If you’re nearing age 65 and starting to think seriously about Medicare and retirement planning, you’ve probably heard about the benefits of a Roth IRA or Roth conversions. But did you know that these financial strategies could affect how much you pay for Medicare?
Let’s walk through what you need to know—so you can make smart, informed decisions that support both your health and your financial future.
What Is a Roth IRA or Roth Conversion?
A Roth IRA is a retirement account where you contribute after-tax dollars. The big benefit? Qualified withdrawals in retirement are tax-free.
Many pre-retirees choose to do a Roth conversion, which means moving money from a traditional 401(k) or IRA into a Roth account. While this move can be great for your long-term tax planning, it may come with an unexpected side effect when it comes to your Medicare costs.
How Roth Conversions Affect Your Medicare Premiums
When you convert traditional retirement savings into a Roth IRA, that money is taxed as income in the year of the conversion. And this is where Medicare comes into play.
Here’s Why It Matters: Medicare uses your income from two years ago to determine what you pay for Medicare Part B and Part D. That means your 2025 Medicare premiums will be based on your 2023 income.
If you did a large Roth conversion in 2023, your reported income may spike—even if you’re already retired. This can lead to IRMAA (Income-Related Monthly Adjustment Amount) surcharges, which increase your monthly Medicare costs.
While some life events (like retirement or loss of income) allow you to appeal these surcharges, Roth conversions are typically not considered appealable events. That means you could be stuck with higher premiums for a full year or longer.
Smart Medicare Planning Tip:
Before you move forward with a Roth conversion, consult your financial advisor and your Medicare Coach. Understanding how your income affects Medicare premiums can save you from unpleasant surprises later.
Get Unbiased Medicare Guidance
The Medicare Coach is not associated with any insurance company, agent, or broker. This means we are completely independent and do not make commissions off recommended plans.
We offer a free online Medicare workshop that has helped over 150,000 people easily make their RIGHT Medicare decision.
To get help with your Medicare decision, you can register for my next free online Medicare workshop by going here: https://join.themedicarecoach.com/free-workshop
