Medicare costs inched higher again this year, and the standard Part B premium is now at $202.90 per month. That’s an increase of $17.90 from the $185 monthly premium last year.
It’s another expense to prepare for when you plan for retirement. But it’s also important to consider that you can end up with even higher premiums if you make some poorly timed Roth conversions. Although a Roth conversion can reduce future taxes, that same move can increase income-related monthly adjustment amounts (IRMAAs), which boost premiums.
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Why Roth conversions can increase Medicare costs
A Roth conversion entails moving money from a traditional individual retirement account (IRA) or 401(k) into a Roth account. The amount moved shows up as ordinary income on your taxes the year you initiate the rollover, but all of those rolled over funds can grow tax-free in a Roth account.
It’s a strategic maneuver to pay a little more taxes now to make sure you don’t have to pay taxes on distributions while potentially lowering your future required minimum distributions (RMDs). You can do gradual Roth conversions instead of moving your entire plan’s balance in one shot. However, Medicare’s IRMAA, can complicate a Roth conversion.
Higher-income individuals who use Medicare are subject to extra charges on top of their Part B and Part D premiums. While Roth conversions can still be a great tool, it’s important to consider how they can impact your taxable income and what it means for your Medicare premiums.
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How the Medicare IRMAA lookback works
Medicare uses a two-year lookback to calculate your IRMAA. Your modified adjusted gross income from 2024 determines this year’s IRMAA. This figure represents your adjusted gross income plus certain tax-exempt interest. If you do a Roth conversion this year, that will be reflected in your 2028 IRMAA fees, if applicable.
IRMAA fees kick in the moment a single tax filer’s modified adjusted gross income (MAGI) exceeds $109,000 ($218,000 for married couples filing jointly). These figures are based on 2024 income and can be adjusted higher by the time 2028 arrives.
The Centers for Medicare & Medicaid Services 2026 fact sheet breaks down how IRMAA charges go up as your MAGI rises. If you qualify for IRMAA, your monthly premium can go up by between $81.20 and $487.
Part D coverage has additional IRMAA surcharges based on the same income levels. The extra monthly charge is $14.50 to $91, depending on how much you earn.
How planning ahead can help
It’s still possible to initiate Roth conversions without winding up with higher IRMAA fees. You just have to keep your MAGI under the designated amount, which is $109,000 for single filers and $218,000 for married couples filing jointly.
To start, create a list of your income sources. Wages, Social Security, pensions, capital gains, dividends and interest all count. If you are withdrawing money from a traditional retirement plan, that counts as well. Then, you can calculate how much you can safely convert to a Roth plan. You may want to spread conversions out over several years.
The SSA-44 form can help you appeal IRMAA fees in the event of a life-altering scenario like divorce or death of a spouse, but it won’t help with Roth conversions. Consider planning for this before you turn 63, since any Roth conversions before that age will not contribute to IRMAAs. You first become eligible for Medicare at 65, and since the two-year look-back goes back to when you were 63, that’s when it starts to matter.
