How Roth Conversions Impact IRMAA and Your Medicare Premiums

If you are a doctor or nonprofit executive who has recently retired — or is about to — the relationship between Roth conversions and Medicare premiums is one of the most important and least understood planning decisions you will make. Done right, a Roth conversion strategy can reduce your Medicare costs for the rest of your life. Done wrong, it triggers the very surcharges you were trying to avoid.

What IRMAA Is and How It Works

IRMAA — the income-related monthly adjustment amount — is a surcharge Medicare adds to your Part B and Part D premiums when your income exceeds certain thresholds. It is not a penalty. It is simply Medicare's way of charging higher-income enrollees more for the same coverage.

The surcharge is calculated using your Modified Adjusted Gross Income (MAGI) from two years prior. That two-year lookback is what makes IRMAA planning both possible and tricky. Your 2025 income determines your 2027 Medicare premiums. A Roth conversion you do this year shows up in your Medicare bill two years from now.

IRMAA operates on a cliff structure. Cross a threshold and your premium jumps — regardless of how far over the line you are. A dollar of income above a threshold costs the same as $10,000 above it.

These are surcharges added on top of the standard Part B and Part D premiums everyone pays. All Medicare enrollees pay the standard Part B premium regardless of income.

What Medicare Counts as Income

Medicare uses Modified MAGI — your Adjusted Gross Income plus tax-exempt interest added back in. This is a broader measure than most people expect. Modified MAGI includes salary and business income, Required Minimum Distributions, capital gains, dividends, Social Security income up to 85%, rental income, and tax-exempt municipal bond interest. A Roth conversion adds directly to this figure in the year the conversion occurs.

The SSA uses your tax return from two years prior to set your IRMAA determination. You will receive a notice from SSA each fall showing your upcoming premium. If your income has dropped significantly since the lookback year — because you retired, for instance — you can appeal the determination using Form SSA-44.

How a Roth Conversion Affects IRMAA

When you convert traditional IRA or 401(k) dollars to a Roth, the converted amount is treated as ordinary taxable income in the year of the conversion. That income is included in your Modified MAGI. Two years later, Medicare uses that MAGI to set your premiums — and if the conversion pushed you over an IRMAA threshold, you will pay the surcharge for that entire year.

This is not a reason to avoid Roth conversions. It is a reason to plan them carefully.

The Long-Term IRMAA Benefit of Roth Conversions

The short-term cost of a Roth conversion is the tax you pay today — and potentially two years of elevated IRMAA premiums. The long-term benefit is what matters more.

After decades of maximizing 403(b), IRA, and deferred compensation contributions, many doctors and nonprofit executives retire with significant balances in tax-deferred accounts. When Required Minimum Distributions begin at age 73, those withdrawals land on top of pension income, Social Security, and investment distributions. The combined Modified MAGI can push well into the upper IRMAA tiers — permanently, for the rest of your life on Medicare.

A $2 million IRA generates a roughly $75,000 RMD at age 73. At $3 million it is closer to $113,000. Add Social Security and investment income and the combined MAGI can lock you into the top IRMAA tiers indefinitely.

Roth conversions reduce the balance that generates future RMDs. The Roth has no RMDs — those dollars never appear in your Medicare income calculation. Converting before age 73 shrinks the RMD problem before it begins.

When a Roth Conversion Makes Sense

The conversion makes financial sense when two conditions align. First, your tax rate today must be lower than your expected rate on future RMDs. There is often a window between retirement and age 73 where income drops before RMDs begin. That corridor is the opportunity. Second, the conversion must be large enough to move you under an IRMAA threshold — or the benefit on the Medicare side is zero.

Converting at a rate that keeps you in the same IRMAA tier as your projected RMDs accomplishes nothing on the Medicare front. You need to clear a cliff, not merely approach one. The conversion math requires projecting your income across all sources at age 73 and working backward from there.

