Medicare IRMAA Impact of IRA Withdrawals and Roth Conversions: Avoid the Two-Year Premium Surprise

You make what feels like a clean, responsible move: convert part of your IRA to a Roth, take a larger IRA withdrawal for a remodel, or sell appreciated investments to rebalance. You pay the tax, you move on.

Then, two years later, Medicare tells you your Part B and Part D premiums are going up. Not because your portfolio grew. Not because you “have too much.” But because of a number on an old tax return.

This is the planning tension I see constantly: the tax move that’s right in isolation can be expensive when it collides with Medicare’s income rules. The good news is you can usually see the collision coming. IRMAA is not a mystery penalty. It’s a predictable outcome of Modified Adjusted Gross Income (MAGI) and a two-year lookback.

In this article, I’ll show you how IRA withdrawals, Roth conversions, and realized capital gains feed into MAGI, how that triggers IRMAA surcharges on Medicare Part B and Part D, and a practical workflow to plan around the two-year delay before you pull the trigger.

IRMAA is an income-timing problem, not an asset problem

IRMAA stands for Income-Related Monthly Adjustment Amount. In plain English: if your income is high enough, Medicare charges you extra each month for Part B (doctor/outpatient coverage) and Part D (prescription coverage).

Two points matter more than anything else:

First, IRMAA is based on income, not your net worth.

I’ve met plenty of retirees with $2 million invested who pay no IRMAA because their taxable income is modest. I’ve also met retirees with $600,000 invested who get hit with IRMAA because they had a big income year.

Second, IRMAA uses a two-year lookback.

Your Medicare premiums for 2026 are generally based on your MAGI from 2024. That delay is what makes IRMAA feel like a “surprise.” It’s not showing up in the year you do the Roth conversion or the big sale. It shows up later, when you’ve mentally moved on.

What does “MAGI” mean for Medicare?

MAGI is Modified Adjusted Gross Income. For Medicare IRMAA purposes, it’s essentially your Adjusted Gross Income (AGI) plus certain add-backs (most commonly tax-exempt interest).

You don’t need to memorize the tax code to plan well here. You do need to understand what tends to push MAGI up:

Traditional IRA withdrawals (taxable distributions)

Roth conversions (the amount converted is generally taxable and increases AGI)

Realized capital gains (selling investments for a profit in a taxable account)

Interest, dividends, wages, business income, rental income

Some Social Security becomes taxable as other income rises (more on that later)

And what usually does not push MAGI up:

Qualified Roth IRA withdrawals (generally tax-free and not included in MAGI)

Return of principal from certain sources (depends on the source)

Loans against assets (not “income,” though they come with their own risks)

The key misconception I want to correct: IRMAA is not a “rich person tax” based on portfolio size. It’s a surcharge triggered by a MAGI number crossing a bracket.

If you want a deeper explanation of how Medicare sets Part B and Part D premiums, we have a separate supporting piece here: /post/medicare-part-b-part-d-premiums-high-income-retirees

How the “good” moves trigger higher Medicare premiums

Let’s talk about the three most common culprits in real retiree plans: IRA withdrawals, Roth conversions, and realized capital gains.

Traditional IRA withdrawals: the most direct IRMAA lever

A traditional IRA (and most 401(k) withdrawals) is straightforward: money out is generally taxable income.

If you withdraw $80,000 from your IRA, that $80,000 typically increases your AGI by $80,000. Higher AGI usually means higher MAGI. Higher MAGI can push you into an IRMAA bracket.

This is why “I’ll just take more from the IRA this year” is rarely a neutral decision once you’re on Medicare.

Common situations where this shows up:

A one-time home project

Helping an adult child with a down payment

Buying a car with cash

Taking a large “catch-up” distribution before RMDs

Paying a big tax bill from another event

If you want to go deeper on the bigger picture of where withdrawals should come from first (taxable vs IRA vs Roth), read: /post/ira-withdrawal-sequencing-before-after-rmds

Roth conversions: tax strategy with a Medicare price tag

A Roth conversion is when you move money from a traditional IRA to a Roth IRA. The conversion amount is generally added to your taxable income in that year.

That’s the whole point: you voluntarily recognize income now, ideally at a reasonable tax rate, to reduce future required minimum distributions (RMDs), potentially reduce future taxes, and create more tax flexibility later.

But here’s the catch: a Roth conversion can raise MAGI enough to trigger IRMAA two years later.

This doesn’t mean Roth conversions are “bad.” It means they need a ceiling.

In our planning, we often talk about setting a conversion ceiling: a maximum conversion amount for the year based on tax brackets and other thresholds (including IRMAA). Here’s a dedicated article on that concept: /post/roth-conversion-tax-bracket-ceiling-retirement

Realized capital gains: the quiet IRMAA trigger in taxable accounts

Capital gains are profits from selling an investment for more than you paid.

