Roth Conversions and the IRMAA Cliff: Why Timing Matters Before Age 73

The Appeal of Roth Conversions Before RMDs Begin

For many retirees, the years between leaving the workforce and reaching age 73 are a rare window of tax flexibility. Wages have stopped, Social Security may not yet have started, and required minimum distributions (RMDs) haven't kicked in. Taxable income is often at its lowest point in decades. That combination makes Roth conversions especially attractive.

A Roth conversion involves moving money from a traditional IRA (funded with pre-tax dollars) into a Roth IRA (funded with after-tax dollars). You pay income tax on the converted amount in the year you convert, but the money then grows tax-free and is never subject to RMDs during your lifetime. Converting during low-income years means paying tax at a lower rate than you might face later. It also shrinks the traditional IRA balance that will eventually be subject to RMDs, reducing the size of those mandatory withdrawals down the road.

On paper, the math frequently works in the retiree's favor. But there is one variable that trips people up more than any other, and it has nothing to do with income tax brackets directly. It's Medicare.

What IRMAA Is and How It Works

IRMAA stands for the Income-Related Monthly Adjustment Amount. It's a surcharge added to Medicare Part B (medical insurance) and Part D (prescription drug coverage) premiums for beneficiaries whose income exceeds certain thresholds. In effect, higher-income Medicare enrollees pay more each month for the same coverage.

The surcharge is based on your Modified Adjusted Gross Income, or MAGI, and it uses a two-year lookback. That means your 2026 Medicare premiums are determined by the income you reported on your 2024 tax return.

In 2026, a single filer whose 2024 MAGI exceeded $109,000 faces an IRMAA surcharge on both Part B and Part D. For married couples filing jointly, the corresponding threshold is $218,000 in 2024 MAGI. Above those levels, the surcharges climb through several tiers, and each tier can add hundreds of dollars per month to a couple's combined premiums.

Why It's Called a Cliff

The word "cliff" is deliberate. IRMAA is not a gradual, phased-in surcharge like a tax bracket, where only the dollars above a threshold are taxed at a higher rate. Instead, crossing an IRMAA threshold by even a single dollar bumps you into the next tier for the entire year.

Consider a retiree who lands one dollar over a bracket line. That one dollar doesn't cost a few cents in surcharge. It can trigger hundreds of dollars in additional monthly premiums for all twelve months. This all-or-nothing structure is what makes IRMAA so punishing for anyone who accidentally nudges their income across a line.

How a Large Conversion Backfires

The income generated by a Roth conversion counts toward MAGI. This is the crux of the problem. A retiree who converts a large sum in a single year can push their income well past an IRMAA threshold, and because of the two-year lookback, the consequence shows up on their Medicare premiums two years later.

Here's a simplified example. Suppose a married couple has $150,000 in ordinary income and decides to convert $100,000 from a traditional IRA in one year. That pushes their MAGI to $250,000, above the $218,000 threshold. Two years later, their Medicare premiums jump, and that surcharge applies for the entire year, not just the portion of income above the line.

The income tax savings from the conversion might be real, but they can be partially or fully erased by several thousand dollars in added Medicare premiums. A move that looked like a smart tax play ends up costing money.

The Standard Planning Response: Spread It Out

The common solution is to convert smaller amounts over several years rather than one large sum in a single year. The goal is to fill up income "room" beneath the relevant IRMAA threshold each year without spilling over into the next tier.

Under the SECURE 2.0 Act, RMDs generally begin at age 73. That makes the years between retirement and age 73 the primary window for staged conversions. A retiree who stops working at 65, for instance, may have roughly eight years to methodically convert traditional IRA funds in measured amounts, keeping annual MAGI just below the surcharge line.

The Analysis Is Multi-Year and Personal

Doing this well requires looking at more than one year at a time. A sound conversion plan weighs current tax rates against expected future rates, projects how large RMDs will be if no action is taken, and accounts for the Medicare premium impact in each year of the plan.

It also means watching the thresholds themselves, which are adjusted over time, and remembering that other income events, such as capital gains or the start of Social Security, also count toward MAGI. For retirees with sizable traditional IRA balances, the interplay between conversions, RMDs, and IRMAA is worth mapping out carefully rather than converting on instinct.