Optimizing Roth IRA Conversions: Filling Tax Brackets Without Triggering IRMAA Surcharges

Roth conversions from traditional IRAs to Roth IRAs offer tax-free qualified withdrawals in retirement and eliminate required minimum distributions (RMDs), but the converted amount is taxed as ordinary income in the year of conversion. Financial planners widely recommend converting only enough to fill the top of your current marginal tax bracket without spilling into a higher one.

For example, a single filer with $80,000 gross income and the $16,100 standard deduction has $63,900 in taxable income, placing them in the 22% bracket (up to $105,700 in 2026 brackets). This leaves room for approximately $41,800 in conversions while remaining in that bracket.

A critical additional factor is the Income-Related Monthly Adjustment Amount (IRMAA), which can increase Medicare Part B and D premiums based on modified adjusted gross income (MAGI) from two years prior. Thresholds for 2026 IRMAA surcharges begin at $109,000 MAGI for individuals and $218,000 for joint filers. Conversions that push MAGI over these cliffs can create effective marginal costs exceeding the tax bracket savings.

Advisors emphasize timing conversions during 'gap years'—post-retirement but pre-Social Security and RMDs (age 73 or 75)—when taxable income is typically lowest. Multiple planning firms stress calculating the lower of the tax-bracket ceiling or the next IRMAA threshold to determine the optimal annual amount.

Fidelity and Vanguard provide Roth conversion calculators and guidance highlighting these trade-offs, including impacts on future RMDs and potential Medicare costs. Incremental conversions over several years can help manage spikes in income.