The math does not work when your other income alone already places you in the top IRMAA tier. No conversion changes a bracket driven entirely by pension income, partnership distributions, or investment income. In that case, the Roth conversion still may make sense for other reasons — your beneficiaries chief among them — but IRMAA reduction is not the argument.

Lots of numbers, IRMAA, and Roth conversions are not something you want to do alone. Contact Tim for a second set of eyes.

Timing Conversions Around Medicare Enrollment

Because IRMAA uses income from two years prior, the year you enroll in Medicare matters. Converting before age 63 means that conversion income falls outside the two-year lookback window entirely when you enroll at 65. Converting at 63 or 64 means the income appears in your Medicare premium calculation in your first or second year of coverage.

For doctors and nonprofit executives who retire before 65, there is often a planning window — a period of lower income before Medicare begins — where incremental conversions can be done at favorable tax rates without triggering IRMAA at all. That window closes at 63 for most people. It is one of the most valuable planning opportunities in retirement and one of the most commonly missed.

The IRMAA Appeal: Form SSA-44

If a Roth conversion inflated your MAGI in a prior year and your ongoing retirement income is substantially lower, you may be able to appeal your IRMAA determination. The SSA allows enrollees to request a reduction based on a life-changing event — and retirement qualifies.

Form SSA-44 asks you to report your current or estimated income and request that SSA use a more recent figure instead of the two-year-old tax return. If approved, your surcharge is adjusted going forward. It does not retroactively eliminate surcharges already paid, so filing promptly after receiving your IRMAA determination matters.

This is particularly relevant for doctors who retire and do a large Roth conversion in the same year. The conversion inflates MAGI for that year — but if ongoing retirement income is well below the threshold, the SSA-44 can reduce or eliminate the resulting surcharge.

Your Beneficiaries

If your children will inherit a traditional IRA, their tax situation belongs in your conversion analysis. Non-spouse beneficiaries must withdraw inherited IRA balances within ten years under current law. For a child in peak earning years — already in the 32% or 37% bracket — every inherited traditional IRA dollar stacks on top of existing income and is taxed accordingly.

An inherited Roth carries the same ten-year withdrawal rule but all distributions are tax-free. Converting at your rate today so your children avoid paying their higher rate later is one of the clearest cases for Roth conversion — entirely independent of your own IRMAA situation.

For physicians and nonprofit executives with substantial IRA balances and children in high-earning careers, the beneficiary calculation alone often justifies a conversion strategy regardless of the IRMAA math.

What a Roth Conversion Strategy Requires

Effective Roth conversion planning for IRMAA purposes requires projecting your Modified MAGI at age 73 across all income sources — pension, Social Security, RMDs, investment income, and any part-time or consulting income. It requires identifying which IRMAA tier that projected income lands you in, and determining whether a realistic conversion path exists to move you under a lower threshold.

It also requires modeling the tax cost of the conversion against the Medicare savings over your projected retirement — accounting for your health, your spouse's situation, and your beneficiaries' tax brackets. These are not back-of-envelope calculations. The answers differ significantly by account balance, retirement age, Social Security timing, investment mix, and family situation.

• What will my projected Modified MAGI look like at 73 across all income sources?
• Which IRMAA tier does that land me in — and is there a realistic path to a lower one?
• Is there a conversion corridor before Medicare enrollment where my tax rate justifies acting?
• What bracket will my children face on an inherited IRA?
• Does the SSA-44 apply to my situation?

These questions have real dollar answers. For a high-earning doctor or nonprofit executive, the difference between a well-planned Roth conversion strategy and no strategy at all can easily exceed $100,000 in combined tax and Medicare costs over a twenty-year retirement.

Fiduciary Retirement Planning for Massachusetts Doctors

Social Security timing, asset allocation, and your 403(b) rollover all interact with the IRMAA and Roth decisions above. I am a fiduciary financial advisor with 35 years of experience helping doctors, nonprofit executives, and Massachusetts public employees with retirement planning and IRMAA strategy.

"My goal is to ensure your retirement plan is built on your best interests, not a product sale."

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