Retirees converting $200K annually from traditional 401(k)s to Roth IRAs between ages 60-64 could avoid $30,000 in IRMAA penalties.
A $2.2 million 401(k) balance could trigger $30,000 in Medicare Income-Related Monthly Adjustment Amount (IRMAA) surcharges by age 73 if left unconverted. Retirees converting $200,000 annually to Roth IRAs between ages 60-64 may avoid these costs, as IRMAA calculations exclude Roth withdrawals.
Without conversions, a 6% annual return could grow the 401(k) to $4.7 million by age 73, generating a $177,400 Required Minimum Distribution (RMD). Combined with $35,700 from Social Security, Modified Adjusted Gross Income (MAGI) would reach $213,000, exceeding IRMAA thresholds.
The five-year window before Medicare enrollment at 65 is critical, as IRMAA lookback periods capture income from ages 63-64. Conversions within the 24% tax bracket are recommended to balance tax efficiency.