The Hidden $20,000 IRMAA Cliff a Retired Couple Walked Into After One Roth Conversion in the Wrong Year Quick Read – IRMAA works as a cliff.
Cross a bracket by a single dollar and your premium jumps for the entire year. – If you are between 60 and 64 and considering a Roth conversion, pull your projected MAGI before you proceed… – Linda and Mark retired at 64 with a clean plan: convert a chunk of their traditional IRA to a Roth in their first low-income year, before Social Security and required minimum distributions complicated the picture
They moved $300,000 in one tax year, paid the federal income tax, and felt good about the math. Then the Medicare bill arrived for their 65th birthday year, and the surcharge wiped out most of what they thought they had saved. A recurring thread on the Bogleheads forum titled Appealing IRMAA Due to Retirement While Roth Converting is full of newly retired couples discovering the same trap: the Roth conversion math was right, but the timing collided with Medicare’s two-year income lookback.
The situation, in one box – Couple, age 64, married filing jointly, first year fully retired – Base retirement income: $80,000 from pensions and dividends – One-time Roth conversion: $300,000 – Resulting MAGI for the year: $380,000 – Core decision: Did the conversion trigger an avoidable Medicare premium surcharge? The higher cost goes beyond the income tax on the conversion itself. It is the Income-Related Monthly Adjustment Amount, IRMAA, which uses your tax return from two years before to set your Medicare Part B and Part D premiums when you turn 65.