Roth Conversions and IRMAA: The Medicare Premium Cliff Most Retirees Miss

A Roth conversion counts as ordinary income in your MAGI, and Medicare sets your Part B and Part D premiums using MAGI from two years prior. Convert past an IRMAA threshold and you fall off a cliff, not a slope: a small overage drops you into the next tier and can add thousands of dollars a year to a couple's premiums, billed two years later.

What IRMAA Is and Why the Lag Catches People

IRMAA (Income-Related Monthly Adjustment Amount) is a surcharge on Medicare Part B and Part D premiums when income exceeds set thresholds. It is not a penalty; it is means-testing.

The timing is what trips retirees up. Medicare looks at your Modified Adjusted Gross Income from two years prior, not this year's income. Retire at 63, convert a large chunk of your IRA in 2025, enroll in Medicare at 65, and the 2025 conversion shows up in your 2027 premiums, long after most people have forgotten it.

The Tiers and the Real Dollar Exposure

For 2024, the standard Part B premium is $174.70 per month. The IRMAA tiers for 2024 (based on 2022 MAGI) are roughly as follows for single filers:

• Tier 1: MAGI $103,001 to $129,000, adds $69.90/month to Part B
• Tier 2: MAGI $129,001 to $161,000, adds $174.70/month
• Tier 3: MAGI $161,001 to $193,000, adds $279.50/month
• Tier 4: MAGI $193,001 to $500,000, adds $384.30/month
• Tier 5: MAGI above $500,000, adds $419.30/month

Each tier also carries a Part D surcharge of roughly $12 to $81 per month. For married filing jointly the thresholds double ($206,000 for the first), and combined MAGI sets the tier for both spouses.

These are cliffs, not brackets. A conversion that pushes MAGI from $128,500 to $129,500 costs an extra $174.70 per month, or $2,096 per year, for a one-dollar overage.

A Worked Example: The $40K Conversion That Cost More Than It Should

A married couple, both 66, with combined MAGI of $195,000 in 2025 before any conversion, already sits in the third IRMAA tier. A $40,000 Roth conversion lifts MAGI to $235,000 and into the fourth tier. That jump adds $210 per month per person in Part B surcharges plus roughly $20 more per person in Part D: $460 per month, or $5,520 per year, for two years, until 2026 MAGI is reported. Two-year cost of crossing one tier: over $11,000.

The alternative is sequencing. Spreading the $40,000 over three to four years, roughly $12,000 to $13,000 per year, keeps them inside Tier 3 (assuming base MAGI stays near $195,000). The IRA still shrinks and future RMDs still fall, but the IRMAA exposure never moves. The full bracket math, 5-year rule, and ACA premium interactions are covered in the parent piece, Roth Conversion: A Practical Guide for High Earners and Pre-Retirees.

How This Connects to the Soil Layer

IRMAA is a tax architecture problem, not an investment problem, which places it in what the Sporos Doctrine calls the Soil layer. The work is precise: convert just enough to reduce the long-term tax burden without triggering a premium cliff that erodes the near-term benefit. A conversion that saves $4,000 in future income taxes but triggers $11,000 in IRMAA surcharges is not a win.

Frequently Asked Questions

Does a Roth conversion always count toward IRMAA?

Yes. A conversion is treated as ordinary income in the year you convert, so it is included in MAGI with no exclusion.

Can I appeal an IRMAA surcharge caused by a Roth conversion?

Generally no. Form SSA-44 appeals cover qualifying life events like retirement, divorce, or the death of a spouse, not voluntary transactions.

Do Roth IRA distributions in retirement count toward IRMAA?

No. Qualified Roth distributions are excluded from MAGI, which is a core long-term benefit of converting: future withdrawals never push you into higher tiers.

Does IRMAA affect both spouses even if only one converts?

Yes. Married filing jointly uses combined MAGI, so one spouse's conversion can trigger surcharges for both.

What to Do Next

What decides this for you. Whether you are within two years of Medicare. The surcharge is assessed on income from two years prior, so a conversion at 63 sets your premium at 65, long after the decision can be revisited.

Where it goes wrong. People treat it as a phase-in and it is a cliff. One dollar over a threshold moves you into the full tier for the entire year, for both Part B and Part D, for both spouses. And recharacterization of conversions was eliminated, so unlike the old rules there is no undoing it once the year closes. A conversion sized without checking the thresholds can cost thousands in premiums that were never part of the calculation, and the bill arrives two years later when the connection is no longer obvious.

Worth a conversation if you are 61 or older and converting, or the amount you have in mind lands anywhere near a threshold. Sizing a conversion to stop just under a cliff, and spreading the rest across additional years, is the difference between a good decision and an expensive one. Book a call.

The information provided is for educational purposes only and does not constitute investment, legal, or tax advice. Tax law changes frequently — verify current rules before acting. Consult with qualified professionals for guidance specific to your situation.