Don’t Let the IRMAA Tail Wag the Dog: Medicare Surcharges, Roth Conversions, and Family Goals

By Cassidy Murphy, CFP®, CPWA®, EA

Last updated: September 30, 2026

This article is for educational purposes only and does not constitute individualized tax, legal, or investment advice. Medicare rules, premiums, and tax law can change, and the right decision depends on your income, health, goals, and broader financial circumstances. Consult your own tax and legal advisors before acting on anything described here.

IRMAA stands for Income-Related Monthly Adjustment Amount. It is an extra charge added to Medicare Part B and Part D premiums when a beneficiary’s modified adjusted gross income (MAGI) exceeds set thresholds. CMS reports that these adjustments affect roughly 8% of people enrolled in Part B.

Social Security defines MAGI for this purpose as the adjusted gross income on your Form 1040 plus tax-exempt interest income. The figure comes from the most recent return the IRS can provide, which is generally two years earlier, so 2026 premiums are set by 2024 income, 2027 premiums will be set by 2025 income, and so on.

Three features of the design matter most for IRMAA planning:

• It is tiered rather than graduated, which means a single dollar above a threshold moves the entire adjustment into the next tier rather than applying only to the excess.
• It is priced per person, so a married couple with both spouses enrolled pays it twice.
• It operates on a two-year delay, which sounds like a disadvantage and is actually the most useful thing about it, because it means the cost of a decision made this year can be estimated with real precision before the money moves.

Table 1: 2026 IRMAA tiers, based on 2024 MAGI

Tier	Single filers	Married filing jointly	Part B per month	Part D per month	Annual, per person	Annual, couple
Standard	Up to $109,000	Up to $218,000	$0.00	$0.00	$0	$0
1	$109,001 to $137,000	$218,001 to $274,000	$81.20	$14.50	$1,148.40	$2,296.80
2	$137,001 to $171,000	$274,001 to $342,000	$202.90	$37.50	$2,884.80	$5,769.60
3	$171,001 to $205,000	$342,001 to $410,000	$324.60	$60.40	$4,620.00	$9,240.00
4	$205,001 to $499,999	$410,001 to $749,999	$446.30	$83.30	$6,355.20	$12,710.40
5	$500,000 and above	$750,000 and above	$487.00	$91.00	$6,936.00	$13,872.00

Source: CMS, 2026 Medicare Parts A & B Premiums and Deductibles (released November 14, 2025; reviewed September 30, 2026). The surcharge is assessed per person, so the couple column assumes both spouses are enrolled in Part B and a Part D plan. Part D amounts are in addition to your own drug plan premium. Married filing separately follows a different schedule that is not shown here.

The step between most tiers is about $1,735 a year per person, or $3,470 for a couple. The final step, from tier four to tier five, is only about $581 per person, which is worth filing away for later.

With all of this in mind, a surcharge quoted in dollars tells you almost nothing, because it is detached from whatever caused it. Divide it by the income that triggered it, though, and it becomes directly comparable to every other marginal rate on your tax return.

Take a couple whose income is currently just under $218,000 and who are considering converting the next $56,000, which would fill the first tier exactly. The surcharge is $2,296.80 between them. Spread across $56,000 of income, that is an additional 4.1 cents on the dollar that is directly attributable to IRMAA.

That 4.1% is the figure for someone converting one full tier, but most conversion decisions do not start at a threshold. A client who is currently nowhere near the first line and converts upward pays the entire surcharge for whatever tier they land in, not just the step from the tier below. So, a more useful version of this calculation would be to divide the total surcharge incurred by the total amount converted.

Table 2: What the surcharge costs as a share of the amount converted

Amount converted, starting just below the first threshold	Tier reached	Annual surcharge, couple	Surcharge as a share of the conversion
$5,000, stopping just past the line	1	$2,296.80	45.9%
$56,000, to the top of tier 1	1	$2,296.80	4.1%
$124,000, to the top of tier 2	2	$5,769.60	4.7%
$192,000, to the top of tier 3	3	$9,240.00	4.8%
$532,000, to the top of tier 4	4	$12,710.40	2.4%
$782,000, into tier 5	5	$13,872.00	1.8%

Married filing jointly, 2026 amounts, both spouses enrolled in Parts B and D, income starting at $218,000. For a single filer starting at $109,000, every percentage after the first row is identical, because the surcharge and the tier widths both halve. The first row is not: a single filer who stops $5,000 past the line pays about 23%. Illustration only.

