| Scenario | MAGI | Part B premium | Part D surcharge | Total annual IRMAA cost |
|---|
Roth conversions and the hidden Medicare price tag
Roth conversions allow retirees to swap tax-deferred balances for tax-free growth, but the process is rarely costless. The extra income that a conversion creates in the eyes of the IRS also feeds into Medicare’s income-related monthly adjustment amount, or IRMAA. Two years later, higher-income retirees pay surcharges on both their Part B and Part D premiums. Because the surcharges apply for the entire calendar year that corresponds to the prior two-year tax return, a single conversion can add thousands of dollars of health-care costs. Retirees who overlook the connection may execute an otherwise smart tax move only to be surprised when their Social Security checks shrink.
Conventional advice usually focuses on marginal tax brackets. Planners encourage clients to fill the 24 percent bracket before it disappears, or to accelerate conversions before required minimum distributions begin. Those thresholds matter, but IRMAA has its own cliff-based structure. Even one dollar above an IRMAA threshold triggers a higher premium for every month of the year. The net result is a set of marginal costs that stack on top of federal and state income taxes. By modeling the interaction between a conversion amount and the IRMAA brackets, retirees can decide whether it makes sense to cap a conversion just under a threshold, accept the surcharge because the long-term benefits outweigh the cost, or postpone altogether.
The planner collects your baseline modified adjusted gross income (MAGI), the size of the intended conversion, and your filing status. It then calculates the resulting MAGI and determines the IRMAA bracket for both Part B and Part D. Because IRMAA uses a two-year lookback, the planner narrates how the 2024 return influences 2026 premiums, or how a series of repeated conversions keeps the surcharge in place for years. You can also enter your monthly Part D plan premium so the tool can illustrate the total monthly cost you would see on a Social Security award letter once the surcharge kicks in.
Understanding the IRMAA formula
IRMAA hinges on two components: your modified adjusted gross income and your filing status. The Social Security Administration reviews your tax return from two years prior and places you in one of six brackets (fewer for married filing separately). Each bracket has a corresponding Part B premium and Part D surcharge. The base Part B premium in 2024 is $174.70. Higher brackets add fixed dollar amounts, leading to $244.60, $349.40, $454.20, $559.00, and $594.00 as income climbs. Part D surcharges range from $12.90 in the first bracket to $81.00 at the top. Because the adjustments are flat dollar increases, jumping a bracket costs the same whether you exceed the threshold by $1 or $10,000.
The math behind the scenes is straightforward but unforgiving. Suppose a single filer has a baseline MAGI of $95,000. The first IRMAA threshold is $103,000. A $60,000 conversion pushes MAGI to $155,000, landing in the third IRMAA bracket with a Part B premium of $349.40 per month and a Part D surcharge of $33.30. That is a $2,096 increase in annual Part B costs and an additional $399.60 in Part D surcharges compared with staying in the base bracket. The conversion may still be worth it if it reduces future required distributions or avoids higher tax brackets later, but the retiree needs to budget for the health-care hit.
Mathematically, IRMAA can be described as a step function. Let M represent MAGI, and let Ti denote the threshold boundaries for a given filing status. The Part B premium for bracket i is Bi, and the Part D surcharge is Di. The IRMAA-adjusted cost can be written as:
Because the planner calculates the correct bracket and multiplies the monthly surcharge across a full year of premiums, you get both the immediate monthly impact and the annualized figure that helps with cash-flow planning.
Worked example: deciding between a full and partial conversion
Consider a married couple filing jointly. Their projected MAGI from pensions, part-time consulting, and Social Security is $180,000. They want to convert $160,000 from a traditional IRA this year to take advantage of temporarily lower tax brackets, but they are wary of IRMAA. Entering the numbers into the planner shows that without a conversion, the couple stays below the $206,000 threshold and pays the base Part B premium of $174.70 per person with no Part D surcharge. The full conversion raises MAGI to $340,000, putting them in the third IRMAA bracket. Their monthly Part B premium would rise to $454.20 per enrollee two years later, and each would owe a $53.80 Part D surcharge. Across both spouses and twelve months, that adds $6,682.80 in Part B surcharges and $1,291.20 in Part D surcharges—almost $8,000 in additional annual Medicare costs triggered solely by the conversion.
The planner also calculates the maximum conversion that would keep them in the second bracket. The next threshold for joint filers is $258,000, so they could convert up to $78,000 this year without crossing into the higher surcharge. The scenario table shows three rows: no conversion, a $78,000 conversion, and the full $160,000 conversion. By exporting the CSV, they can discuss the trade-offs with their financial advisor. The numbers might lead them to spread the conversion across two years, keeping IRMAA surcharges manageable while still accelerating the shift to Roth assets.
Reading the comparison table
The table beneath the form provides a snapshot of how different conversion amounts change your Medicare costs. The first row anchors to your baseline, showing MAGI, Part B premium, Part D surcharge, and the annual IRMAA total with no conversion. The second row illustrates the largest conversion that keeps you beneath the next bracket (or notes that you are already in the top tier). The final row displays the proposed conversion. This layout highlights the non-linear nature of IRMAA: small changes near a threshold have massive effects, while large conversions within the same bracket do not change Medicare premiums at all.
For users repeating conversions over multiple years, the table reinforces that IRMAA surcharges persist as long as prior-year returns justify them. If you plan to convert for three consecutive years, the result panel multiplies the annual surcharge by the number of affected years. That figure helps retirees decide whether the long-term tax benefits justify multiple seasons of higher Medicare costs. The CSV export includes the same rows, enabling you to archive the analysis or share it with tax preparers.
Putting the results in context
The result narrative interprets the raw numbers. It explains which IRMAA bracket you entered, how much more you will pay each month, and the total additional cost over the planning horizon you specified. It also calculates an effective marginal cost per conversion dollar. For example, if a $50,000 conversion triggers an extra $2,400 of premiums, the marginal cost is roughly 4.8 cents per converted dollar before accounting for income taxes. That perspective can be eye-opening. Retirees who thought they were simply accelerating income must also consider the health-care surcharge when evaluating whether the conversion lowers their lifetime tax bill.
The planner also encourages proactive action. If a conversion pushes you into a higher bracket, the narrative recommends filing a reconsideration request (Form SSA-44) if you experience a life-changing event that reduces income, such as retirement, marriage, or the loss of a spouse. It reminds users that IRMAA is based on the tax return from two years prior, giving them time to prepare for the premium change or to plan conversions strategically across multiple tax years.
Limitations and planning assumptions
This calculator relies on the 2024 IRMAA thresholds and premiums, which may be adjusted annually for inflation. Future years could see different bracket boundaries or premium amounts. The planner assumes that both spouses in a joint filing status are enrolled in Medicare Parts B and D; if only one spouse participates, actual costs will be lower than the table indicates. The tool also does not calculate federal or state income taxes generated by the conversion, nor does it model how Social Security taxation changes when MAGI increases. Users should integrate those factors into their broader tax planning.
Additionally, the planner assumes that IRMAA applies for the entire year once a threshold is crossed. If you successfully appeal the surcharge, the actual cost will be lower. The effective marginal cost metric treats the surcharge as an unavoidable expense for the duration you entered, which is appropriate for most retirees who plan conversions intentionally. Finally, this tool cannot replace personalized advice from a fiduciary financial planner or tax professional. It aims to illuminate the Medicare-specific consequences so you can make informed decisions about how much to convert, when to execute conversions, and how to communicate the implications to household members who depend on Social Security income. Combining the calculator’s clarity with professional guidance leads to Roth strategies that balance taxes, health-care costs, and retirement lifestyle goals.