A Roth conversion moves pre-tax dollars from a traditional IRA, SEP, SIMPLE or 401(k) into a Roth IRA. It creates taxable ordinary income in the conversion year and can raise Medicare premiums two years later. The appeal in retirement is tax-free Roth withdrawals later and no lifetime required payouts from the Roth account. That benefit must be weighed against the immediate income-tax bill and the higher health-care premiums a large conversion can trigger.
Official resources:
- Read the official guidance from Irs — Use this primary source to verify the official guidance.
- Read the official guidance from Ssa — Use this primary source to verify the official guidance.
Table of Contents
- What tax do you pay on a conversion?
- How does a conversion raise Medicare premiums?
- What changes after age 73?
- Why does timing matter so much?
What tax do you pay on a conversion?
The IRS treats converted pre-tax dollars as ordinary income in the year of conversion. After-tax basis is excluded on a pro-rata basis, as described in IRS Roth IRA rules. There is no income limit or dollar cap blocking conversions, unlike direct Roth contributions.
Under IRS rules, money held in the Roth IRA can later come out tax-free when the five-year rule plus age 59½, disability or first-home conditions are met. A partial conversion therefore adds to adjusted gross income without pushing basis dollars into tax twice. Larger conversions can move a retiree into a higher marginal bracket for that one year.
How does a conversion raise Medicare premiums?
Social Security sets Medicare income-related premiums from MAGI, meaning adjusted gross income plus tax-exempt interest, reported two years earlier. A 2024 conversion therefore sets 2026 premiums, according to Social Security's IRMAA calculation rules. For 2026, CMS set the standard Part B premium at $202.90 per month with a $283 deductible.
The first income tier starts above $109,000 single or $218,000 joint MAGI, as reported in the 2026 Part B premium announcement. Crossing a threshold works as a cliff for both Part B and Part D. Rose Insurance's summary of CMS tables puts the first 2026 tier at $284.10 per month for Part B plus $14.50 per month for Part D per person, detailed in the 2026 Medicare premium tables.
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- Estimate MAGI with and without the conversion before acting.
- Compare the result to the nearest single or joint threshold.
- Remember that the premium change arrives two years later and applies per person.
What changes after age 73?
IRS distribution rules say a conversion cannot include a required minimum distribution. Account owners age 73 and older must first satisfy all aggregated IRA required distributions for the year. Only the remaining balance can be converted.
Take the full required amount as cash or transfer it to a taxable account, then convert a separate amount. Roth IRAs themselves have no lifetime required distributions. Dollars converted earlier therefore reduce the traditional balance that creates future required withdrawals.
Why does timing matter so much?
Tax law ended recharacterization for conversions made on or after Jan. 1, 2018. A conversion that creates more tax or Medicare cost than expected cannot be undone.
A voluntary conversion also does not qualify for premium relief through Form SSA-44. Social Security allows that appeal only for qualifying life-changing events such as retirement or spousal death. Model the conversion on a draft return, check the two-year Medicare effect, then convert a smaller amount across several low-income years if needed.
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