What’s interesting is that the surcharge never exceeds about five cents on the dollar for anyone converting a meaningful amount, no matter how deep into the tiers they go, and it actually gets cheaper past tier three, because the fourth tier is wider and the fifth is unbounded above. For comparison, the federal bracket step from 24% to 32% costs eight cents on every dollar above it, and the step from 12% to 22% costs ten. Every row in that table that fills an entire tier is cheaper than either of those jumps.

One asymmetry is worth pointing out, because it’s counterintuitive. Filling a tier costs a married couple exactly the same percentage as a single filer, because although the surcharge doubles, the tier width doubles along with it. But when you look at the first row, clipping a tier costs a couple twice as much, because the overage is a fixed dollar amount and the doubled surcharge lands on the same $5,000. Marriage does not change the cost of doing this well; it doubles the cost of doing it carelessly.

So, the honest version of the argument is not that the surcharge is small. It is that the surcharge is relatively small when you handle it properly and among the most expensive rates you will ever pay when you handle it carelessly. The difference has nothing to do with how much you convert and everything to do with where you stop.

Now let’s look at the top-tier surcharge in two different ways. The first compares it with portfolio value, and the second compares it with annual spending, assuming a household withdraws 4% of its portfolio in a year.

Table 3: The top-tier surcharge in proportion

Portfolio value	Annual spending at 4%	Surcharge as a share of the portfolio	Surcharge as a share of one year’s spending
$5,000,000	$200,000	0.277%	6.9%
$7,500,000	$300,000	0.185%	4.6%
$10,000,000	$400,000	0.139%	3.5%
$15,000,000	$600,000	0.092%	2.3%

Top-tier surcharge of $13,872 for a couple with both spouses enrolled in Parts B and D. The 4% draw is an assumption for illustration, not a recommendation. Hypothetical illustration only.

The right-hand column compares a cash cost to other cash costs, which is a comparison the portfolio column cannot quite make. At $5 million, the maximum possible surcharge is roughly 7% of a spending year, which is real, noticeable, and still not the sort of number that should decide whether to convert or whether to take the family somewhere while everyone can travel. At $15 million it is closer to 2%. As a share of what you actually spend, this is still meaningful, but bounded.

Another way to look at IRMAA premiums proportionally is to compare them to a relatively normal level of daily market movement within a portfolio:

Table 4: The surcharge next to ordinary market movement

Portfolio value	A 0.5% one-day move	A 1% one-day move	The whole top-tier surcharge, as a one-day move	The 2026 increase in that surcharge, as a one-day move
$5,000,000	$25,000	$50,000	0.28%	0.023%
$7,500,000	$37,500	$75,000	0.18%	0.015%
$10,000,000	$50,000	$100,000	0.14%	0.012%
$15,000,000	$75,000	$150,000	0.09%	0.008%

One-day movements are assumptions for illustration, not forecasts. Surcharge of $13,872 for a couple with both spouses enrolled in Parts B and D, and a 2026 increase of $1,159.20. Hypothetical illustration only.

Market values can rise or fall, and the table is arithmetic rather than a forecast. In this illustration, a change of about 0.02% in a $5 million portfolio is roughly the size of the entire 2026 increase in the top-tier surcharge for a couple. A paper change in portfolio value and a cash premium are not the same thing, so the comparison is only meant to show scale and does not claim that the two feel alike.

Much of the anxiety around IRMAA assumes a choice between triggering the surcharge and avoiding it. However, for a household with a substantial pre-tax balance, that choice may not actually exist and some level of IRMAA may be unavoidable.