If you sell $300,000 of a fund with a $200,000 cost basis, you may have a $100,000 realized gain. That gain is included in your income calculation and can increase MAGI.

This is the one that catches disciplined investors off guard. You might not feel like you “made income.” You just rebalanced, or you sold a concentrated position, or you moved to a more conservative allocation.

But for IRMAA, realized gains count.

If capital gains are likely to be part of your retirement tax picture, see: /post/capital-gains-retirement-tax-planning

A quick note on Roth withdrawals

Qualified withdrawals from a Roth IRA generally do not count as income for Medicare IRMAA. That’s one reason Roth assets can be so valuable for retirees: they can fund spending without increasing MAGI.

That said, the conversion itself is income. The withdrawal later is typically not.

IRMAA brackets for 2026: what matters and how to use them

IRMAA works in brackets. Cross a bracket line and Medicare adds a surcharge.

Two practical points:

It’s not gradual within a bracket. It’s step-like. Being $1 over a threshold can matter.

The surcharge applies per person. Married couples often feel this twice.

For 2026, published estimates indicate Part B IRMAA surcharges range roughly from $81.20 up to $487 per month, and Part D surcharges range roughly from $14.50 up to $91 per month, depending on your income bracket.

Those numbers change over time, and the brackets are adjusted periodically. The exact bracket cutoffs you should use are the ones applicable to your filing status (single vs married filing jointly) and the year Medicare is pricing.

How I suggest you use IRMAA brackets in real planning:

Don’t obsess over the exact dollar of the premium.

Do treat the bracket thresholds like guardrails.

If you’re going to cross a guardrail, do it on purpose.

In other words, we’re not trying to “win” by avoiding every surcharge forever. We’re trying to avoid accidental surcharges that didn’t buy you anything.

The two-year lookback: the rule that changes how you time everything

Here’s the IRMAA timing rule in plain English:

Medicare looks at your MAGI from two years ago to set your current year Part B and Part D premiums.

So:

Your 2026 Medicare premiums are generally based on your 2024 MAGI.

Your 2027 premiums are generally based on your 2025 MAGI.

This is why a conversion done in December can still matter. It’s not about when you “feel” the move. It’s about which tax year the income lands in.

A simple way to think about it:

Every tax decision you make this year has a Medicare echo two years from now.

That echo can be fine. It can even be worth it. But you want to hear it before you act.

The planning workflow I use with clients: forecast MAGI before you convert, withdraw, or sell

If you’re within a few years of Medicare or already on it, here’s the workflow I want you to adopt. It’s not complicated. It’s just disciplined.

Step 1: Build a “base MAGI” estimate for the year

Start with the income you expect even if you do nothing special:

Pensions

Social Security (some may be taxable)

RMDs if they apply

Interest and dividends

Part-time work

Rental income

Then add the items people forget:

Tax-exempt interest (often from municipal bonds) can be added back for Medicare MAGI

One-time income events you already know about

You’re not trying to be perfect. You’re trying to be directionally right before you add a big conversion or a big sale.

Step 2: Identify your “decision income” buckets

These are the levers you can control:

How much to withdraw from the IRA beyond what’s required

How much to convert to Roth

How much to realize in capital gains (and in which year)

Which accounts to spend from

If you’re already using a weekly or monthly planning rhythm, this is a great place to plug in. Our pillar checklist helps you keep these moving parts organized: /post/weekly-retirement-planning-checklist-250k-5m

Step 3: Stress-test the year against three thresholds

Most retirees focus only on the tax bracket. I want you to check three threshold systems at the same time:

Your federal tax bracket (ordinary income)

Capital gains brackets (for taxable sales)

IRMAA brackets (Medicare premiums)

Sometimes the “best” move is to fill a tax bracket even if it triggers IRMAA. Sometimes it’s the opposite.

The point is: you can’t rank tradeoffs if you only look at one scoreboard.

Step 4: Decide whether you’re avoiding a bracket or deliberately jumping it

This is where the editorial point of view matters.

Underrated strategy: staying just under an IRMAA threshold when it costs you very little.

If you’re $3,000 away from the next IRMAA bracket, and the only reason you’d cross it is “we might as well convert a little more,” that’s often a low-quality trade.

Overrated strategy: contorting your entire plan to avoid any IRMAA forever.

I’ve seen retirees skip reasonable Roth conversions for years to avoid a surcharge, only to get hit later by much larger RMDs, higher taxation of Social Security, and a bigger tax bill for the surviving spouse. Avoiding IRMAA at all costs can be penny-wise, pound-foolish.

Best strategy: use IRMAA brackets as pacing tools.

