Topline: A Roth move now can raise Medicare costs years later
In a year of choppy markets and shifting retirement rules, a surprisingly hidden risk is catching pre‑enrollees off guard. A planned Roth conversion at age 63 can push a couple’sMAGI high enough to trigger income-related Medicare surcharges two years down the road. The result: higher Part B and Part D costs in 2028, even for savers who otherwise thought they were on a straightforward tax-free growth path.
The issue isn’t the conversion itself, it’s the way Medicare computes premiums years later. The Social Security Administration and CMS use a two-year lookback: the tax year two years before Medicare begins helps determine your 2028 Part B and Part D charges. That means decisions made in 2026 can shape your costs in 2028, long after the ink has dried on the 2026 tax return.
As markets bounce around and tax rules evolve, retirees and near-retirees should understand the cliff that can come with a roth conversion spike your Medicare costs. Financial planners say the risk is real for households whose combined MAGI lands near or above the threshold that triggers IRMAA surcharges.
What IRMAA is and how it matters
IRMAA stands for income-related monthly adjustment amount. It adds a surcharge to the standard Medicare Part B premium and to your Part D plan in proportion to your MAGI. The surcharge is not a one-time tax hit; it persists for every year CMS determines you’re above the threshold. And the thresholds operate like a cliff: cross a dollar line into a higher tier, and the full surcharge applies for the entire year.
CMS notes that IRMAA affects about 8% of people with Medicare Part B, but the risk landscape shifts depending on your income, the timing of any Roth conversion, and when you start Medicare. The first IRMAA threshold sits around $218,000 for joint filers and about $109,000 for single filers, with higher brackets kicking in as MAGI climbs.
The two-year lookback and how it can catch you off guard
Most people assume Medicare costs reflect today’s income. In practice, they don’t. The two-year lookback uses MAGI from your Form 1040 two years prior, plus specific tax-exempt income like municipal bond interest. A Roth conversion, even if tax-free in the conversion year, increases your AGI and flows through to MAGI, which means a conversion completed in 2026 will influence your 2028 Medicare premiums.
Key mechanics to remember:
- MAGI for IRMAA = AGI plus tax-exempt interest. A Roth conversion counts as ordinary income that flows into AGI, even if the money sits in a tax-free future vehicle.
- The lookback means timing is critical. A conversion in 2026 can affect 2028 premiums, even if the couple enrolls in Medicare later.
- IRMAA brackets are tiered and, crucially, a small step over a threshold can trigger the higher surcharge for the entire year.
The cliff: how a modest conversion could become a costly surprise
To illustrate the cliff, consider a hypothetical couple with a pre-conversion MAGI around the first IRMAA threshold. A Roth conversion of a modest size in 2026 could push MAGI above $218,000 for joint filers. If that happens, the couple faces the higher Part B and Part D surcharges in 2028. Experts stress that even a single dollar over the threshold can trigger the full tier surcharge for the year, per person.
In practice, the math looks like this: if your MAGI in the conversion year lands near the threshold, converting a middle six-figure sum can kick you into a higher tier two years later. The result is not a one-time bite but a sustained increase in monthly Medicare costs. This is the core reason some households rethink Roth conversion plans if they are within striking distance of IRMAA thresholds when the conversion is completed.
A concrete example on the timing and the amounts at stake
Here is a cautious, simplified scenario to illustrate the potential impact, using commonly cited thresholds for 2026 as a guide. Note that actual surcharges depend on CMS’s published brackets for the year you’re billed and your exact MAGI.
- Couple age 63 in 2026: they generate $160,000 in MAGI pre-conversion through wages and investment income.
- They convert $90,000 from a traditional IRA to a Roth in 2026. The conversion increases AGI, and thus MAGI, in that year.
- Two years later, in 2028, their MAGI crosses the federal IRMAA threshold for joint filers. As a result, their Medicare Part B and Part D surcharges rise above the standard premiums for the year.
- The exact monthly increase varies with the bracket, but the effect is material: hundreds of dollars per month in extra costs, not a one-time spike.
A financial planner I spoke with described the risk this way: roth conversion spike your costs in Medicare, not just your taxes, when you cross the IRMAA cliff by even a small amount. The planner added: timing matters more than people expect. The two-year lookback can turn a routine retirement tax move into a Medicare premium surprise two years down the line.
Who should test this scenario now
Early pre-enrollees—those approaching age 65 but not yet enrolled in Medicare—are most at risk if they plan a Roth conversion in their early 60s. The policy reality is straightforward: if your combined MAGI in the conversion year sits well above the current first threshold, you should run a MAGI projection for 2028 based on mid-year income assumptions. The better you model it now, the more you can decide whether to adjust timing or conversion size.
Market conditions matter, too. With volatility in equity markets and ongoing tax policy debates, some households are re-evaluating Roth conversion plans against long-run Medicare costs. The goal is not to eliminate tax-free growth, but to optimize long-term savings with a clear eye on Medicare bills that arrive years later.
What investors can do to manage the risk
If you’re near the IRMAA cliff, or if you’re simply trying to ensure that a planned Roth conversion doesn’t spike your Medicare premium two years down the line, consider these steps:
- Do a two-year MAGI projection. Use your current income, capture the effect of a proposed Roth conversion, and model the 2028 MAGI for both spouses if applicable.
- Test different conversion sizes. A partial conversion may reduce the likelihood of crossing a threshold while preserving most of the tax-free growth benefits.
- Coordinate with your tax advisor and financial planner. A joint decision can balance tax efficiency with Medicare costs in retirement.
- Keep a buffer for IRMAA surcharges. Even if you stay near the threshold, the additional monthly costs can accumulate meaningfully over a year or more.
- Review other income sources. Municipal bond income and other tax-exempt income count toward MAGI, so understanding all income streams helps you plan more precisely.
Bottom line for 2028 and beyond
The notion that a roth conversion spike your Medicare costs underscores the importance of timing in retirement planning. The two-year lookback creates a bridge between today’s tax decisions and tomorrow’s Medicare bills. For investors who want to minimize surprises, the path forward is deliberate forecasting, cautious conversion sizing, and ongoing dialogue with a trusted tax and retirement planner.
As market conditions continue to evolve, the question for many households is not whether to pursue tax-free growth via Roth conversions, but when and how much to convert without stepping into the IRMAA cliff. With careful planning, retirees can still pursue strong after-tax growth while mitigating the risk of a steep Medicare premium increase in 2028 and beyond.
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