The IRMAA Trap: Medicare Premiums and Roth Conversions

Picture this: you retire at 65, enroll in Medicare, and open your first premium notice. Instead of the standard Part B rate, you see a number that is significantly higher. No mistake was made. You simply earned too much income two years ago, and Medicare remembers.

This is the IRMAA trap, and it catches a surprising number of retirees who did not see it coming. The Income-Related Monthly Adjustment Amount, or IRMAA, is a surcharge added to Medicare Part B and Part D premiums for beneficiaries whose income exceeds certain thresholds. It is not a penalty in the punitive sense, but it functions like one if you were not expecting it.

What makes IRMAA especially tricky is the combination of a two-year lookback window and bracket thresholds that do not phase in gradually. Cross a threshold by a single dollar and you can owe significantly more in premiums for the entire year. For people navigating Roth conversions, Required Minimum Distributions (RMDs), or the sale of assets in early retirement, understanding IRMAA is essential planning territory.

The Social Security Administration (SSA) determines your Medicare premiums each year by reviewing your most recently filed federal tax return. In practice, this means your 2026 Medicare premiums are based on your 2024 tax return, the most recent one available when SSA makes its determination.

The income figure Medicare uses is your Modified Adjusted Gross Income (MAGI), which for most people is their Adjusted Gross Income (AGI) plus any tax-exempt interest income. This is a broader number than many retirees expect, because it includes:

• Wages, self-employment income, and business income
• Taxable Social Security benefits
• Traditional IRA and 401(k) withdrawals
• Capital gains from asset sales
• Roth IRA conversion amounts
• Required Minimum Distributions (RMDs)
• Tax-exempt municipal bond interest

Each of these income sources flows into MAGI and counts toward your IRMAA threshold. A Roth conversion of $50,000 in 2024, for example, would increase your 2024 MAGI by $50,000 and could push you into a higher IRMAA bracket for 2026.

It is also worth noting that IRMAA determinations can be appealed. If your income has dropped significantly since the year being used (due to retirement, the death of a spouse, loss of income-producing property, or other qualifying life events), you can request that Medicare use more recent income data. The SSA Form SSA-44 is used for this process.

For 2026, IRMAA surcharges apply when your 2024 MAGI exceeded $106,000 for single filers or $212,000 for married filing jointly. These thresholds and the associated premium amounts are set annually by the Centers for Medicare and Medicaid Services (CMS) and are subject to change each year.

The surcharge structure works in escalating tiers. The standard 2026 Part B premium is $185.00 per month (per person). Above the base threshold, additional IRMAA charges are layered on top. Below is an illustrative overview of how the bracket structure works based on 2024 income (the lookback year for 2026 premiums). Note that these figures reflect official CMS guidance and should be verified at medicare.gov for the most current published rates:

• Up to $106,000 (single) / $212,000 (joint): Standard Part B premium, no surcharge.
• $106,001 to $133,000 (single) / $212,001 to $266,000 (joint): First IRMAA tier. Additional monthly surcharge applies to both Part B and Part D.
• $133,001 to $167,000 (single) / $266,001 to $334,000 (joint): Second tier. Surcharge increases meaningfully.
• $167,001 to $200,000 (single) / $334,001 to $400,000 (joint): Third tier. Premiums rise further.
• $200,001 to $500,000 (single) / $400,001 to $750,000 (joint): Fourth tier. Substantial surcharges apply.
• Above $500,000 (single) / above $750,000 (joint): Highest tier. Part B premiums more than triple the base rate.

One important dynamic to understand is that IRMAA is applied per person on Medicare. A married couple where both spouses are enrolled in Medicare both pay the surcharge if their joint MAGI triggers it. This effectively doubles the cost impact for couples in higher brackets.

The IRMAA surcharge on Part D (prescription drug coverage) is paid in addition to whatever premium your specific drug plan charges, and it is billed directly through Medicare rather than through your plan.

Roth conversions are one of the most discussed strategies in retirement tax planning, and for good reason. Converting pre-tax IRA or 401(k) funds to a Roth account can reduce future taxable income, lower RMDs starting at age 73, and create tax-free assets for both the retiree and their heirs. There is a detailed breakdown of the underlying math in our article on how to model the tax math behind Roth conversion ladders.

The tension with IRMAA is direct: the amount you convert is added to your MAGI in the year of conversion. If that addition pushes your MAGI over an IRMAA threshold, it triggers higher Medicare premiums two years later. This does not automatically make conversions a poor choice, but it does mean the timing and size of each conversion deserves careful consideration alongside its IRMAA implications.

Consider a hypothetical scenario for illustration purposes only. Suppose a single retiree has a base MAGI of $90,000 per year from Social Security, a small pension, and interest income. They are considering a Roth conversion:

• No conversion: MAGI stays at $90,000. They remain below the $106,000 IRMAA threshold. Standard Part B premium applies.
• $20,000 conversion: MAGI rises to $110,000. They cross into the first IRMAA tier. A surcharge is added to both Part B and Part D premiums for the two years following this tax year.
• $50,000 conversion: MAGI rises to $140,000. They enter the second IRMAA tier, with a larger surcharge than the first.

