The Early-Retirement Roth Conversion Window — and the IRMAA Trap

The years between your last paycheck and your first RMD are often the lowest-tax years of your life. Here's how to use them strategically.

Why a window exists at all

Most people spend their careers accumulating money in pre-tax accounts (traditional 401(k)s and IRAs) and then spend retirement drawing it down. The problem: every dollar you withdraw in retirement is ordinary income. Social Security is partially taxable. RMDs kick in at age 73 and can be large. By your mid-70s, taxable income can be surprisingly high — higher than many working years.

But the gap between retirement and age 73 (or whenever SS + RMDs combine to fill your bracket) is often a low-income pocket. If you retire at 62 and delay Social Security to 70, you have eight years where your only "income" is what you pull from savings. That's your window.

What the 2026 brackets make possible

For 2026, the standard deduction is $32,200 for married couples filing jointly ($16,100 for single filers). That means a couple can have $32,200 in AGI and pay no federal income tax at all.

The bracket thresholds for taxable income in 2026 (after the standard deduction):

• 12% bracket: taxable income up to $100,800 (MFJ) / $50,400 (single) — equivalent to about $133,000 AGI (MFJ) or $66,500 AGI (single)
• 22% bracket: taxable income $100,800–$211,400 (MFJ) / $50,400–$105,700 (single)
• 24% bracket: starts above $211,400 taxable (MFJ) / $105,700 (single)

Source: IRS Rev. Proc. 2025-67, 2026 inflation adjustments.

For a couple spending $90,000 from their IRA, their AGI is $90,000. The top of the 12% bracket sits at roughly $133,000 AGI. That means they could convert an additional $43,000 to Roth and still stay entirely within the 12% bracket — paying just 12 cents on the dollar to permanently escape future ordinary-income tax on that money.

Or they might decide to fill the 22% bracket — up to about $243,600 AGI — and convert up to $153,000 in total, accepting the 22% rate today in exchange for eliminating a potentially higher rate on future RMDs.

The IRMAA trap: Medicare's hidden tax on conversions

This is where most retirement-income plans go wrong.

IRMAA (Income-Related Monthly Adjustment Amount) is Medicare's income surcharge. If your MAGI exceeds certain thresholds, you pay more for Parts B and D. For 2026, the first IRMAA tier starts at:

• $109,000 (single filers)
• $218,000 (married filing jointly)

Above those levels, the Part B premium jumps from $202.90/month to $284.10/month per person — an extra $81.20/month, or roughly $975/year per person. Higher tiers add more. The top IRMAA tier (above $500,000 single / $750,000 MFJ) totals $689.90/month per person.¹

The two-year lookback: IRMAA is based on your MAGI from two years prior. Your 2026 Medicare premiums are based on your 2024 tax return. Conversions done in 2026 won't hit Medicare premiums until 2028. That's useful timing information — but it also means mistakes made today are costly two years from now.

Worked example: the Hendersons

Jim (62) and Carol (60) just retired. They have $1.9M in traditional IRAs, $80K in a Roth, and $120K in a taxable brokerage account. Planned spending: $92,000/year. Jim will claim Social Security at 70 ($3,700/mo); Carol at 67 ($1,850/mo).

Without a conversion strategy:

• Ages 62–69: draw $92K/yr from IRA. IRA balance stays roughly flat (portfolio growth roughly offsets draws). At 73, IRA is ~$1.7M.
• At 73: Jim's RMD on $1.7M is approximately $64,000 (using Uniform Lifetime Table divisor of 26.5).
• SS combined $66,600/yr + RMD $64,000 = $130,600 MAGI → comfortably above the $218,000 MFJ IRMAA threshold? Actually not in this case — but still, a large RMD pile.
• Tax on $130,600 AGI (less $32,200 deduction = $98,400 taxable) → most taxed at 22%.

With a conversion strategy:

• Ages 62–69: draw $92K from IRA plus convert $40,000/yr to Roth. Total MAGI = $132,000 — within the 22% bracket, and just below the $218K IRMAA threshold with room to spare.
• 8 years × $40K = $320,000 shifted to Roth. IRA balance at 73 is roughly $1.38M.
• At 73: RMD on $1.38M ≈ $52,000. Combined SS + RMD = $118,600 → now below the IRMAA threshold.
• Result: lower Medicare premiums for life, and a larger Roth balance available tax-free for large future expenses (long-term care, home, heirs).

Additional considerations before converting

ACA premium subsidies (pre-65)

If you retire before Medicare eligibility and buy insurance on the ACA marketplace, Roth conversions count toward your MAGI — and can reduce or eliminate your premium tax credit. The subsidy cliff is income-based and worth modeling carefully if you're 60–64.

State taxes

Thirteen states tax Social Security. Some tax IRA withdrawals; some don't. A state with a generous retirement-income exclusion may make conversions more expensive than they appear at the federal level alone.

Roth five-year rule

Roth conversions have a five-year clock for penalty-free access to the converted principal (not earnings) if you're under 59½. If you're 62+, this is generally not a concern — but worth confirming with a planner if you have unusual circumstances.

When to stop converting

• When your projected future tax bracket (from RMDs + SS) is lower than your current conversion rate — converting doesn't help.
• When conversions would cross an IRMAA tier and the premium cost exceeds the tax benefit.
• When you've converted enough that RMDs will be manageable and fit inside your preferred bracket.

The planning problem

Getting this right requires projecting income across multiple years simultaneously: current bracket, future RMD trajectory (which depends on portfolio growth), SS claiming timing, IRMAA lookback, state taxes, and spending trajectory. There's no clean formula — it's a multi-variable optimization across 20+ years of future income.

That's the core of what a retirement-income specialist does. Not "invest this money" but "sequence these tax events to minimize lifetime tax and IRMAA exposure."

Sources

1. CMS — 2026 Medicare Parts A & B Premiums and Deductibles. Part B base premium $202.90; IRMAA tiers through $689.90/mo.
2. IRS — 2026 tax inflation adjustments. Standard deduction $32,200 MFJ / $16,100 single; bracket thresholds per Rev. Proc. 2025-67.
3. Kiplinger — 2026 IRMAA Brackets and Surcharges. Tier 1 threshold $109,000 single / $218,000 MFJ; full surcharge schedule.

Verified against 2026 IRS and CMS publications. Tax laws change — confirm current-year figures before acting.