Convert in measured amounts over multiple years.

Time capital gains intentionally.

Coordinate withdrawals so you’re not stacking income sources in one year.

Step 5: Write down the “Medicare echo year” on the plan

If you do a big conversion in 2026, write down: “Potential IRMAA impact in 2028.”

This sounds simple, but it changes behavior. It makes the future premium increase part of the decision, not a surprise later.

A realistic household example: the conversion that looked perfect until Medicare showed up

Let’s use a simplified example. Numbers are rounded for clarity.

Mark and Denise are 67 and 66, married, recently retired. They have about $2.4 million invested:

$1.6 million in traditional IRAs

$500,000 in a taxable brokerage account with embedded gains

$300,000 in Roth IRAs

They want to:

Delay Social Security to 70

Do Roth conversions in their “gap years” (before RMDs)

Rebalance to reduce stock risk

They also want to spend $60,000 on a kitchen remodel.

Here’s what they consider doing in the same year:

Withdraw $60,000 from the IRA for the remodel

Convert $200,000 from IRA to Roth

Sell $150,000 of appreciated funds in taxable to simplify holdings, realizing $50,000 of gains

None of these are crazy by themselves.

But stack them and you’ve created a high MAGI year.

What happens next:

Their MAGI jumps.

Two years later, both Mark and Denise may pay higher Part B and Part D premiums because of IRMAA.

They also may cause more of their future Social Security to be taxable once benefits start, because higher “other income” tends to make more Social Security taxable.

This is where planning earns its keep.

A more coordinated version might look like:

Fund the remodel from taxable cash or a mix of taxable and Roth (if appropriate), reducing the IRA withdrawal.

Set a Roth conversion ceiling that keeps them within a chosen tax bracket and, if possible, below a key IRMAA threshold.

Split the taxable sales across two tax years to manage realized gains.

Do the rebalancing inside tax-advantaged accounts where possible to avoid realizing gains.

The goal isn’t to avoid taxes. The goal is to choose when you pay them, and to avoid paying extra Medicare premiums by accident.

How IRMAA interacts with Social Security taxation (the stacking effect)

Here’s a common retiree surprise: a Roth conversion or IRA withdrawal doesn’t just add income. It can also make more of your Social Security taxable.

Social Security taxation uses a concept called provisional income. In plain English, it’s a formula that looks at your other income and determines how much of your Social Security becomes taxable.

So a large IRA withdrawal or Roth conversion can:

Increase your taxable income directly, and

Increase the portion of Social Security that is taxable

That stacking effect can push MAGI higher than you expected, which can push you into IRMAA.

If you want the clean explanation of how Social Security becomes taxable and how withdrawals affect it, read: /post/social-security-taxation-provisional-income-withdrawals

This is why I rarely evaluate a Roth conversion in isolation. I want to see the whole income picture: Social Security timing, RMDs, pension start dates, and the taxable account.

Retiree questions I’m hearing right now (and straight answers)

How do IRA withdrawals affect my Medicare Part B and Part D premiums?

Traditional IRA withdrawals generally increase your taxable income in the year you take them. That increases MAGI, and MAGI is what Medicare uses (with a two-year lookback) to determine whether you pay IRMAA surcharges on Part B and Part D.

If you’re already close to an IRMAA threshold, even a “one-time” IRA withdrawal can push you over.

What is the impact of Roth IRA conversions on Medicare surcharges?

A Roth conversion increases your taxable income in the year of the conversion, which can increase MAGI and trigger IRMAA surcharges two years later.

The conversion is the trigger, not the Roth account itself.

Qualified Roth IRA withdrawals later are generally not included in MAGI and typically do not trigger IRMAA.

How can capital gains influence my Medicare premiums through IRMAA?

Realized capital gains from selling investments in a taxable account are included in your income and can increase MAGI.

That means a year with large gains (selling a business interest, selling a concentrated stock position, rebalancing a long-held portfolio, selling real estate with a gain) can cause IRMAA surcharges two years later.

What is the two-year lookback period for IRMAA calculations?

Medicare generally uses your tax return from two years prior to set your current year premiums.

Example: 2026 premiums are generally based on 2024 MAGI.

There are exceptions and appeal processes for certain life-changing events, but the default rule is two years.

How can I plan my income to minimize Medicare premium surcharges?

Think in terms of pacing and coordination:

Forecast MAGI before you execute a big withdrawal, conversion, or sale.

Set a Roth conversion ceiling rather than converting “as much as possible.”

Avoid stacking multiple income events in the same tax year when you can spread them.

Use account structure intentionally: taxable, IRA, and Roth each have different tax effects.

Rebalance inside IRAs when possible to reduce realized gains.

