Avoiding the IRMAA Cliff: What Every Retiree Needs to Know About Roth Conversions

Avoiding the IRMAA Cliff: What Every Retiree Needs to Know About Roth Conversions

Retirees often focus on Social Security and Required Minimum Distributions (RMDs) when planning income in retirement, but one hidden cost tends to get overlooked: Medicare IRMAA surcharges.

If you’re not careful, a smart tax move like a Roth conversion could unintentionally push your income high enough to trigger IRMAA penalties, increasing your Medicare Part B and D premiums by thousands of dollars per year.

Here’s what you need to consider when navigating that tightrope and how you can use timing to your advantage.

What Is IRMAA?

IRMAA stands for Income-Related Monthly Adjustment Amount. It’s a surcharge added to your Medicare Part B and Part D premiums if your Modified Adjusted Gross Income (MAGI) exceeds certain thresholds.

And here’s the kicker: the government looks at your MAGI from two years prior. So, if you’re on Medicare in 2025, your premiums are based on your 2023 income.

Because IRMAA isn’t progressive like income tax, even $1 over a threshold can trigger the full premium hike, costing you hundreds or more per year.

How Roth Conversions Impact IRMAA

When you convert traditional IRA or 401(k) funds to a Roth IRA, the converted amount is added to your taxable income that year. That means if you convert too much at once, or time it poorly, you could end up increasing your MAGI and triggering IRMAA penalties down the road.

Roth conversions can be a powerful tool for managing long-term taxes, but without coordination, they can create short-term Medicare pain.

The Sweet Spot: Planning Before Medicare Starts

For many people, the most strategic time to begin Roth conversions is in the years leading up to age 65, before enrolling in Medicare:

• You may have reduced or no earned income
• You haven’t started Required Minimum Distributions (RMDs)
• You could be delaying Social Security
• You’re still below IRMAA-triggering Medicare enrollment

This creates a temporary “low-income window” where you can convert just enough to fill up a low tax bracket — without pushing your Modified Adjusted Gross Income (MAGI) above IRMAA thresholds. Done right, you reduce future RMDs, gain tax-free growth, and avoid unnecessary Medicare surcharges.

Real-World Example: The IRMAA Surprise

Let’s say you retire at 63, file taxes as an individual, and convert $100,000 from your IRA to a Roth. Combined with $50,000 in other taxable income, your MAGI for 2025 hits $150,000.
That puts you squarely in the $133,501–$161,000 IRMAA bracket, triggering:

• A Medicare Part B premium of $306.90/month (vs. $185.00 standard)
• A Medicare Part D premium of $85.80/month (vs. $46.50 average)

That’s just under $2,000 in extra annual premiums, just from bumping into a higher IRMAA bracket.

Now imagine that over multiple years, it adds up fast.

What We Recommend

If you’re thinking about Roth conversions as part of your retirement plan, consider:

• Coordinating with your tax advisor and financial planner
• Running multi-year income projections
• Monitoring IRMAA thresholds annually
• Breaking large conversions into smaller annual moves
• Using tax-efficient charitable strategies to offset income (e.g., Donor-Advised Funds)

Let’s Build a Plan Around It

At Strategic Wealth Partners, we help clients plan Roth conversions with intention, balancing tax planning with Medicare cost control. If you’re approaching retirement or in the early post-work years, this is a critical window to get right.

📅 Book a meeting with one of our advisors using the link below and see how a few strategic moves now can lead to tax-efficient income.

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