Roth Conversion and the Medicare IRMAA Surcharge

A Roth conversion—moving money from a traditional IRA into a Roth IRA—temporarily spikes your modified adjusted gross income (MAGI), which can trigger higher Medicare premiums two years later through a mechanism called the Income-Related Monthly Adjustment Amount, or IRMAA surcharge.

The Two-Year Lookback Problem

Medicare uses a two-year lookback when deciding your IRMAA surcharge. The income that determines your 2026 surcharge comes from your 2024 tax return. This lag catches many retirees off guard: perform a large conversion in year one, and you won’t see the premium increase until year three of your retirement—often when you’ve already budgeted for standard premiums.

The surcharge applies to both Part B (medical insurance) and Part D (prescription drug coverage). If you convert $100,000 from your traditional IRA to a Roth, that full $100,000 counts toward your MAGI for that year. If your MAGI climbs above the threshold—$97,000 for single filers or $194,000 for married couples filing jointly in 2024—you’ll face an additional monthly premium when you reach Medicare age (typically 65).

How IRMAA Income Brackets Work

The surcharge isn’t binary—it’s tiered. Social Security publishes annual brackets, and the further above the threshold you go, the higher the surcharge. For 2024, the Part B surcharges range from roughly $65 per month at the lowest tier to nearly $595 per month at the highest. Part D surcharges are less steep—up to about $76 monthly—but they stack on top of Part B.

The thresholds and surcharge amounts are indexed annually. A $200,000 MAGI for a married couple isn’t “a little over” the $194,000 line—it’s $6,000 over, pushing you into a higher bracket. Every $1 of additional income can mean a jump in the bracket-based surcharge.

Because the thresholds are modest relative to typical retirement incomes, many people converting sizable IRAs will cross them. A retiree with $80,000 of baseline income who converts $50,000 will have $130,000 MAGI—well into surcharge territory.

Why Two Years, Not One?

The two-year lag exists partly for administrative simplicity and partly to dampen the revenue impact of using preliminary estimates. When you report your tax return for a conversion year, the IRS transmits income data to Social Security. Social Security then waits one full year before applying IRMAA adjustments to your Medicare premiums. This gives households time to respond—either by accepting the surcharge or by filing an appeal if their current-year income is lower.

For example, you convert $80,000 in 2025. Your 2025 tax return shows elevated MAGI. In late 2026 or early 2027, Social Security notifies you of an IRMAA surcharge effective in 2027. If your 2026 income is much lower, you can request a recalculation based on “life changes.”

Strategic Timing: Spreading Conversions

The most common planning approach is to spread conversions across multiple years to keep annual MAGI below the threshold. If you have $400,000 to convert, converting $100,000 per year for four years keeps each year’s MAGI lower than converting it all in one year. This requires discipline, though, especially if you’re trying to capture lower tax brackets in particular years.

Another tactic is to move the conversion into a year when other income is naturally lower—for instance, a year in which you haven’t yet begun taking Social Security or when a spouse’s business has had a down year. Some retirees also time conversions before a major tax deduction, like a large charitable contribution, though the charitability is independent of the conversion itself.

What Income Counts in MAGI?

MAGI for IRMAA purposes includes ordinary income, capital gains, and the taxable portion of Social Security benefits—but not the tax-free portion. It also includes the full amount of your Roth conversion, regardless of whether that conversion came from pre-tax contributions or nondeductible contributions. This is a critical distinction: even if you convert a nondeductible IRA (which you’ve already paid taxes on), the full conversion amount counts toward MAGI.

Medicare MAGI does not include certain exclusions like foreign earned income or municipal bond interest, so if you have sources of income that don’t normally figure into your regular tax liability, they still won’t affect IRMAA.

When the Surcharge Doesn’t Appear

If you never enroll in Medicare Part B, you’re not subject to the surcharge. Some higher-income individuals decline Part B initially and cover their hospital needs through other means (such as an employer plan or the VA). Similarly, if you don’t take Part D prescription drug coverage, you won’t face a Part D surcharge—though you’ll pay a late-enrollment penalty if you join later.

Your spouse’s income is included only if you’re married filing jointly. If you’re married filing separately, each spouse’s income is used independently, but filing separately typically triggers other penalty provisions, making it an impractical route.

Requesting an IRMAA Recalculation

If your income dropped after the tax year in question—due to job loss, business closure, or death of a spouse—you can file a Medicare Income-Related Monthly Adjustment Amount Life-Changing Event form with Social Security. This allows a recalculation based on your current-year projected income rather than the two-year-old figure. Successful appeals typically lower your premiums for the remainder of the benefit year.

Appeals are time-limited. You generally have 60 days from the date you receive notice of the IRMAA determination to request a review. Many retirees overlook this deadline and remain locked into the surcharge for a full year.

Planning Around Large Conversions

Sophisticated retirees planning a major conversion often work backward from the two-year window. If you’re retiring in 2025, you might do a large conversion in 2024 (while still employed, before Medicare age) to capture employer income and avoid the IRMAA surcharge delay. Alternatively, you might wait until 2026 or 2027—well after you’ve started Medicare—to perform conversions, accepting that the surcharge will hit in year 2 but planning your overall cash flow to absorb it.

The Roth conversion itself is still often worthwhile, even with the temporary IRMAA surcharge. Because Roth accounts grow tax-free and withdrawals don’t count as income for IRMAA or Social Security taxation purposes, a conversion in year one yields tax-free growth in years two and beyond. The surcharge is a temporary cost, not a permanent break on the strategy’s logic.

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