Roth Conversions and IRMAA: Avoid the Medicare Cliff
Aug 20, 2026Can a Roth conversion increase your Medicare premiums?
Yes—but that does not automatically mean you should stop converting.
The real question is whether paying a higher Medicare premium for a limited period could help you reduce future required minimum distributions, manage long-term taxes, and potentially avoid higher Medicare costs later in retirement.
In this Retirement Income School™ lesson, I’ll explain how Medicare’s income-related monthly adjustment amount—better known as IRMAA—works, why crossing a threshold can create a costly “cliff,” and how an IRMAA tier-cap strategy can help you make Roth conversions more deliberately.
What Is IRMAA?
IRMAA stands for income-related monthly adjustment amount. It is an additional charge applied to Medicare Part B and Part D premiums when your modified adjusted gross income exceeds certain limits.
Medicare Part B generally covers physician services, outpatient care, medical equipment, and other eligible services. Medicare Part D provides prescription drug coverage through private plans.
Most Medicare beneficiaries pay the standard Part B premium plus the premium charged by their selected Part D plan. Higher-income beneficiaries may also pay IRMAA surcharges for both types of coverage.
For 2026, the standard Medicare Part B premium is $202.90 per month. IRMAA begins when 2024 modified adjusted gross income exceeds:
- $109,000 for an individual filer
- $218,000 for a married couple filing jointly
The income limits and surcharge amounts can change annually. You can review the current figures in the official CMS Medicare premium tables.
How the Two-Year Lookback Works
Medicare generally determines your IRMAA surcharge using the federal tax return from two years earlier.
That means your 2026 Medicare premiums are generally based on the modified adjusted gross income reported on your 2024 tax return.
This matters when you are planning Roth conversions because the taxable amount of a conversion increases your income for that year. A conversion at age 63, for example, could affect your Medicare premiums at age 65.
When planning a conversion, you are not only considering this year’s tax bill. You may also be setting your Medicare premium two years into the future.
Understanding the IRMAA Cliff
Income tax brackets operate gradually. When your income enters a higher tax bracket, only the dollars above that threshold are taxed at the higher marginal rate.
IRMAA works differently.
Once your income crosses an IRMAA threshold, the corresponding monthly surcharge applies for the entire year. That is why people refer to it as the IRMAA cliff.
Consider a single Medicare beneficiary with modified adjusted gross income of $109,000. Under the 2026 limits, that individual remains at the standard Part B premium and pays no Part D IRMAA surcharge.
If that person’s income increases to $109,001, the monthly surcharges become:
- $81.20 for Medicare Part B
- $14.50 for Medicare Part D
- $95.70 in combined monthly surcharges
Over 12 months, that $1 of additional income could result in $1,148.40 of additional Medicare costs.
That does not necessarily mean the extra income or Roth conversion was a mistake. It means the decision should account for the entire cost of crossing the threshold.
Three IRMAA Rules That Matter for Roth Conversions
When evaluating a Roth conversion, remember these three points:
- A Roth conversion increases taxable income.
The taxable portion of the conversion is included in the income Medicare uses when determining IRMAA. - Crossing a threshold affects the entire year.
Moving into the next IRMAA tier can increase both Part B and Part D costs for all 12 months. - IRMAA generally uses a two-year lookback.
The income you recognize today may affect your Medicare premiums two years from now.
Once you understand these rules, you can begin planning around them instead of automatically avoiding Roth conversions.
What Is an IRMAA Tier-Cap Strategy?
An IRMAA tier-cap strategy means selecting an income threshold intentionally and limiting your Roth conversion so your projected modified adjusted gross income remains within that tier.
The basic process is:
- Estimate your income before the conversion.
- Choose the IRMAA tier that fits your goals.
- Calculate how much room remains within that tier.
- Convert up to the selected limit.
- Recalculate and repeat the process each year.
Instead of converting a large account all at once—or stopping conversions completely—you divide the conversion into planned annual amounts.
The IRMAA cliff is unforgiving, but it is also visible. When you know where the line is, you can plan around it.
Choosing the Right IRMAA Tier
The lowest possible IRMAA tier is not always the best choice.
Keeping your income below every surcharge threshold may reduce Medicare costs today, but it can also extend your Roth conversion over a much longer period. During that time, your traditional IRA may continue growing and future tax laws, Medicare rules, and personal circumstances may change.
