Are Roth Conversions Included in MAGI? (Myths, Truths, and IRMAA Risks in Retirement)

Key Takeaways

• Roth conversions increase your AGI and are included in most MAGI calculations—including the one Medicare uses for IRMAA surcharges—but are specifically excluded from the MAGI formula that determines Roth IRA contribution eligibility.

• A large Roth conversion can trigger one or two years of higher Medicare Part B and Part D premiums through IRMAA, since Medicare looks at your income from two years prior.

• Strategic conversions in your 60s, before required minimum distributions kick in at age 73 and before you claim Social Security, can dramatically reduce your future taxable income and stabilize healthcare costs for decades.

• The short-term IRMAA “hit” from conversions is often worth it when you compare it to years of elevated premiums and taxes caused by large RMDs later in retirement.

• Revolutionary Wealth specializes in building IRMAA-aware Roth conversion schedules that model the short-term premium increase against long-term tax and healthcare savings for retirees.

AGI vs MAGI: What Really Happens When You Do a Roth Conversion in Retirement?

I’m already retired. I live off Social Security, a small pension, and withdrawals from my traditional IRA. When I started thinking about doing a Roth conversion in 2025, my first question was simple: will this spike my income and mess with my Medicare premiums?

The answer requires understanding two related but distinct numbers that the IRS cares deeply about.

Adjusted Gross Income (AGI)is the figure on line 11 of your Form 1040. It includes wages, interest, dividends, pension payments, the taxable portion of your Social Security benefits, and—critically—the taxable amount of any IRA distributions, including Roth conversions. When you convert money from a traditional IRA to a Roth IRA, that converted amount is treated as a taxable distribution and flows directly into your AGI.

Modified Adjusted Gross Income (MAGI)starts with your AGI and then adds or subtracts specific items depending on what the calculation is being used for. Here’s where the confusion begins: there is no single MAGI. The IRS uses different MAGI formulas for Roth contribution eligibility, net investment income tax, ACA premium tax credits, and Medicare IRMAA. Each formula can treat certain income differently. To calculate MAGI, you start with your AGI and then make the specific adjustments required for the tax benefit, credit, or surcharge you are determining eligibility for, such as the American Opportunity Credit, Net Investment Income Tax, Medicare IRMAA surcharge, or Roth IRA contributions.

Let me show you a simple example for the 2025 tax year. Suppose you have $60,000 of ordinary income from your pension plus the taxable portion of your Social Security benefits. You decide to do a $40,000 Roth conversion. Your AGI jumps to $100,000. Most MAGI calculations start from that $100,000 figure.

From a retiree’s viewpoint, “Roth conversions count as income” for the major calculations you actually care about: your Medicare premiums, how much of your Social Security gets taxed, and whether you owe the net investment income tax. The conversion shows up on your tax return, raises your AGI, and usually raises your MAGI too.

Myth vs. Truth: Are Roth Conversions Included in MAGI?

If you’ve spent any time researching Roth conversions online, you’ve probably run into conflicting statements. One article says conversions don’t affect MAGI. Another says they raise your Medicare costs. Tax software help screens add to the confusion. Let me cut through the noise.

Myth: “Roth conversions never count in MAGI.”Truth: They do count in most MAGI calculations. When Medicare calculates your IRMAA, it uses a MAGI measure that equals your AGI plus tax-exempt interest—and your Roth conversion amount is fully included in that AGI. The same applies to the net investment income tax, ACA premium tax credits, and the formula that determines how much of your Social Security benefits are taxable. The only exception is the MAGI formula used to determine whether you can contribute to a Roth IRA. In that specific calculation, conversion income is backed out.

When it comes to Roth IRA contributions, there is a limit on how much you can contribute each year, and your ability to qualify for a direct contribution depends on your MAGI and filing status. For example, if you are married filing jointly, the income phaseout range for Roth IRA contributions is higher than for single filers, affecting the annual contribution limit and who can qualify to contribute directly.

Myth: “If I convert to Roth, my income is tax-free now.”Truth: The year you convert, the converted amount is fully taxable and raises your AGI and MAGI. You pay taxes on the conversion in the current year. The tax-free benefit comes later—when you make qualified withdrawals from the Roth account in future years. You defer taxes on the growth, not on the conversion itself.

Myth: “Medicare ignores Roth conversions.”Truth: Medicare’s IRMAA rules look at your MAGI from two years prior. If you did a $60,000 Roth conversion in 2023, that conversion increases your 2023 AGI, which feeds into the MAGI used to set your 2025 Medicare premiums. Medicare does not ignore conversions—it counts them fully.

Myth: “If my MAGI is too high for Roth contributions, I can’t do a Roth conversion.”Truth: There are no income limits on Roth conversions. The Roth IRA income limits only apply to direct contributions. You can have a MAGI of $500,000 and still convert as much as you want from a traditional IRA to a Roth. The only constraint is how much tax you’re willing to pay.

So yes, Roth conversions are included in MAGI for Medicare IRMAA, but no, they are not included in the MAGI formula that limits Roth contributions. This single distinction is the source of most of the confusion.

