When implementing Roth conversions, it is important to keep in mind that doing so could impact your Medicare premiums, even before age 65. This is through something called IRMAA, or Income-Related Monthly Adjustment Amount. Realizing additional income could push you into the next 2026 IRMAA bracket and thus increase your Medicare Part B and D premiums. You might be wondering: How do I avoid these IRMAA surcharges? This is a common question that pre-retirees and retirees often overlook. Planning for retirement is about more than simply determining whether or not you have accumulated enough money. It also requires making complicated decisions about when to recognize taxable income and how those decisions today can impact tomorrow’s taxes and healthcare costs.
What is IRMAA and How Does it Affect Medicare Premiums?
IRMAA is a surcharge added to both Medicare Part B and Part D premiums for those whose income exceeds a certain threshold.
IRMAA is calculated by looking at your income. If you are married filing jointly, then this means your combined modified adjusted gross income (MAGI) from your joint tax return is used to determine which IRMAA bracket both you and your spouse fall into. However, even though the bracket is calculated through joint incomes, the surcharge applies to each individual separately.
For example, if a married couple’s MAGI is $250,000, they would land in the second IRMAA tier that adds $81.20/month to each spouse’s Part B premium and $14.50/month to Part D. With these assumptions, the household’s additional surcharges would be:
($81.20 + $14.50) x 2 spouses x 12 months = $2,296.80 per year
How Your Income Is Determined for Medicare
To determine your income, Medicare uses a specific version of Modified Adjusted Gross Income (MAGI) that consists of your adjusted gross income (AGI) and tax-exempt interest income.
It is important to note, tax-exempt interest income, most often from municipal bonds, count for IRMAA purposes even though it may not be subject to federal income tax.
Other income that may affect IRMAA includes:
- Wages and self-employment income
- Pension income
- Taxable Social Security benefits
- Traditional IRA distributions
- Required minimum distributions
- Taxable portions of annuity distributions
- Roth conversions
- Interest and dividends
- Capital gains
- Rental and business income
How Far Back Does Medicare Look at Your Income?
This can be one of the most confusing things regarding IRMAA timing. Medicare generally determines your premiums using your MAGI from two years earlier.
For example, your 2026 Medicare premiums would be based on your 2024 MAGI on your federal income tax return. Your 2027 premiums would be based on your 2025 return. And so on.
This is a very important detail, as a client who retires in 2026 may see their income for 2026 drop substantially, but their Medicare 2026 premiums would still be higher based on the income they earned whiling working in 2024.
2026 IRMAA Thresholds
The following table displays the IRMAA thresholds for different filers in 2026, which again, would be based off your 2024 MAGI:
2026 Medicare Part B and Part D IRMAA amounts
2024 MAGI: Individual | 2024 MAGI: Married filing jointly | 2026 total Part B premium per person | 2026 Part D surcharge per person |
$109,000 or less | $218,000 or less | $202.90 | None |
Above $109,000 through $137,000 | Above $218,000 through $274,000 | $284.10 | $14.50 per month |
Above $137,000 through $171,000 | Above $274,000 through $342,000 | $405.80 | $37.50 per month |
Above $171,000 through $205,000 | Above $342,000 through $410,000 | $527.50 | $60.40 per month |
Above $205,000 but below $500,000 | Above $410,000 but below $750,000 | $649.20 | $83.30 per month |
$500,000 or more | $750,000 or more | $689.90 | $91.00 per month |
To clarify, the Part D adjustment would be added to the premium charged by your Part D Medicare plan.
Why is IRMAA a Cliff Instead of a Gradual Increase?
Unlike an ordinary marginal tax bracket, once your income passes a threshold, the full additional premium is owed. There is no progression. The full amount is owed even if you barely surpass the threshold.
Looking at the chart above, if a married couple’s MAGI increased by $1 from $218,000 to $218,001, they would fall into the second IRMAA tier. This means each spouse would pay an additional $81.20 per month for Part B and an additional $14.50 per month for Part D. This might not seem like much, but combined annually ends up at almost $2,300, highlighting the magnitude of careful planning.
How Does the Death of a Spouse Affect IRMAA and Medicare Premiums?
Often overlooked in IRMAA planning, and capable of generating severe consequences, is what happens after the first spouse passes away. A widowed spouse generally moves from the more favorable married filing jointly to single filing status, significantly narrowing their tax brackets and IRMAA thresholds even if household income declines somewhat. This can create higher taxes and significantly increase the surviving spouse’s Medicare premiums.
Can you Appeal an IRMAA Surcharge?