Choosing a higher tier could allow you to:
- Complete the conversion sooner
- Reduce the balance subject to future required minimum distributions
- Create more tax-free retirement assets
- Leave tax-free Roth assets to beneficiaries
- Reduce exposure to potentially higher taxes later
The decision involves comparing the additional Medicare cost with the potential long-term benefit of converting more money.
A Hypothetical Roth Conversion Example
Consider a hypothetical married couple, Sam and Sally.
Sam is 66, Sally is 63, and they have $625,000 they want to convert from a traditional IRA to a Roth account. Their retirement income includes pensions, investment income, and future Social Security benefits.
They also have several years before required minimum distributions become a major factor, giving them time to complete a series of partial conversions.
In one hypothetical analysis, their strategy is capped at a selected IRMAA tier. The software projects annual conversion amounts based on their income, federal taxes, state taxes, Medicare thresholds, and conversion timeline.
Using the selected tier, the conversion is completed over approximately five years.
When the strategy is changed to avoid IRMAA surcharges entirely, the projected conversion period extends to approximately 11 years.
Neither result is automatically right or wrong.
The comparison shows the tradeoff: accepting a planned Medicare surcharge may allow a conversion to be completed sooner, while remaining in a lower tier may reduce current premiums but extend the conversion timeline.
All figures in this example are hypothetical. Actual results depend on product terms, interest crediting, tax rates, income, Medicare thresholds, and individual circumstances.
Why Every Roth Conversion Plan Is Different
There is no universal Roth conversion formula.
Your strategy may depend on:
- Your current and expected tax brackets
- Your age and required minimum distribution timeline
- The size of your IRAs, 401(k)s, 403(b)s, or TSP
- Your Social Security and pension income
- How you plan to pay the conversion taxes
- Your Medicare enrollment status
- Your estate and inheritance goals
- Your expectations about future tax rates
- Your beneficiaries’ potential tax situations
- Your need for liquidity and retirement income
Some people may benefit from paying conversion taxes with money from a brokerage or savings account. Others may use a different source based on their available assets and overall plan.
This is why a Roth conversion should be modeled as part of a complete retirement strategy—not evaluated in isolation.
The Potential Cost of Waiting
You may be tempted to stop Roth conversions simply to avoid an IRMAA surcharge.
The problem is that your traditional IRA does not stop growing because you delayed the decision.
When required minimum distributions begin, the IRS determines the minimum amount you must withdraw each year. Those withdrawals can increase your taxable income, push you into a higher tax bracket, and potentially create recurring IRMAA surcharges.
Avoiding a temporary surcharge today could contribute to higher taxable income and Medicare costs later.
The goal is not to avoid IRMAA at all costs. The goal is to determine whether paying a known surcharge for a limited period supports a better long-term outcome.
Questions to Ask Before You Convert
Before completing a Roth conversion, ask:
- How much taxable income do I already expect this year?
- How much room remains in my current tax bracket?
- How much room remains in my selected IRMAA tier?
- Could the conversion increase my Medicare premiums in two years?
- How many years do I have before required minimum distributions?
- Where will the money come from to pay the conversion taxes?
- Would a higher IRMAA tier help me complete the conversion sooner?
- How could the conversion affect my spouse and beneficiaries?
The best strategy is the one that coordinates taxes, Medicare premiums, retirement income, and estate planning around your unique goals.
The Key Takeaway
Do not automatically stop Roth conversions because of the IRMAA cliff.
Instead, consider using an IRMAA tier-cap strategy.
A planned Roth conversion may increase your Medicare premiums temporarily, but it could also reduce future required distributions, increase your tax-free assets, and give you more control over retirement income.
The decision should be based on the complete numbers—not fear of a single surcharge.
What to Do Next
If you are considering a fixed indexed annuity, compare more than the illustrated interest potential.
Review the insurer, surrender period, liquidity provisions, caps, participation rates, rate guarantees, renewal provisions, optional rider fees, and minimum guaranteed values.
Most importantly, determine how the contract would fit into your complete retirement plan.
Want help exploring whether an FIA may be appropriate for your retirement goals? Visit Retirement Income School™ and click Book a Q&A Call.
DISCLAIMER:
The information in this lesson is provided for general educational purposes only and does not constitute financial, legal, or tax advice. Retirement Income School™ and Dr. Amanda Barrientez do not provide individual investment recommendations. Always consult with a licensed advisor or tax professional before implementing any strategy discussed.