Required minimum distributions (RMDs) begin at age 73 or 75, depending on when you were born (age 75 for anyone born in 1960 or later), and they get proportionally larger each year as you get older. Consider a couple currently in their mid-sixties, holding $2.5 million in traditional IRAs alongside $2.5 million in taxable accounts. At a 6% assumed return and without any withdrawals along the way, the pre-tax side reaches north of $4 million by 75. This produces a first RMD in the neighborhood of $170,000. Stack that on top of Social Security, pensions or deferred compensation, and portfolio income, and their income lands in the first or second tier in the very first distribution year.

In these situations, the question is not “surcharge versus no surcharge.” Instead, it becomes a deliberate choice between a few years in a higher tier now, temporarily, against a higher tier for the rest of two lifetimes, arrived at by default. Converting earlier can often reduce the number of years spent in higher tiers later in retirement, because a smaller pre-tax balance produces smaller RMDs.

Hypothetical example for illustration only. The 6% return is an assumption, not a projection, and actual results vary.

If I could get one fact pattern in front of every married client, it would be this one, and it has more to do with tax brackets than with Medicare.

Let’s say the same couple has roughly $325,000 of income in their mid-seventies. Filing jointly, their last dollar sits in the 24% bracket and they pay the second-tier surcharge of about $2,885 each. Now suppose one of them dies. The survivor inherits the IRA, keeps the larger Social Security benefit and loses the smaller one, and files as a single taxpayer the following year. Same house, same portfolio, and we’ll assume roughly $300,000 of income.

Her last dollar is now taxed at 35%, because the single tax brackets are half as wide, so the same income runs through them twice as fast. The single Medicare thresholds are also half as high, which moves her from the second tier to the fourth: using today’s numbers, $6,355 on her own against $2,885 before.

Eleven percentage points of federal rate, on distributions she has no discretion over, for the remainder of her life. Notice which of those two numbers is doing the damage. The surcharge went up by about $3,470, but the tax on the same income went up by several times that. Nothing about her circumstances improved or worsened; only her filing status changed. This is the arithmetic that can make conversions worthwhile even when the couple’s own rate looks unremarkable, and it’s why I am more comfortable recommending a surcharge be paid deliberately today than most clients expect.

Hypothetical example for illustration only. Actual results vary with income, law, and individual circumstances.

CMS sets new amounts each fall. I want to include this table because it slightly undercuts the description of IRMAA as a “known” cost: we know what the amounts are now, but we can only guess at the future.

Table 5: Total top-tier Medicare cost by year

Year	Standard Part B, monthly	Top-tier surcharge, monthly per person	Total monthly, one person	Total annual, one person	Total annual, couple	Increase from prior year, couple
2023	$164.90	$472.00	$636.90	$7,642.80	$15,285.60	Not applicable
2024	$174.70	$500.30	$675.00	$8,100.00	$16,200.00	+$914.40
2025	$185.00	$529.70	$714.70	$8,576.40	$17,152.80	+$952.80
2026	$202.90	$578.00	$780.90	$9,370.80	$18,741.60	+$1,588.80

Sources: CMS fact sheets for 2023, 2024, 2025, and 2026 (reviewed September 30, 2026). The surcharge column combines the Part B and Part D adjustments. Totals exclude each person’s own Part D plan premium, which varies by plan and is paid in addition to the amounts shown.

I have shown the total premium rather than the surcharge alone, because that’s the number that actually leaves the account. A couple in the top tier is paying about $18,742 a year for Medicare, of which roughly $13,872 is the surcharge and the remainder is the standard Part B premium they would owe at any income level. The year-over-year increase in 2026 was about $1,589 for a couple, or roughly 9%, against increases closer to $950 in each of the two prior years. The surcharge is knowable two years in advance, which is genuinely the most useful feature of the rule, but the amount itself is not fixed and has been growing faster than inflation. Past changes do not predict future ones, and 2027 figures are not yet available; CMS has historically published each year’s premiums in the fall.

A Roth conversion moves money from a pre-tax IRA to a Roth IRA. The converted amount is generally taxed as ordinary income in the year of the conversion, reported by the custodian on Form 1099-R and by the taxpayer on Form 8606. Conversion income raises MAGI, so it can affect Medicare premiums two years later.

