It can also reduce or eliminate the temporary enhanced deduction for taxpayers 65 and older under the One Big Beautiful Bill Act, which phases out as MAGI rises.
• Converting while on an ACA marketplace plan before 65. Higher income can reduce the premium tax credit available under IRC Section 36B. This should be modeled separately from IRMAA.

One more caution: a conversion cannot be undone. Recharacterizing a Roth conversion back to a traditional IRA has not been permitted for conversions made after 2017, as noted in IRS Publication 590-A. A sizing mistake is permanent.

Is IRMAA ever a reason to convert anyway?

Yes. IRMAA is generally a one-year cost tied to one year of income, while the potential benefits of a Roth conversion can play out over decades. For many families, a planned surcharge can be a reasonable price for a larger conversion, depending on their circumstances.

Situations where paying some IRMAA may still make sense include:

• Future RMDs that would trigger IRMAA anyway. Under the SECURE 2.0 Act, required minimum distributions generally begin at age 73, or 75 for those born in 1960 or later. Large pre-tax balances can produce RMDs that push income into IRMAA tiers year after year.
• The “widow’s penalty.” After one spouse dies, the survivor typically files as single in later years. Single filers face IRMAA and tax bracket thresholds roughly half those for joint filers, while the IRA and its RMDs may be about the same size. Converting while both spouses are living and filing jointly may help reduce that future squeeze.
• Heirs who would inherit pre-tax accounts. Under the rules summarized in IRS Publication 590-B, many non-spouse beneficiaries must empty an inherited IRA within ten years. If those heirs are likely to be in high tax brackets during that window, inheriting Roth dollars can be more efficient.

The goal is not necessarily to avoid IRMAA at all costs. It is to know exactly what each additional dollar of conversion costs, including Medicare premiums, before deciding.

How can a Roth conversion be sized with IRMAA in mind?

There is no single right conversion amount, but a disciplined process can help evaluate the trade-offs. This is the general framework I use:

• Project the full year’s MAGI first. Include pensions, Social Security, interest, dividends, mutual fund capital gain distributions, and any planned sales before choosing a conversion amount.
• Identify both nearby limits. Note the next income tax bracket and the next IRMAA threshold, then treat whichever comes first as the working ceiling, with a cushion for income surprises.
• Remember which year’s thresholds apply. The thresholds that will apply two years from now haven’t been published yet. Because they are adjusted annually for inflation, the current year’s figures are often used as a conservative proxy.
• Convert late in the year. To count for a given tax year, a conversion generally must be completed by December 31. Waiting until late in the year, once most income is known, can reduce the risk of overshooting.
• Pay the tax from outside the IRA when possible. Using taxable savings to pay the conversion tax keeps more dollars in the Roth.
• Coordinate with RMDs and charitable giving. Once RMDs begin, the RMD for the year must be taken before converting, because RMDs cannot be converted, per IRS Publication 590-A. After age 70½, qualified charitable distributions under IRC Section 408(d)(8) can satisfy RMDs without adding to AGI, which can free up room for a conversion.

What if my premiums jumped because of income from my working years?

The Social Security Administration allows beneficiaries to request a new determination after certain life-changing events. These include work stoppage or reduction, marriage, divorce, death of a spouse, and loss of pension income. The request is made on Form SSA-44. For many new retirees, retirement itself may support using a more recent, lower year of income.

A voluntary Roth conversion, however, is not on that list. If a conversion pushes you into a higher tier, you should generally expect to pay the surcharge for that year. That is why sizing it correctly before you convert matters so much.

Why should Texas retirees look at this carefully?

Because Texas has no state income tax, the cost of a Roth conversion here is mostly federal. That often makes conversions look more attractive to Texans than to retirees in high-tax states. It also means IRMAA can make up a larger share of the total cost of converting.

For retirees who spent careers at large Houston-area employers, a sizable 401(k) combined with a pension and Social Security can put household income close to the IRMAA thresholds before any conversion happens. In those cases, the room for “IRMAA-free” conversions may be smaller than expected. It deserves careful modeling.

How does a fee-only fiduciary approach the Roth conversion decision?

Tiverton Wealth, LLC is a fee-only Registered Investment Advisor. As an investment adviser, we owe clients a fiduciary duty under the Investment Advisers Act of 1940, as described in the SEC’s 2019 Commission Interpretation Regarding Standard of Conduct for Investment Advisers (Release No. IA-5248). As a CFP® professional, I am also bound by the fiduciary duty in the CFP Board’s Code of Ethics and Standards of Conduct.

In practice, our compensation does not change based on whether you convert, how much you convert, or which accounts you hold. That allows the analysis to focus on your tax brackets, Medicare costs, estate goals, and cash flow.

Tiverton Wealth’s ongoing planning clients also receive annual tax return preparation through our affiliated firm, Tiverton Tax, LLC, under a separate tax engagement agreement. For a decision like this, coordinating the conversion plan with the actual tax return can help reduce the risk of surprises. For families in The Woodlands, Spring, Conroe, and the broader Greater Houston area, this kind of year-by-year modeling is a central part of retirement planning.

If you are weighing Roth conversions in the years leading up to or just after Medicare, it can help to review the numbers with a fiduciary financial planner who looks at the whole picture, not just the tax bracket.

You can review my full regulatory background on the SEC’s Investment Adviser Public Disclosure website: Alex Bridges — IAPD record.

This article is provided by Tiverton Wealth, LLC for general educational and informational purposes only. It does not constitute personalized investment, tax, or legal advice, and should not be relied upon as a substitute for advice from a qualified professional familiar with your specific circumstances. Tiverton Wealth, LLC is a fee-only Registered Investment Advisor providing services only in jurisdictions where it is properly registered or exempt from registration. Investing involves risk, including the possible loss of principal, and no strategy can guarantee a profit or protect against loss. Past performance is not indicative of future results. Please consult with a qualified financial, tax, or legal professional before making decisions based on this content.

Frequently Asked Questions

Does a Roth conversion count as income for Medicare IRMAA?

Yes. The taxable portion of a Roth conversion is included in adjusted gross income, and IRMAA is based on modified adjusted gross income, which is AGI plus tax-exempt interest. A conversion raises the income Medicare uses to set your Part B and Part D premiums, generally two years later.

How many years before Medicare should I start thinking about IRMAA?

Because IRMAA generally uses the tax return from two years earlier, income in the year you turn 63 typically sets your premiums in your first year on Medicare at 65. Conversions from age 63 onward should usually be sized with IRMAA thresholds in mind.

Can I appeal an IRMAA surcharge caused by a Roth conversion?

Generally, no. Form SSA-44 lets beneficiaries request a new determination after specific life-changing events, such as retirement, marriage, divorce, or the death of a spouse. A voluntary Roth conversion is not one of those events, so a conversion-driven surcharge is usually paid for that year.

Is it ever worth paying IRMAA to do a larger Roth conversion?

It can be, depending on your circumstances. IRMAA is generally a one-year cost, while conversion benefits can last decades. Large future RMDs, a potential shift to single filing after a spouse’s death, or heirs in high tax brackets can make a planned surcharge reasonable. The trade-off should be reviewed with a qualified professional.

Does IRMAA apply if I have a Medicare Advantage plan?

Yes. Medicare Advantage enrollees still pay the Part B premium, including any Part B IRMAA. If the plan includes prescription drug coverage, the Part D IRMAA also applies and is paid separately to Medicare.