IRMAA planning is an important part of retirement planning because even a small increase in income can trigger significantly higher Medicare premiums. In this episode of Wise Money, we explain how IRMAA works, why Medicare surcharges catch so many retirees by surprise, and the strategies that may help you reduce or avoid those extra costs. From Roth conversions and retirement withdrawals to property sales and taxable income management, we cover the key financial decisions that can impact your future Medicare premiums. If you want to avoid costly Medicare surprises in retirement, this episode is packed with practical planning insights.
Season 11, Episode 37
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This information is for general financial education and is not intended to provide specific investment advice or recommendations. All investing and investment strategies involve risk, including the potential loss of principal. Asset allocation & diversification do not ensure a profit or prevent a loss in a declining market. Past performance is not a guarantee of future results.
Why Roth Conversions Need to Account for IRMAA
Roth conversions can be a powerful retirement planning strategy. By moving money from a traditional IRA or pre-tax retirement account into a Roth IRA, you may reduce future required minimum distributions, create more tax-free retirement income, and potentially leave a more tax-efficient inheritance for your beneficiaries.
But there is one important detail that can be easy to overlook: Medicare premiums.
That is where IRMAA planning becomes so important.
What Is IRMAA?
IRMAA stands for income-related monthly adjustment amount. In simple terms, it is a surcharge added to your Medicare Part B and Part D premiums when your income exceeds certain thresholds.
The frustrating part is that IRMAA is based on your income from two years prior. For example, your 2026 Medicare premiums are generally based on your 2024 tax return. That means a Roth conversion today may not affect your Medicare premiums immediately, but it could create a higher Medicare cost two years later.
Roth Conversions Increase Taxable Income
A Roth conversion is taxable in the year you complete it. If you convert $50,000 from a traditional IRA to a Roth IRA, that $50,000 is generally added to your taxable income for the year.
That added income could push you into a higher tax bracket, but it could also push you into an IRMAA bracket. This is where the planning gets more nuanced.
A Roth conversion may look attractive when only considering federal taxes. But if the conversion also increases your Medicare premiums for an entire year, the total cost of the strategy is higher than the tax bill alone.
IRMAA Can Change the Math
The key issue with IRMAA is that it is bracket-based. In some cases, going just $1 over a threshold can cause higher Medicare premiums for the full year.
That does not automatically mean the Roth conversion is a bad idea. It simply means the IRMAA cost needs to be included in the calculation.
For example, if a Roth conversion creates $15,000 of additional tax and also triggers $2,000 of additional Medicare premiums, the real cost of the conversion is closer to $17,000. That may still be worth it, especially if the conversion helps reduce future RMDs, lowers future taxable income, or creates long-term tax flexibility.
But it should not be a surprise.
When a Roth Conversion May Still Make Sense
Sometimes, intentionally paying IRMAA for one year can be part of a smart long-term plan. This may happen when someone has a large pre-tax IRA and is trying to reduce future required minimum distributions.
If the account is likely to keep growing, future RMDs could push income higher every year in retirement. In that case, doing Roth conversions earlier may help reduce future taxable income, even if it means paying higher Medicare premiums temporarily.
The decision should come down to the full retirement plan, not just one year of taxes.
Good IRMAA Planning Requires Tax Projections
Roth conversions should not be done with guesswork. Before converting, it is important to run a tax projection that looks at:
Current-year taxable income: You need to know where your income stands before adding a Roth conversion.
Current and future tax brackets: The goal is often to pay tax at today’s rates if it helps avoid higher rates later.
Medicare premium thresholds: IRMAA planning should include whether the conversion could push you into the next Medicare surcharge bracket.
Future RMDs: A conversion may make sense if it reduces large required distributions later in retirement.
Cash flow for taxes: Ideally, the taxes from a Roth conversion are paid from outside assets, not withheld from the converted amount.
The Bottom Line
Roth conversions can be a wise strategy, but they should never be reviewed in isolation. Taxes, Medicare premiums, retirement income, cash flow, and estate planning all work together.
That is why IRMAA planning matters. The goal is not always to avoid IRMAA at all costs. The goal is to understand the tradeoff before making the decision.
A well-planned Roth conversion may still be worth doing, even if it triggers IRMAA. But if the surcharge comes as a surprise, it can make an otherwise good strategy feel like a costly mistake.
