Most people know that withdrawing from an IRA means paying income tax. Far fewer realize that those same withdrawals can also raise what you pay for Medicare. If you're approaching or already taking Required Minimum Distributions, this is a cost worth understanding before it catches you by surprise.
What IRMAA Actually Is
IRMAA stands for Income-Related Monthly Adjustment Amount. In plain terms: if your income crosses certain thresholds, Medicare charges you more for Part B and Part D coverage. The tricky part is that Medicare looks back two years at your tax return to determine this — so a big RMD (or a Roth conversion done without a plan) can trigger a higher premium two years later, often without you realizing why until the notice arrives.
Why RMDs Are a Common Trigger
Because RMDs are added directly to your taxable income each year, they can push your income across an IRMAA threshold you didn't even know was there — sometimes by just a small amount. Once you cross that line, the increased premium applies to the full year, not just the portion of income over the threshold. For couples with larger IRA balances, this can mean a meaningful, avoidable increase in monthly Medicare costs.
It Adds Up More Than You'd Expect
On their own, IRMAA surcharges might look like a modest monthly increase. But add them up over a 20-plus year retirement — and consider that they often increase as RMDs grow larger each year — and the lifetime cost can be substantial. This is exactly the kind of cost that's easy to overlook when you're only looking at this year's numbers instead of the full picture.
How Roth Conversion Planning Helps
Because Roth withdrawals in retirement don't count as taxable income, a well-timed Roth conversion strategy can reduce your taxable income in future years — which can help you stay under IRMAA thresholds you'd otherwise cross. The tradeoff is that a conversion itself creates taxable income in the year it happens, which is exactly why timing and sequencing the conversion matters so much.
This is where a coordinated plan makes the difference between a strategy that helps and one that accidentally creates the very problem you're trying to avoid.
Let's Look at Your Specific Situation
If you're already taking RMDs — or they're on the horizon — it's worth reviewing whether Roth conversion planning could help manage both your tax bill and your Medicare costs together. I work with Orange County clients on exactly this kind of coordinated planning.
Schedule a complimentary conversation, or join our next ROTH BluePrint webinar, where we walk through real examples of the cumulative RMD and IRMAA costs over a couple's lifetime.