Roth Conversion Strategy to Reduce IRMAA: A Step-by-Step Guide

A client of mine — retired engineer, single filer, 68 — did a $40,000 Roth conversion on the advice of his previous advisor. His other income that year was $91,000. Total MAGI: $131,000. Two years later his Medicare Part B premium jumped from $185 to $370.60 a month. He called me confused. The conversion had pushed him just over the $133,000 IRMAA threshold, and he was now paying an extra $2,227 per year — for two years. The income tax savings on the conversion was about $8,800. After $4,454 in IRMAA costs, the net benefit was $4,346. A $15,000 conversion would have kept him under the cliff, saved $3,300 in taxes, triggered zero IRMAA, and left $25,000 of conversion room for the following year.

That's the cost of Roth conversion planning that ignores IRMAA. The income tax math was correct. The full picture wasn't.

Why This Is a Dual Optimization Problem

Most Roth conversion software — and most advisors' mental models — treat income tax brackets as the only constraint. Convert up to the top of the 22% bracket, or the 24% bracket, and stop. That works fine for clients not yet on Medicare.

For clients 63 and older, IRMAA adds a second set of thresholds that fire on a two-year delay. A Roth conversion in 2025 doesn't affect 2025 Medicare premiums — it affects 2027 premiums. That lag is exactly what makes this easy to overlook and costly when you do.

The 2025 IRMAA thresholds for individual filers: $106,000, $133,000, $167,000, $200,000, and $500,000. For married filing jointly, the thresholds roughly double: $212,000, $266,000, $334,000, $400,000, and $750,000. Cross one of those lines in a conversion year and both spouses pay surcharges on Part B and Part D for the following two years.

A married couple in the second IRMAA bracket pays an extra $370.60 per month per person on Part B alone — that's $4,454 per year per couple on top of Part D surcharges. Those costs land before any tax benefit from the conversion shows up in the portfolio.

Step One: Map the Conversion Ceiling Before You Convert Anything

Project current-year MAGI from every source except the Roth conversion: the taxable portion of Social Security (up to 85%), pension payments, RMDs, investment income, and any earned income. That number is your baseline. The distance between that baseline and the next IRMAA threshold is the conversion ceiling for the year.

Example: a married couple, both 68, with the following 2025 income:

• Combined Social Security: $42,000 ($35,700 taxable at 85%)
• Pension: $48,000
• Portfolio dividends: $12,000

MAGI before conversion: approximately $95,700. Distance to the $212,000 MFJ first threshold: $116,300. They have significant room. You can convert up to $116,000 without triggering a dollar of IRMAA — and you should be asking whether any of that capacity is worth using given their IRA balance and projected RMD trajectory.

Now change one variable: the pension is $110,000 instead of $48,000. Baseline MAGI: approximately $157,700. Distance to the $212,000 threshold: $54,300. A $50,000 conversion puts them at $207,700 — just under the line. A $55,000 conversion triggers IRMAA. That $5,000 difference costs over $4,400 in Medicare surcharges across two years. The modeling here isn't complicated. What requires discipline is running it before deciding the conversion size, not after.

When Crossing a Threshold Is Actually the Right Call

Sometimes you should convert over an IRMAA threshold. The math can support it — but you have to run it explicitly, not assume.

The case for crossing is strongest when: the client has a large IRA (over $1 million), RMDs are projected to force them into a higher bracket at age 73 regardless, and their current marginal tax rate is lower than what those future RMDs will hit. In those situations, converting aggressively now — even at some IRMAA cost — reduces a much larger and longer-lasting exposure in the RMD years.

Here's the framework. A $100,000 conversion that triggers $4,454 in IRMAA surcharges over two years and produces $22,000 in income tax savings (at a 22% marginal rate) nets $17,546. That's worth doing. If the conversion pushes them into the third IRMAA bracket and the surcharge climbs to $8,000–$10,000 over two years, the net narrows sharply. The question isn't whether IRMAA costs cancel the conversion — it's whether the net is positive and better than a smaller conversion this year plus another one next year.

Run the explicit comparison before recommending. "Cross the threshold" is sometimes right. "Cross it because we didn't check" is never right.

The Long Game: How Conversions Reduce IRMAA in the RMD Years

The long-term case for strategic Roth conversions isn't only about income tax savings — it's about flattening the MAGI curve in the years when RMDs are largest and hardest to control.

A 65-year-old with a $900,000 traditional IRA faces an RMD of roughly $34,600 at age 73. By 80, that RMD grows to approximately $52,000. By 85, it's near $65,000. Stacked on Social Security and other income, those distributions can push a single filer well above $106,000 — or a married couple above $212,000 — creating persistent IRMAA surcharges for the rest of retirement.

A disciplined conversion program during the 65–72 window, sized to stay under IRMAA thresholds each year, chips away at the IRA and flattens that trajectory. Eight years of $30,000–$50,000 annual conversions reduces the IRA by $240,000–$400,000 and meaningfully lowers the RMDs that follow. The IRMAA savings in years 73–85 often dwarf any modest surcharges incurred during the conversion years.

Show clients the two-scenario comparison: projected MAGI at ages 73, 78, and 83 with no conversions versus with a threshold-capped conversion plan. The lifetime difference in Medicare premiums is frequently the most persuasive number in the room — more persuasive than the income tax argument alone.

Key Takeaways

• Project baseline MAGI before setting any conversion amount — the distance to the next IRMAA threshold is your working ceiling, and you need that number first.
• A 2025 Roth conversion affects 2027 Medicare premiums; the two-year lag is the reason advisors keep missing this until the bill arrives.
• For married couples, crossing the first MFJ IRMAA threshold at $212,000 triggers more than $4,400 in annual surcharges per couple — model it explicitly before finalizing conversion amounts.
• Crossing a threshold is sometimes the right call, but only after netting the IRMAA cost against the income tax savings; assume nothing, calculate everything.
• The real payoff of disciplined conversions is lower RMDs at 73–85, which means lower MAGI, lower IRMAA, and lower taxes in the years when income is hardest to manage.
• Build a year-by-year conversion plan for every IRA-heavy client in their 60s — the difference in projected lifetime Medicare costs between "no conversions" and "threshold-capped conversions" is often $20,000–$50,000 or more.