2026 Roth and IRMAA Masterclass

What happens when the move that saves you the most tax also hands you a surprise Medicare bill two years later? You walk straight into the central tension of retirement tax planning. A Roth conversion shrinks the tax-deferred balance the IRS will eventually force you to drain. IRMAA, the income-based surcharge on Medicare Parts B and D, punishes you for raising your income to do it. The whole game is filling one bracket without spilling into the other.

The two ladders you’re climbing at once

A conversion is voluntary income. You move money from a traditional IRA to a Roth, pay ordinary tax on the amount today, and every dollar after that grows and comes out tax-free, with no required minimum distribution ever. The reason to do it now is arithmetic. For 2026, a married couple’s 22% bracket runs from $100,800 to $211,400 of taxable income, and the 24% bracket goes from there up to $403,550. Those are wide, and under current law they’re permanent. If your retirement accounts are large, the income they’ll force out later through RMDs can land you in 32% or higher. Converting at 24% to avoid 32% is the trade.

IRMAA is the cost on the other side of the ledger. Your Medicare premium is set by your income from two years prior, so your 2026 surcharge is driven by 2024 income, and a conversion you do in 2026 sets your 2028 premium. For 2026, a married couple stays at the standard Part B premium of $202.90 a month each up to $218,000 of MAGI. Cross that by a dollar and you jump to $284.10. The tiers keep climbing from there, and the top one at $750,000 of joint income costs $689.90 a month per person. The cruelty is the cliff. IRMAA is not a phase-in. One dollar over a breakpoint moves you a full tier, so a conversion that overshoots by $500 can cost a couple thousands a year in extra premiums.

Why 2026 is a window, not a warning

Most years you’re squeezed between these two ladders. 2026 gives you room. The ordinary brackets are wide and the IRMAA tiers sit well above the bracket lines, so for many affluent retirees the constraint isn’t the tax rate at all. It’s the IRMAA breakpoint. That changes the target. You’re not filling to the top of your tax bracket. You’re filling to just under the IRMAA tier you’ve decided you can live with.

Picture a 66-year-old couple, both on Medicare, with $90,000 of other taxable income. On the tax side they could convert roughly $121,000 more and still stay inside the 22% bracket, which tops out at $211,400. But the $218,000 IRMAA breakpoint is the lower ceiling in MAGI terms, so the binding limit is the conversion that keeps their MAGI under $218,000, not the one that fills the bracket. Read that carefully. Their tax bracket says one number, their Medicare surcharge says another, and the smaller number wins. Plan to the wrong one and the savings evaporate into premiums.

The order of operations that protects you

The mistake I see most is treating the conversion as a December decision. By December you’ve already earned your interest, your dividends, your capital gains distributions, and you’re guessing at the total. The fix is sequencing. Project the full year’s MAGI first. Subtract the floor of income you can’t control. What’s left is your conversion headroom, and you leave a cushion of a few thousand dollars under the breakpoint because mutual fund distributions in late December are notorious for blowing up a tight plan.

There’s a second wrinkle for the very wealthy. If both spouses are 65 or older in 2026, the temporary senior deduction can add up to $12,000 of deductions, but it phases out as income rises, so a large conversion can quietly erase a deduction you were counting on.

If your accounts are large

The households this matters most for are the ones with $3M or more in tax-deferred accounts, because that’s where RMDs get violent. At 75, the first RMD on a $3M IRA is well over $120,000 whether you need it or not, and it stacks on top of Social Security and pensions. The years to convert are the quiet ones, after you stop working and before RMDs and Social Security fill the bracket. That window is often just your late 60s to early 70s, and it closes fast. Some couples accept one IRMAA tier on purpose during those years, because paying a few thousand in surcharges to convert at 24% beats decades of forced income at 32%. That’s a defensible trade. Overshooting by accident is not.

The conversion and the surcharge aren’t enemies. They’re two dials on the same machine, and 2026 hands you more room between them than most years will. Spend it on purpose. For the detailed mechanics of staying under the line, see Roth conversions without triggering IRMAA.