Roth Conversions and IRMAA

Submitted by Paul Stifel on Tue, 2024-01-09 19:44

Mr. Slott encourages large conversions from IRAs to Roth, which makes sense. Does that mean one should ignore IRMAA penalties for exceeding different levels of MAGI income?

I don’t have a good way to compare swallowing the IRMAA penalties (for a year) vs continuing to drift just short of those penalties with RMDs forcing my hand. No way to tell if I’m going to drift north of the limits eventually.

I have done some conversions when there is headroom below the IRMAA limits, but they are not very large.



Submitted by David Mertz on Tue, 2024-01-09 20:05

  • IRMAA thresholds must certainly be considered when deciding how much to convert to Roth.  The amount by which your Roth conversion increases your AGI increases your MAGI for the purpose of IRMAA two years later.
  • Crossing into the next higher IRMAA typically increases Medicare Part B and D IRMAA combined by around $1,000.  Going over the threshold by just one dollar would mean a massive increase in marginal tax rate for that dollar, so it makes sense not to push the limit too hard.
  • The problem is predicting IRMAA thresholds at least none months in advance of the final determination of the cost-of-living adjustment.  The following website does nearly the best one can do to predict the thresholds with only a few months of available CPI data:
  • https://thefinancebuff.com/medicare-irmaa-income-brackets.html
  • I do my last Roth conversion late in the year when I have a really good idea of my AGI and have some idea of the IRMAA thresholds that will be announced late the following year.

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