Coordinate Social Security timing and RMD planning so you’re not creating a future income spike.

What are the current IRMAA income brackets for 2026?

IRMAA brackets depend on filing status and are updated periodically. For 2026, published estimates show Part B surcharges ranging roughly from $81.20 up to $487 per month and Part D surcharges roughly from $14.50 up to $91 per month, depending on income.

In planning, I treat the bracket thresholds as guardrails. We use the exact bracket table for the applicable year and your filing status, then decide whether we’re staying under a line or intentionally crossing it for a good reason.

What tends to be misunderstood (and how to think about it instead)

Misunderstood: “If I have over $250,000 invested, Medicare will charge me more.”

Better: Medicare charges more when MAGI crosses thresholds. Many households with substantial assets keep MAGI moderate.

Misunderstood: “IRMAA means I shouldn’t do Roth conversions.”

Better: IRMAA means you should pace Roth conversions. A conversion can still be a great move if it reduces future RMDs, improves survivor planning, or reduces long-term taxes. Just don’t do it blindly.

Misunderstood: “Capital gains are only a tax issue, not a Medicare issue.”

Better: Realized gains are income for MAGI purposes. A big gain year can be a Medicare premium year two years later.

Misunderstood: “If I’m over the line, I should avoid income at all costs.”

Better: If you’re already going to be over a bracket, it can be smart to “fill up” that bracket with additional conversions or gains in the same year, because the surcharge is often the same within the bracket. This is where careful math matters.

A practical action list to avoid IRMAA surprises (without freezing your plan)

Here’s what I’d do if you’re within five years of Medicare or already enrolled, and you have $250,000+ in investable assets.

1. Pull your last two tax returns and find your MAGI starting point

If you don’t know your AGI, start there. Then identify add-backs like tax-exempt interest. If you’re not sure, your CPA can help you locate the right lines.

2. List your “income levers” for the next 24 months

Roth conversions you’re considering

IRA withdrawals beyond RMDs

Planned taxable sales (rebalancing, funding a purchase, simplifying holdings)

Any known one-time events (property sale, business sale, severance)

3. Choose a target: stay under a bracket or jump it intentionally

This is a values decision as much as a math decision.

If avoiding the next IRMAA bracket costs you very little in long-term tax efficiency, it’s often worth doing.

If staying under the bracket forces you to skip high-quality Roth conversions that reduce future RMD risk, you may decide the surcharge is an acceptable cost.

4. Set a Roth conversion ceiling and revisit it mid-year

Don’t wait until December to discover you overshot.

Income changes during the year. Markets move. Dividends show up. A mid-year check-in can prevent accidental bracket crossings.

(If you want a framework for setting that ceiling, see /post/roth-conversion-tax-bracket-ceiling-retirement.)

5. Coordinate rebalancing with tax location

If you need to reduce risk, try to do the heavy lifting inside IRAs and other tax-advantaged accounts first, where trades don’t create capital gains.

If you must sell in taxable, consider spreading sales over tax years, harvesting losses when available, and matching gains with charitable strategies when appropriate.

6. Write down the “two-year echo” for every major move

If you execute a big conversion in 2026, note the potential premium impact in 2028.

If you realize a large gain in 2026, note the same.

This keeps Medicare in the room while you’re making tax decisions.

7. If you had a life-changing event, ask whether an IRMAA appeal applies

Retirement, a spouse’s death, or other major changes can sometimes allow you to request a new determination. This is very fact-specific, and you’ll want to coordinate with Social Security/Medicare resources and your tax professional.

The bigger point: don’t assume the letter is final if your income has clearly dropped due to a qualifying event.

Where this fits in the bigger cluster plan

IRMAA planning is not a standalone trick. It’s one part of a coordinated retirement income and tax plan.

If you’re building a system, these pieces connect:

Your weekly planning rhythm and decision tracking: /post/weekly-retirement-planning-checklist-250k-5m

Withdrawal sequencing before and after RMDs: /post/ira-withdrawal-sequencing-before-after-rmds

Setting a Roth conversion ceiling: /post/roth-conversion-tax-bracket-ceiling-retirement

Capital gains planning in retirement: /post/capital-gains-retirement-tax-planning

How Part B and Part D premiums are actually determined: /post/medicare-part-b-part-d-premiums-high-income-retirees

How Social Security gets taxed as other income rises: /post/social-security-taxation-provisional-income-withdrawals

When these are coordinated, you stop making “single-move” decisions and start making multi-year decisions. That’s where avoidable surprises tend to disappear.

If you want help building an IRMAA-aware plan before you do the next big Roth conversion, IRA withdrawal, or taxable sale, book an appointment here: http://grapewealthmanagement.salesmate.io/meetings/#/grapewealthmanagement/user/1