If you do a Roth conversion in 2026, Medicare can charge you significantly higher premiums starting in 2028 — because Medicare looks back two years at your income to set your premium rate. This surcharge is called IRMAA (Income-Related Monthly Adjustment Amount), and it catches thousands of retirees off guard every year. The good news: with a little planning, you can convert strategically, keep more money growing tax-free, and still avoid an unwelcome spike in your healthcare costs.

What exactly is IRMAA and why does it matter?

IRMAA stands for Income-Related Monthly Adjustment Amount. It’s a surcharge that Medicare adds on top of your standard Part B and Part D premiums if your income exceeds certain thresholds. Medicare doesn’t look at what you earned this year — it uses your tax return from two years ago. So your 2028 Medicare premiums will be based on your 2026 Modified Adjusted Gross Income (MAGI).

In plain language: a large Roth conversion you do today could cost you hundreds — sometimes thousands — of extra dollars per year on your Medicare bill two years from now.

For 2026, the IRMAA income thresholds work roughly like this (brackets adjust annually for inflation):

  • Standard premium: Income below ~$106,000 (single) / ~$212,000 (married filing jointly)
  • First IRMAA tier: $106,001–$133,000 single — adds roughly $70/month per person to Part B
  • Higher tiers: Surcharges climb steeply, reaching $400+ per month per person at the top bracket

For a married couple, crossing into just the first IRMAA bracket could mean $1,700+ in extra Medicare premiums in 2028 — simply because of a conversion decision made in 2026.

How does the two-year lookback actually work?

Medicare uses your IRS tax data, and the Social Security Administration (SSA) applies it on a two-year delay. Here’s the timeline:

  1. You do a Roth conversion in 2026, boosting your MAGI.
  2. You file your 2026 tax return in early 2027.
  3. SSA reviews that return and sets your 2028 Medicare premiums accordingly.
  4. You start paying higher premiums in January 2028.

This delay is exactly why so many retirees are blindsided. You feel the financial impact long after you’ve already made the decision. The fix is to model the Medicare cost before you convert, not after.

How much can a Roth conversion actually raise your Medicare premium?

Let’s say you and your spouse have $180,000 in combined MAGI in 2026 — comfortably under the IRMAA threshold. You decide to convert $40,000 from a traditional IRA to a Roth IRA, pushing your MAGI to $220,000. You’ve just crossed into the first IRMAA tier.

Result: Each of you pays roughly $70 more per month for Part B in 2028, plus potential Part D surcharges. That’s $1,680+ in additional premiums — just from one conversion decision. Convert more aggressively and you could jump two or three tiers, adding $4,000–$9,000 to your annual Medicare costs.

This doesn’t mean Roth conversions are bad — far from it. It means the size and timing of each conversion needs to be calibrated carefully.

What’s the smart strategy for Roth conversions near retirement?

The goal is to convert up to — but not over — the next IRMAA threshold. Financial planners call this “filling the bracket” or “threshold-aware converting.” Here’s a practical approach:

1. Calculate your current-year MAGI early. Don’t wait until December. By October, you should have a solid estimate of your income for the year so you know how much room you have before hitting the next IRMAA tier.

2. Model the two-year impact. Before converting a single dollar, look at what your Medicare premiums will be in the year the conversion hits. A fee-only financial advisor or a good tax software tool can run this projection.

3. Spread conversions over multiple years. Converting $25,000 per year for five years may produce far better outcomes than converting $125,000 in one year — both in terms of taxes owed and IRMAA surcharges avoided.

4. Watch for one-time income events. Selling a rental property, receiving a large required minimum distribution (RMD), or collecting deferred compensation in the same year as a conversion can push you over a threshold unexpectedly.

5. Appeal an IRMAA determination if your situation changed. If your income dropped significantly due to retirement, divorce, or a spouse’s death after the lookback year, you can file Form SSA-44 to request that Medicare use a more recent tax year. This is worth doing — many people don’t know this option exists.

How does this connect to a sustainable retirement income plan?

Roth conversions are one piece of a broader retirement income puzzle. A well-structured plan also accounts for how you withdraw money, how you manage debt on a fixed income, and how you maintain a financial cushion for emergencies.

The 4% withdrawal rule — a widely used guideline suggesting retirees can withdraw 4% of their portfolio annually without running out of money over 30 years — is still a useful starting point, though many planners now suggest 3.3%–3.7% given today’s market and longevity realities. Roth accounts are especially valuable under this framework because Roth withdrawals don’t count toward your MAGI, which means they won’t trigger IRMAA surcharges and won’t push you into a higher tax bracket.

Keeping 6–12 months of essential expenses in a liquid, low-risk account — your retirement emergency fund — also prevents you from being forced into a large, unplanned withdrawal in a bad market year, which could spike your MAGI and your Medicare costs simultaneously.

If you’re carrying debt into retirement, prioritize paying off high-interest balances before ramping up Roth conversions. Every dollar you pay in interest is a dollar that can’t compound tax-free inside your Roth account.

What should you do right now?

If you’re between ages 60 and 72, the window between retirement and your first required minimum distribution is often the best time to do Roth conversions at favorable tax rates. But that window has a hidden trap: every conversion dollar is a dollar that Medicare will see in two years.

The action items are simple:

  • Pull your 2026 MAGI estimate now, before year-end.
  • Map it against IRMAA thresholds for 2028.
  • Convert only up to the threshold that keeps your Medicare costs acceptable.
  • Repeat this process every year.

Smart retirement planning isn’t about avoiding Roth conversions — it’s about timing them so you keep the tax benefit without handing it back to Medicare.

Frequently Asked Questions

How can I stick to a budget after retirement?

Build your retirement budget around fixed essential expenses first — housing, healthcare, food, and insurance — then layer in discretionary spending. Review it quarterly, not just annually, so small overages don’t become big problems. Using separate accounts for different spending categories (often called ‘bucket budgeting’) makes it easier to track without feeling restricted.

What is the best way to pay off debt on a fixed income?

On a fixed income, prioritize high-interest debt first — especially credit cards — using any surplus from your monthly budget or a one-time windfall like a tax refund. Avoid taking on new debt to pay old debt. If you’re carrying a mortgage into retirement, weigh the psychological and cash-flow benefit of paying it off against the opportunity cost of pulling funds from an investment account.

How should a retiree invest in 2026?

Most retirees benefit from a diversified mix that balances growth (stocks or stock funds) with stability (bonds, CDs, or money market funds), calibrated to their time horizon and income needs. A common rule of thumb is to hold your age as a percentage in bonds, though many advisors now suggest slightly more equity exposure given longer life expectancies. Always keep 1–2 years of living expenses in cash or near-cash so you’re never forced to sell investments at a loss.

What is the 4% withdrawal rule and does it still work?

The 4% rule suggests that withdrawing 4% of your portfolio in year one of retirement, then adjusting for inflation each year, historically avoids running out of money over 30 years. It still works as a useful benchmark, but many planners recommend a slightly more conservative rate of 3.3%–3.7% given today’s market valuations and longer life expectancies. Flexibility — spending a little less in down market years — dramatically improves the rule’s reliability.

How do I build an emergency fund in retirement?

Aim to keep 6–12 months of essential living expenses in a liquid, FDIC-insured account like a high-yield savings account or money market fund. This prevents you from being forced to sell investments at a bad time or make large, unplanned IRA withdrawals that could spike your taxable income and trigger IRMAA surcharges. Even in retirement, an emergency fund is one of the most important financial safety nets you can maintain.