The question isn't whether to convert. For most retirees with large traditional IRAs and a gap between retirement and RMD age, the case for some level of conversion is strong. The question is how much to convert in a given year — and the answer requires balancing at least four variables simultaneously: your current tax bracket, your IRMAA threshold exposure, the Social Security taxation hump, and the source of funds you'll use to pay the tax bill. Get the sizing right and the conversion is efficient. Get it wrong — converting too much, crossing an IRMAA cliff, or triggering the Social Security
Before you can determine a conversion amount, you need a clear picture of your income for the year. This means totaling all sources: Social Security benefits (the taxable portion), pension income, Required Minimum Distributions if you're already taking them, interest and dividends from taxable accounts, capital gains, and any other income. The number that matters is your Modified Adjusted Gross Income — your AGI with a few additions. MAGI is the figure used to determine both tax bracket placement and IRMAA surcharge exposure. Once you have a projected MAGI for the year, you can calculate your 'conversion budget' — the amount you can convert before hitting the ceiling of your target bracket or the floor of the next IRMAA tier.
For anyone age 63 or older, IRMAA is the most dangerous threshold in the conversion calculation. Because Medicare uses a two-year lookback, a conversion at 63 affects premiums at 65. At 65, it affects premiums at The surcharge is not graduated — it's a cliff. Crossing a tier boundary by even a dollar triggers the full surcharge for that tier. 2026 IRMAA Tier Income Threshold **Additional Annual (Joint) (2024 Lookback) Cost Per Couple** Tier 1 Over $218,000 ~$2,297 Tier 2 Over $274,000 ~$5,770 Tier 3 Over $342,000 ~$9,240 Tier 4 Over $410,000 ~$12,710 Source: CMS 2026 Medicare Part B and Part D premium schedules. Figures are annual totals based on monthly surcharges per person for a couple. A $100,000 conversion that pushes a couple from $217,000 to $317,000 in MAGI doesn't just create additional federal income tax. It also triggers Tier 2 IRMAA surcharges — adding nearly $5,770 in Medicare costs in a year when those surcharges actually apply (two years later). That stealth cost effectively raises the true tax rate on the conversion by several percentage points. Practical implication: cap conversion amounts to stay meaningfully below the next IRMAA tier, not just the next tax bracket.
This is one of the most overlooked variables in conversion planning, and it has a direct impact on the math. When you convert $100,000 to Roth, you owe income tax on that $100,000. There are two ways to pay it: from the conversion itself, or from a taxable account. If you withhold taxes from the IRA distribution itself, you only move the after-tax amount into the Roth. On a $100,000 conversion with a 22% tax rate, you'd only deposit $78,000 into the Roth. The $22,000 never got there. If you pay the $22,000 from a taxable brokerage account or savings, the full $100,000 enters the Roth and begins compounding tax-free. You also eliminate a future tax liability on those outside funds. The conversion is significantly more efficient. This is why the practical guidance from most CPAs is: don't convert more than you can afford to pay the taxes on from outside the IRA. The conversion math works best when the tax cost doesn't reduce the amount growing tax-free.
Most conversion strategies follow one of three target approaches: Fill to the top of the 12% bracket. This is the conservative approach — maximizing conversion at the lowest available rate while leaving room below the 22% tier. Works well in early retirement when income is modest. Fill to the top of the 22% bracket. The most common target for middle-income retirees. Captures a meaningful conversion amount at historically low rates before RMDs compress the opportunity. Fill to the IRMAA Tier 1 floor, or stop just below it. For retirees approaching 6365 or already in their Medicare years, this is often the binding constraint — not the tax bracket itself. A specific year's optimal amount sits at the intersection of all three: high enough to meaningfully reduce the future RMD burden, low enough to avoid crossing an IRMAA cliff, and within the bracket you've targeted. This is precisely the calculation a CPA with your full income picture is positioned to run.
An extra dollar of Roth conversion income doesn't just push you into|Security income can be subject to federal tax, and the phase-in|IRMAA surcharges land two years after the income event that triggered
CMS 2026 Medicare Part B and Part D premium schedules. Figures