If a retiree’s financial situation has changed dramatically but they are still paying Medicare premiums based on income from two years ago, it may be possible to request a new IRMAA income determination. This can be done through Social Security Form SSA-44. This form is used when a qualifying event, such as retirement, reduction in work, divorce, or the death of a spouse, have caused income to significantly decline. Using Form SSA-44 allows Social Security to consider more recent income than relying on your income from two years prior. Unfortunately, creating additional income through a Roth conversion is not considered a qualifying event for purposes of an IRMAA appeal.
Does a Roth Conversion Increase Your Medicare Premiums?
It can, but not always if prudent planning is involved.
When initiating a Roth conversion, money is moved from a tax-deferred retirement account, such as a traditional IRA or old 401k, into a Roth IRA.
The converted amount is included in your taxable income during the year you convert it. Because a taxable Roth conversion increases your AGI, it generally increases IRMAA MAGI as well.
For example, let’s assume a married couple had a MAGI of $198,000. Using the 2026 IRMAA threshold of $218,000, they would have $20,000 of room to initiate a Roth conversion before going over into the next IRMAA bracket.
If they were to convert $25,000 to a Roth, that would put them into the next IRMAA tier, thus increasing their Part B and D premiums.
Can Qualified Charitable Distributions Help Reduce IRMAA?
For retirees who are charitably inclined, Qualified Charitable Distributions, or QCDs, can help significantly mitigate the impact of IRMAA. An eligible IRA owner (over the age of 70 ½) can take a distribution from their IRA and send it straight to a qualified charity of their choice, thus excluding the distribution from adjusted gross income. QCDs may also help IRA owners who need to satisfy required minimum distributions, or RMDs, reduce taxable income while supporting their charitable goals. This can be a valuable tool for retirees who are looking to prevent themselves from falling into a higher IRMAA threshold.
Should You Always Avoid IRMAA Surcharges?
Taking all of this into consideration, always looking to avoid IRMAA surcharges is not necessarily the best plan of action.
Converting an additional sum today at a relatively favorable tax rate, even though it may cause an additional Medicare cost two years from now, can help reduce future required minimum distributions (RMDs), increase the amount of tax-free assets available to your beneficiaries, and can help generate increased flexibility for future healthcare expenses.
The better question to ask yourself is: “Does the long-term benefit of recognizing income today outweigh the taxes and Medicare costs created by doing so?”
IRMAA should be treated as an additional cost of converting, not necessarily the end all be all.
Can Roth Conversions Before Age 65 Still Trigger IRMAA?
For some retirees, the years before retirement and enrolling in Medicare provide a valuable planning opportunity for Roth conversions due to several years of relatively low taxable income.
However, it is very important to highlight that a conversion completed at age 63 can affect and increase your Medicare premiums at age 65. For married couples who file jointly, it is especially important to have prudent planning.
For example, if one spouse is 63 and the other is 61, the couple’s joint income is used to determine their MAGI, thus affecting the 63-year-olds premiums at 65.
Planning should ideally begin several years before enrollment in Medicare to properly plan for the impact IRMAA may have.
Questions for Pre-Retirees
Pre-retirees should begin asking questions about IRMAA and Roth conversions several years before they expect to retire, such as:
- At what age do we expect to retire?
- Which tax return will determine our first Medicare premiums?
- How large are our tax-deferred accounts?
- What might our future RMDs look like?
The earlier you start to plan, the better. Waiting until RMDs, Social Security, pensions, and Medicare begin may limit your options and reduce flexibility.
Questions for Current Retirees
For retirees who are already enrolled in Medicare, helpful questions to ask yourself are:
- What is our current IRMAA threshold?
- How much room is there until we go into the next threshold?
- Do we expect future RMDs to increase?
- Are capital gains expected to be realized this year, thus increasing our income?
These questions should be revisited annually because thresholds, income, and circumstances all change.
Common IRMAA Planning Mistakes
- Looking at taxable income instead of modified adjusted gross income
- Ignoring the two-year lookback
- Avoiding Roth conversions after age 65
- Completing a Roth conversion without looking at capital gains
Thresholds Change
IRMAA thresholds and Medicare premiums change. It is important to always stay up-to-date with the current thresholds. This makes annual planning essential.
Closing Thoughts
Ultimately, thoughtful planning is an act of stewardship. By looking beyond today’s tax bill and considering how Medicare costs, Roth conversions, future income expectations, and charitable goals all go hand-in-hand, pre-retirees and retirees alike can make wiser decisions with the resources that have been entrusted to them. At Anthem Advisors, our goal is to help families across North Alabama and Huntsville find that kind of clarity so their financial decisions support their long-term goals and what matters most to them.
For help determining which tools are right for your plan, contact us to schedule a Roth conversion review today.
Disclosure: This material is provided for informational and educational purposes only and should not be construed as personalized investment, legal, tax, or accounting advice. Advisory services are provided only pursuant to a written advisory agreement. Information contained herein has been obtained from sources believed to be reliable; however, we do not guarantee its accuracy or completeness.