In this hypothetical, the retiree converting $20,000 might still find it worthwhile, because the long-term tax savings from Roth assets could outweigh the two years of IRMAA surcharges. But the calculus changes depending on the conversion amount, the retiree's tax bracket, how many years remain before RMDs begin, and the size of their pre-tax balance. There is no universal answer, and the tradeoff is different for every household.

A widely discussed approach among tax-focused planners is to convert up to, but not over, an IRMAA bracket threshold. Rather than maximizing conversions in a single year, some people spread smaller conversions across multiple years to manage their MAGI carefully. This requires knowing your projected income with reasonable accuracy and revisiting the plan each year as circumstances change.

Because RMDs also increase MAGI starting at age 73, planning Roth conversions in the years between retirement and RMD commencement (sometimes called the "conversion window") is a common area of focus. Understanding how RMDs are calculated and when they begin is a useful starting point for mapping out that window.

IRMAA is one of those topics where a few persistent myths can lead to costly surprises. Here are some of the most common misunderstandings worth addressing:

Misconception 1: IRMAA only applies to people with very high incomes.
The surcharge begins at $106,000 for single filers and $212,000 for joint filers based on 2024 income. These thresholds are lower than many people expect, and a single large Roth conversion, asset sale, or business distribution can push an otherwise moderate-income retiree over the line.

Misconception 2: Once you are in an IRMAA bracket, you pay more forever.
IRMAA is recalculated every year based on the most recent tax return available. If your income drops below the threshold in a subsequent year, your Medicare premium returns to the standard rate. Conversely, if income spikes again, the surcharge returns.

Misconception 3: Roth IRA withdrawals in retirement do not affect IRMAA.
This is one of the genuine advantages of Roth accounts. Qualified Roth IRA distributions are not included in MAGI and do not count toward IRMAA thresholds. This is part of why having Roth assets available in retirement can offer flexibility in managing taxable income. However, the conversion itself, if done while traditional IRA funds are still pre-tax, does count.

Misconception 4: You cannot appeal an IRMAA determination.
You can. If you experienced a qualifying life-changing event (such as retirement, reduced work hours, divorce, or the death of a spouse) that significantly reduced your income since the lookback year, SSA may use more recent income data to set your premium. The appeal process involves filing SSA Form SSA-44 and providing documentation of the change in circumstances.

While this article is educational in nature and not a substitute for personalized financial advice, it is useful to understand the types of approaches that are commonly discussed in the context of IRMAA planning. A qualified adviser can help assess which, if any, of these considerations apply to a specific situation.

• Bracket-aware Roth conversions: Some planners focus conversion amounts on keeping MAGI just below the next IRMAA threshold. This requires projecting total income from all sources each year with reasonable precision.
• Coordinating large income events: Asset sales, business distributions, or large deferred compensation payments can push MAGI above a threshold in a single year. Being aware of the IRMAA calendar, specifically which lookback year applies, may inform the timing of discretionary income events.
• Qualified Charitable Distributions (QCDs): For those aged 70.5 or older, QCDs allow up to $105,000 per year (2024 IRS limit, indexed for inflation) to be transferred directly from a traditional IRA to a qualified charity. QCDs satisfy RMD requirements but are excluded from MAGI, which can help manage IRMAA exposure. IRS Publication 590-B provides the relevant rules.
• Health Savings Accounts (HSAs): HSA contributions reduce AGI. For those still eligible to contribute (enrolled in a qualifying high-deductible health plan), maximizing HSA contributions is one tool that lowers MAGI. However, Medicare enrollment ends HSA contribution eligibility, so this applies primarily in pre-Medicare years.
• Tax-loss harvesting: Realized capital losses can offset realized gains, reducing MAGI. This is a consideration for those holding taxable investment accounts alongside retirement accounts.

The broader point is that IRMAA does not exist in isolation. It is one variable in a larger equation that includes income taxes, Social Security taxation (which also has its own income thresholds), and the overall goal of making retirement assets last. For a broader view of how different income sources interact in retirement, it may be worth reviewing our guide to estimating your real retirement tax bill.

IRMAA is one of those aspects of retirement planning that rewards preparation and penalizes surprise. The rules are not hidden, but they are easy to overlook until the premium notice arrives. Understanding how the two-year lookback works, which income sources count toward MAGI, and how Roth conversions interact with the bracket thresholds gives you a clearer picture of the real cost of income decisions in the years surrounding Medicare enrollment.

If you are exploring how your projected retirement income might interact with IRMAA, tools that model total retirement income across different scenarios can help you see the full picture. Our retirement income planner is designed to help you map out income from all sources in one place, which is a useful starting point for any conversation with a qualified financial adviser about IRMAA and Roth conversion planning.

Disclaimer: This article is for general educational purposes only and does not constitute personalized financial, tax, or legal advice. IRMAA rules, Medicare premiums, and tax regulations are subject to change. Readers are encouraged to consult a qualified financial adviser, tax professional, or Medicare specialist before making any financial decisions related to the topics discussed here.