The "Gotcha Tax": Coordinating Medicare, IRMAA and Roth Conversions for Clients 63+

Every fourth quarter, retired clients face several decisions at the same time. Medicare Open Enrollment runs from October 15 to December 7, and December 31 is the deadline to complete a Roth conversion for the year. Most advisors deal with these one at a time. Financial planner Drew Boyer argues they belong in the same client meeting.

The problem is IRMAA, the Income-Related Monthly Adjustment Amount. It's an income-based surcharge on Medicare Part B and Part D premiums, set using the client's modified adjusted gross income (MAGI) from two years earlier. The surcharge brackets are cliffs: going $1 over a threshold triggers the full surcharge. So a Roth conversion that looks right on a tax-bracket chart in December can raise a client's Medicare premiums two years later. Clients rarely connect the two, and many advisors don't model it.

In this session, Drew will show how to run Open Enrollment and Roth conversion planning together so the tax savings from a conversion aren't lost to Medicare surcharges.

You'll learn how to:

• Explain IRMAA, the two-year lookback and how the surcharge brackets work
• Spot the income that pushes clients into IRMAA: Roth conversions, IRA withdrawals and RMDs, capital gains, property sales and pensions
• Use ages 60–63 as the main Roth conversion window, and size conversions to stay under the next IRMAA bracket
• Decide when it's worth accepting a lower IRMAA bracket to cut future RMDs
• Weigh savings from switching Part D plans (the out-of-pocket cap rises to $2,400 in 2027) against surcharges a conversion could trigger
• Use Form SSA-44 to appeal IRMAA after a life-changing event such as retirement, divorce or the death of a spouse