Methodology · IRMAA Planning
IRMAA Medicare lookback math methodology
Reviewed by Byron Malone · Last reviewed .
How we compute Medicare IRMAA surcharges triggered by Roth conversions on the IRMAA Lookback Calculator: the two-year income lookback mechanic, the 2026 IRMAA tier schedule for Medicare Part B and Part D, and the interaction with Roth conversion strategy for pre-retirees and retirees already on Medicare.
What IRMAA is and why it matters for Roth planning
IRMAA stands for Income-Related Monthly Adjustment Amount. It is a surcharge on Medicare Part B (medical insurance) and Part D (prescription drug coverage) premiums levied on beneficiaries whose MAGI exceeds defined thresholds. The surcharge is not income tax — it is a premium adjustment administered by the Social Security Administration (SSA) under 42 CFR §408.2.
The lookback mechanic means that your Medicare premiums in a given year are based on your MAGI from two years prior. A Roth conversion in 2026 affects your 2028 Medicare premiums. For a pre-retiree executing large conversions during low-income years, this lookback can negate a significant portion of the expected tax savings.
2026 IRMAA tier schedule
2026 IRMAA Thresholds — Modified AGI (from 2024 tax return) Source: CMS / SSA Income-Related Premium tables; 42 CFR §408.2 Part B Standard Premium (2026): $185.00/month (base, no IRMAA) Tier 1 — MAGI $109,001–$136,000 single / $218,001–$272,000 MFJ Part B surcharge: +$74.00/month → total $259.00/month Part D surcharge: +$13.70/month (added to plan premium) Annual IRMAA cost per person: ~$1,052 Tier 2 — MAGI $136,001–$163,000 single / $272,001–$326,000 MFJ Part B surcharge: +$185.00/month → total $370.00/month Part D surcharge: +$35.30/month Annual IRMAA cost per person: ~$2,437 Tier 3 — MAGI $163,001–$500,000 single / $326,001–$750,000 MFJ Part B surcharge: +$296.00/month → total $481.00/month Part D surcharge: +$57.00/month Annual IRMAA cost per person: ~$3,828 Tier 4 — MAGI above $500,000 single / above $750,000 MFJ Part B surcharge: +$370.00/month → total $555.00/month Part D surcharge: +$80.70/month Annual IRMAA cost per person: ~$5,413 For married couples, surcharges apply per person — a couple on Medicare crossing Tier 1 pays the annual IRMAA surcharge twice.
IRMAA thresholds are indexed annually by the Social Security Administration. Verify current thresholds at medicare.gov and CMS published premium schedules each fall.
How the lookback interacts with conversion planning
IRMAA Conversion Cost Formula:
Conversion Year: 2026
IRMAA Reference Year: 2024 (two years prior, already filed)
IRMAA Impact Year: 2028 (two years after conversion)
MAGI Before Conversion (2026): $85,000 (single)
Conversion Amount: $30,000
MAGI After Conversion (2026): $115,000 → crosses Tier 1 threshold
Tier 1 IRMAA surcharge (2028, per CMS): ~$1,052/year (at 2026 rates)
Part B surcharge: $74/mo × 12 = $888
Part D surcharge: $13.70/mo × 12 = $164
Break-even check:
Tax savings from conversion at 22% bracket:
$30,000 × 22% = $6,600 saved in future (vs. 24% scenario)
IRMAA cost triggered: $1,052 in 2028
If IRMAA persists two years (2028–2029): $2,104 additional cost
Net benefit of conversion: $6,600 − $2,104 = $4,496 (still positive)
→ But if conversion pushed MAGI to Tier 2, recalculate with higher surchargeThe break-even check depends on how many years the IRMAA surcharge applies (only the impact year, or multiple years if income stays elevated), and whether the tax saved in future years exceeds the cumulative IRMAA cost. For conversions that only briefly cross a tier boundary, the math often still favors conversion. For large conversions that push into Tier 3 or Tier 4, the IRMAA cost can exceed a decade of expected tax savings.
Edge cases
- Life-changing event appeals. The SSA permits beneficiaries to appeal IRMAA determinations based on a qualifying life-changing event (retirement, loss of income, divorce, death of spouse). If a large conversion was one-time and income has since dropped, the appeal process can reduce or eliminate the surcharge for subsequent years. This is not modeled in the calculator but is a material planning lever.
- Cliff versus gradient. IRMAA operates on a cliff structure, not a gradual phase-in. A single dollar above a tier threshold triggers the full surcharge for that tier for the entire year. A conversion that crosses a boundary by $500 costs as much in IRMAA as one that crosses by $50,000 — making the exact conversion amount highly sensitive around tier boundaries.
- MAGI definition for IRMAA. IRMAA MAGI includes tax-exempt interest income (municipal bond interest). It does not include Roth IRA distributions. This is a key benefit of the Roth account after conversion: future qualified distributions do not appear in IRMAA MAGI.
- Part D plan variation. The Part D IRMAA surcharge is added to whatever the enrollee pays for their specific Part D plan premium. The surcharge amounts in our table are the 2026 federal IRMAA add-on amounts per CMS; actual total Part D premium depends on plan selection.
Named-expert guidance
Per Michael Kitces, Nerd's Eye View (kitces.com): the optimal Roth conversion strategy for pre-Medicare enrollees requires modeling the two-year lookback explicitly. Kitces documents scenarios where a conversion that appears to save taxes in a given bracket generates more in IRMAA surcharges over two years than it saves in ordinary income taxes — particularly for taxpayers near the $109,000 Tier 1 threshold who are within two years of Medicare eligibility.
Per Wade Pfau, Retirement Researcher (retirementresearcher.com): “Safe withdrawal rates are about systematic withdrawals from a volatile portfolio.” Pfau's retirement income research frames IRMAA as a Medicare surcharge that functions like a marginal tax on retirement income — and should be incorporated into withdrawal-rate models as a real cost, not a footnote. A Roth conversion strategy that ignores IRMAA produces an overstated net benefit estimate for Medicare-age retirees.
Sources
This is methodology documentation, not tax advice. Roth conversion decisions interact with your overall tax bracket, state-conformity to federal IRC §408A, IRMAA Medicare costs, RMD timing, and your retirement income plan. Consult a licensed CPA, EA, or financial planner before executing any IRA conversion.
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