A $2.2 Million 401(k) Could Cost You $30,000 in Medicare Surcharges Without This Five-Year Roth Conversion Window

Quick Read

• $200K yearly Roth conversions ages 60-64 dodge $30K+ successful IRMAA surcharges by property 73.

• Convert wrong 24% bracket earlier Medicare enrollment; IRMAA lookback captures conversions astatine ages 63-64.

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A 60-year-old azygous retiree sitting connected $2.2 cardinal successful a accepted 401(k) and $400,000 successful a taxable brokerage has astir 5 quiescent years earlier Medicare enrollment changes the taxation mathematics forever. Those years are the astir invaluable existent property connected the status calendar, and astir retirees discarded them. The determination to convert, oregon not convert, accepted dollars to a Roth betwixt 60 and 64 volition softly find whether Medicare costs an other $30,000 oregon much crossed retirement.

Here is the concern successful plain numbers. The retiree plans to assertion Social Security astatine 70 (roughly $42,000 a year) and enroll successful Medicare astatine 65. No Roth equilibrium exists yet. Left untouched, the 401(k) compounds toward the archetypal Required Minimum Distribution astatine property 73.

The baseline way softly builds a Medicare occupation

Assume the 401(k) earns 6% annually and grows to astir $4.7 cardinal by property 73. The archetypal RMD, calculated against the IRS Uniform Lifetime Table, comes successful astatine astir $177,400. Add 85% of Social Security (about $35,700) and Modified Adjusted Gross Income lands adjacent $213,000.

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That MAGI parks the retiree successful IRMAA Tier 3 oregon Tier 4, the Medicare income brackets that surcharge Part B and Part D premiums. Combined Part B and Part D IRMAA astatine that level runs $4,200 to $5,300 per year. Across ages 73 to 85, that is $50,000 to $65,000 successful cumulative surcharges, paid connected apical of regular Medicare premiums and mean income taxation connected each RMD dollar. The IRMAA calculation uses a two-year lookback, truthful income earned astatine 71 sets the premium astatine 73.

Inflation makes this worse. Core PCE has climbed from 125.79 successful May 2025 to 129.28 successful March 2026, and CPI has risen from 320.8 successful April 2025 to 333.0 successful April 2026. Medicare premiums way that pressure, and IRMAA thresholds set connected a lag.

The five-year conversion model

The hole is to drain the 401(k) deliberately during the years erstwhile IRMAA does not yet apply. Before 65, Medicare is not successful the picture, truthful income tin beryllium lifted without triggering a premium surcharge 2 years later.

The plan: person $200,000 per twelvemonth for 5 years, ages 60 done 64, moving $1.0 cardinal from the 401(k) to a Roth IRA. That magnitude fills the single-filer 24% bracket, which tops retired adjacent $197,300. Federal taxation connected the afloat conversion runs astir $210,000. Pay that measure from the $400,000 brokerage relationship alternatively than withholding from the conversion itself. Every dollar withheld is simply a dollar that ne'er compounds tax-free.