In almost every case we model, the income tax is the larger cost by a wide margin, and it should be what sizes the conversion. The general rule I follow is pretty straightforward: size the conversion to the gap between today’s rate and the rate you expect on the same dollars later, then stop on a threshold rather than between two of them. That applies whether the threshold is a bracket ceiling or a Medicare tier line.

Stopping between lines is the only genuinely avoidable mistake here, because you have paid for a threshold you did not finish using. When a projected conversion lands a short way past a Medicare line, there are two fixes, and which one is right depends on how much room sits above the line. If there is enough income between that line and the next bracket ceiling to spread the surcharge across, roughly $20,000 for a single filer or $40,000 for a couple, push up and fill the tier. If there is not, trim the conversion back below the line. Either is fine. Sitting a few thousand dollars over is not.

That said, a conversion deserves more than a rate comparison, and IRMAA is one line in a longer list.

Table 6: Factors to weigh alongside the surcharge

Consideration	Why it matters
Tax rate now versus later	Conversion income is taxed at current rates, while the future rate depends on future income, future law, filing status, and what your required distributions look like.
Funding the tax	Paying from taxable assets rather than withholding from the conversion keeps more invested, but selling appreciated positions adds gains to MAGI in the same year.
Required distributions	A smaller pre-tax balance means smaller distributions later, which is often the largest long-term benefit and the one least visible in a single-year projection.
Filing status ahead	The single brackets and single thresholds a survivor will face are usually the strongest argument for converting during a marriage.
Heirs	Most non-spouse beneficiaries must empty an inherited retirement account within ten years, frequently during their own peak earning years.
Basis step-up	Taxable assets generally receive a step-up at death. Spending them down to fund conversion tax gives up part of that benefit, and a full analysis should account for it.
Liquidity and risk	Cash used for conversion tax is not available for other goals, and no conversion plan should increase concentration or liquidity risk.
State income tax	Your state of residence at the time of conversion can change the total cost materially, and a future move cuts both ways.
IRMAA	A known, tiered, per-person surcharge appearing two years later, which can be estimated in advance and should be filled rather than clipped.

Conversions generally cannot be undone once completed, which is why this belongs in a model before any money moves.

Many affluent retirees hesitate to spend or give because a cost on a statement is easy to see while the value of time with family is nearly impossible to quantify. The IRMAA surcharge is precise, recurring, and tiered, which tends to give it an outsized presence in decision-making. However, once you understand it as a rate of a few cents on the dollar (when handled properly) or potentially as a relative “blip” compared to your portfolio’s daily movements, letting a two-year-lookback premium decide whether to fund a multigenerational trip or a family milestone may be focusing on the wrong variable.

The practical point is that the source of funds can be planned, and the IRMAA effect of any choice can be estimated and evaluated in advance. For many households with substantial assets, the surcharge can reasonably be viewed as a cost of doing what matters while everyone is healthy and able to take part. That is a judgment about values, health, and spending capacity rather than a formula, and it is one of the more rewarding conversations we have.

Charitable goals follow similar logic, with one addition: qualified charitable distributions (QCDs), available once the IRA owner reaches 70½, reduce adjusted gross income and can help manage MAGI directly. For a charitably inclined household, they should generally be sized before conversions rather than layered on afterward, because a traditional IRA left to charity is never taxed at all, which means converting money destined for charity is a straightforward loss.

IRMAA is worth measuring even when it is not the deciding factor. A few situations call for more attention.

Sitting near a threshold. This is the one that matters most. Income a few thousand dollars over a tier line costs the full tier, which is why the timing of a gift, a loss harvest, a Roth conversion or a distribution is worth reviewing in December rather than discovering in April. If you are going to cross a line, cross it properly.

One-time income events. A business sale, an equity liquidity event or a large realized gain can lift MAGI in a single year and affect premiums two years later. These are also the situations where the two-year delay is most useful, because the cost is estimable well in advance.

