Roth Conversions and Medicare IRMAA for Wichita Retirees
Imagine your suitcase is 1 pound over the airline’s weight limit. The person at the counter wants another $100. You’re now paying $100 to bring a pair of shoes you probably won’t wear.
A small Roth conversion can create a similar problem. Cross a Medicare income threshold by a dollar, and you can owe the full increase for the next premium tier.
So for Wichita retirees considering a conversion before year end, “we have room in our tax bracket” doesn’t finish the analysis. Medicare has its own income thresholds, and the additional premiums generally show up 2 years later. I’d want that cost in the calculation before deciding how much to convert.
How a Roth conversion affects Medicare
When you move money from a traditional IRA to a Roth IRA, the previously untaxed amount generally becomes income for that year. You don’t have to spend the money for it to count.
Moving it into the Roth can be enough to generate the tax bill. IRS guidance on IRA conversions
That additional income can also affect what you pay for Medicare. The Social Security
Administration, or SSA, uses income information from the IRS to determine whether you owe an income related monthly adjustment amount (IRMAA). Although the charge applies to Medicare Part B and prescription drug coverage, SSA makes the income determination. It uses modified adjusted gross income, or MAGI, which for this purpose is your adjusted gross income plus tax exempt interest. Social Security’s Medicare premium rules
To make that determination, SSA generally looks back 2 tax years. So a conversion in 2026 would generally affect Medicare premiums in 2028. Because of that delay, even someone who hasn’t enrolled in Medicare yet can create a future surcharge. A conversion in the calendar year you turn 63 may affect premiums when you enroll at 65. Social Security’s income rules
This also means a 2026 conversion needs to be evaluated against the Medicare thresholds for 2028. Those figures aren’t yet available. Today’s published thresholds can illustrate the problem, but they don’t give you an exact conversion limit for this year.
A small conversion can create a larger bill
To see how this works, consider a hypothetical married couple filing jointly. Their 2024 MAGI would have been $217,000, but a fully taxable $2,000 Roth conversion raised it to $219,000. Assume both spouses have Part B and Part D coverage throughout 2026.
For 2026 premiums, the first IRMAA tier starts above $218,000 for joint filers. Crossing that threshold adds $81.20 per month for Part B and $14.50 for Part D, per person. So the couple’s additional annual cost is…
($81.20 + $14.50) × 12 months × 2 people = $2,296.80
That’s $2,296.80 in additional Medicare premiums because of a $2,000 conversion, before counting income taxes on the conversion. These are published 2026 premiums based on 2024 income, not a forecast of 2028 costs. CMS 2026 Medicare premium tables
The cost jumps because IRMAA works in steps. Crossing a threshold puts you into the next premium tier even if you go over by only a small amount. This is why the last few dollars of a conversion need careful calculations and attention.
Paying IRMAA can still make sense
But I wouldn’t reject a Roth conversion just because it creates a Medicare surcharge. I just want to know what we’re getting in exchange for that.
Moving money out of a traditional IRA can reduce the balance used to calculate future required minimum distributions. Roth IRAs have no required minimum distributions during the original owner’s lifetime, and qualified withdrawals are tax free. So paying to convert some money now may give you more control over future taxable income. IRS guidance on required distributions and Roth IRA withdrawals
Whether that trade-off makes sense depends on your situation. How much income will pensions and Social Security provide? How large might future required withdrawals become? What would the tax picture look like for a surviving spouse?
Those questions help explain why you might accept a surcharge today. If the conversion is expected to reduce larger costs later, paying it may be reasonable. But that expectation needs to come from a calculation, with assumptions you understand.
What to review before December 31
To make that comparison, you need a reasonable estimate of this year’s income. By the fourth quarter, you usually have a fairly clear picture. That makes it a good time to update your tax projection, especially if you retired during the year and still received wages, a bonus, or severance.
Before choosing a conversion amount, review…
Expected income for the full year, including pensions, IRA withdrawals, investment income, and realized capital gains.
Tax exempt interest, which still counts toward Medicare’s income calculation.
Whether one or both spouses will have Medicare coverage in the affected premium year.
Cash available to pay the conversion’s taxes and room for income that arrives late in the year.
Because some of those numbers may still change, I recommend leaving some margin. A projection that lands exactly on an income threshold assumes every remaining number will cooperate. December investment distributions don’t care what your spreadsheet said in October.
I’d also include any expected Medicare surcharge in the plan rather than assume it can be removed later. Retirement or reduced work hours may qualify you to request a new determination from SSA when your income falls. But a Roth conversion itself is not a qualifying life changing event. Calling it a one time income spike doesn’t make the surcharge disappear. Social Security’s qualifying event rules
Once you’ve settled on an amount, confirm the processing deadline with the company holding your IRA. You can convert from a traditional IRA to a Roth IRA at the same custodian or arrange a direct conversion between different custodians. For either direct method, plan to have the conversion completed by December 31 for it to count in 2026. IRS conversion methods and conversion timing
Give yourself time to get the calculation right before submitting the request. A completed Roth conversion cannot be reversed through recharacterization. IRS rules
Choose a conversion amount you can explain
Before you convert, I recommend asking your financial planner and tax professional to compare a smaller conversion, a larger conversion, and no conversion. Put the current taxes and possible Medicare surcharges beside the expected effect on future withdrawals. Then look at whether the expected benefit justifies the cost.
That comparison gives you a reason for the amount you choose. You may decide to stop below a Medicare threshold. You may decide crossing it is worth paying for. Either decision needs more support than “there’s room left in our tax bracket.”
If nobody has shown you that comparison, what is your conversion amount based on?
This article is for educational purposes and is not personalized investment or tax advice. Roth conversion decisions depend on your full financial situation and current law. Consult your financial planner and tax professional before acting.
