Converting traditional 401(k) funds to Roth after age 62 triggers Medicare Part B surcharges due to a two-year income lookback.
A Medicare rule penalizes Roth 401(k) conversions made after age 62 by increasing Part B premiums. The two-year income lookback means conversions at 63 or later count toward Medicare’s Income-Related Monthly Adjustment Amount (IRMAA) when enrolling at 65.
A $200,000 conversion at 63, pushing modified adjusted gross income (MAGI) to $250,000, can incur $3,895 in annual Part B surcharges. Married couples face double the cost. The standard 2026 Part B premium is $202.90 per month, but IRMAA surcharges can significantly increase this.
Retirees with $1.4 million in traditional 401(k) accounts often debate whether to convert early or spread tax hits over a decade. However, Medicare’s lookback rule makes early conversions more cost-effective, as income is typically lower before Social Security and required minimum distributions (RMDs) begin.