Tax-exempt interest. Municipal bond interest counts toward MAGI even though it is not taxed, which regularly surprises investors who bought munis specifically to manage income.

Smaller portfolios. The same dollar amount is a larger share of resources, and the proportional comfort available to a $5 million household is not available to everyone.

A drop in income. Social Security will consider a new determination after certain life-changing events, including marriage, divorce, the death of a spouse, work stoppage or reduction, loss of income-producing property, or loss of pension income. The request uses Form SSA-44 and requires documentation, and approval depends on the facts. Worth knowing what is on that list, and equally worth knowing that a voluntary Roth conversion is not.

The surcharge, income tax, capital gains, required distributions and Social Security taxation all move together, which is why this analysis works best when tax and investment decisions are modeled in the same place rather than handed back and forth. At Fiduciary Financial Group, our fee-only fiduciary model means CPA advisors and wealth managers work from the same plan, with no commissions or product incentives. The point of that structure is to keep a tax question connected to investment risk, liquidity and what the family actually wants the money to do.

To learn more, explore our services, read how we work with high-net-worth households, review our retirement income and tax planning guide, or contact our team to start a conversation.

Figures in this article are as of September 30, 2026, and come from the following primary sources.

• CMS, 2026 Medicare Parts A & B Premiums and Deductibles (November 14, 2025)
• CMS, 2025 Medicare Parts A & B Premiums and Deductibles, plus the 2024 and 2023 fact sheets linked above
• Social Security Administration, POMS HI 01101.010, Modified Adjusted Gross Income (December 2, 2025)
• Social Security Administration, Form SSA-44, Life-Changing Event
• IRS Publication 590-A and the Form 8606 instructions
• IRS, Retirement Plan and IRA Required Minimum Distributions FAQs
• IRS Revenue Procedure 2025-32, 2026 inflation adjustments

What is IRMAA?

The Income-Related Monthly Adjustment Amount, an extra charge added to Medicare Part B and Part D premiums for beneficiaries whose modified adjusted gross income exceeds set thresholds. It is tiered, priced per person, and based on income from two years earlier.

What income counts toward it?

Adjusted gross income from Form 1040 plus tax-exempt interest income, generally taken from the return filed two years before the premium year. Roth conversions, capital gains, IRA distributions and municipal bond interest all affect it.

How much is the highest surcharge in 2026?

The top tier applies to single filers with MAGI of $500,000 or more and couples filing jointly at $750,000 or more. Part B is $487.00 a month and Part D is $91.00 a month, which comes to $578.00 a month or $6,936 a year for one person. The surcharge is assessed per person, so a couple with both spouses enrolled in both parts pays $13,872 a year. Adding the standard Part B premium, that couple’s total 2026 Medicare cost is about $18,742, before each person’s own Part D plan premium.

Does a Roth conversion increase it?

Generally yes, if the conversion income pushes MAGI across a threshold, and the effect appears two years later. How much depends on your other income and which tier you reach. The income tax on the conversion is a separate and usually larger cost.

How should I think about the size of the surcharge?

Divide it by the income that caused it, which puts it in the same units as your tax brackets. Converting into a tier and filling it costs somewhere between about 2% and 5% of everything converted, no matter which tier you reach, which is less than either federal bracket step in the same range. Converting only a few thousand dollars past a threshold costs about 23% of that amount for a single filer and about 46% for a couple. The surcharge is rarely the reason to change a plan, and frequently the reason to adjust the last few thousand dollars of one.

Should wealthy retirees let it drive their financial decisions?

Usually not. For households with substantial assets it is a bounded, knowable, and comparatively small cost, and it belongs alongside income tax, filing status ahead, investment risk, liquidity and family goals rather than ahead of them. The right answer depends on individual circumstances and is worth modeling with your tax professional and advisor.

Can a determination be appealed?

Social Security will consider a new determination after certain life-changing events, such as marriage, divorce, the death of a spouse, work stoppage or reduction, loss of income-producing property, or loss of pension income. Requests use Form SSA-44 and require supporting documentation. A voluntary Roth conversion is not a qualifying event.