Special Case: MAGI for Roth IRA Contribution Eligibility (The One Time Conversions Are Excluded)

The main source of confusion about Roth conversions and MAGI comes from a quirk in the tax code. When the IRS tests whether you can contribute new money to a Roth IRA in a given year, it uses a special MAGI formula that treats conversions differently.

Here’s how the 2026 Roth contribution MAGI calculation works at a high level. You start with your AGI. Then you add back certain deductions like traditional IRA contributions, the foreign earned income exclusion, and student loan interest deductions. Finally—and this is the key part—you subtract the taxable amounts from Roth conversions and rollovers from qualified retirement plans to Roth accounts.

Consider a married couple filing jointly in 2026. Their AGI is $260,000, which includes a $60,000 Roth conversion they completed that year. Based on AGI alone, they appear to be well above the $230,000 to $240,000 phase-out range for Roth IRA contributions. But for contribution eligibility, the $60,000 conversion is backed out of the MAGI calculation. Their “Roth contribution MAGI” is treated as $200,000, which allows them to make full Roth IRA contributions for 2026.

For 2026, the income limits for Roth IRA contributions are $168,000 for singles and $252,000 for joint filers.

If you contribute above these limits, you will have excess contributions in your Roth IRA. Excess contributions can result in a 6% penalty for each year the excess remains in the account. To avoid this penalty, you must withdraw the excess contributions and any earnings before the tax filing deadline, or apply the excess to the next year's contribution limit.

This exception only helps determine if you can add new money to a Roth IRA. It does not help you with Medicare IRMAA, ACA premium tax credits, or the net investment income tax. For those calculations, your conversion income counts fully.

Revolutionary Wealth helps retirees coordinate both Roth conversions and ongoing Roth contributions, especially during the early retirement years between ages 60 and 67—before Medicare enrollment and before full Social Security benefits begin. This window often represents the best opportunity to execute conversions while still making annual contributions to build your Roth account.

Net Investment Income Tax Implications of Roth Conversions

If you’re planning a Roth IRA conversion in retirement, there’s another tax you need to keep on your radar: the Net Investment Income Tax (NIIT). This 3.8% tax can sneak up on retirees who convert large amounts from a traditional IRA to a Roth IRA, especially if you’re not watching your modified adjusted gross income (MAGI) closely.

Here’s how it works: The NIIT applies to net investment income—think dividends, capital gains, rental income, and interest—if your MAGI exceeds $200,000 for single filers or $250,000 for married couples filing jointly. When you do a Roth conversion, the amount you convert is added to your taxable income for the year, which can easily push your MAGI above these thresholds and make more of your investment income subject to the NIIT.

For example, let’s say you’re a married couple filing jointly with $180,000 in income from pensions, Social Security, and investments. You decide to convert $100,000 from your traditional IRA to a Roth IRA this year. That conversion bumps your MAGI to $280,000—well above the NIIT threshold. As a result, not only do you pay regular income tax on the conversion, but you may also owe the 3.8% NIIT on your net investment income for that tax year.

The good news? With careful planning, you can minimize the impact of the NIIT on your retirement savings. One common strategy is to spread your Roth conversions over several years, keeping each year’s MAGI below the NIIT threshold. You might also consider making qualified charitable distributions or using tax-loss harvesting in your taxable account to offset gains and reduce your overall taxable income. Remember, the NIIT does not apply to tax-free income, such as qualified withdrawals from a Roth IRA or interest from municipal bonds.

It’s also important to note that the NIIT can affect your ability to contribute to a Roth IRA. If your MAGI is too high—above $153,000 for single filers or $228,000 for married couples filing jointly in 2026—your eligibility to make direct Roth IRA contributions begins to phase out and is eliminated entirely at higher income levels. While you can still consider a backdoor Roth IRA conversion, it’s crucial to understand how your income, conversions, and investment earnings interact under current tax laws.

Given the complexity of these rules and the potential for higher taxes, it’s wise to work with a tax professional or financial advisor who understands the interplay between Roth conversions, the NIIT, and your overall retirement plan. They can help you calculate your MAGI, project the tax impact of different conversion amounts, and develop a strategy that maximizes your tax-free retirement savings while minimizing unnecessary taxes.

How Roth Conversions Impact Medicare IRMAA (The Short-Term Pain)

IRMAA stands for Income-Related Monthly Adjustment Amount. It’s a surcharge that higher-income retirees pay on top of their standard Medicare Part B and Part D premiums. For 2025, the surcharge kicks in when your MAGI exceeds roughly $106,000 for single filers or $212,000 for married couples filing jointly. Cross into higher brackets, and you can pay hundreds of extra dollars per month.

The IRMAA formula uses a straightforward definition of MAGI: your AGI plus tax-exempt interest from municipal bonds. Unlike the Roth contribution formula, there is no subtraction for conversion income. If you did a Roth conversion in 2023, that full amount is part of the MAGI that determines your 2025 Medicare premiums.

Let me show you a specific example. A single retiree in 2023 has $85,000 of AGI from pension payments and Social Security. She decides to do a $60,000 Roth conversion that same year. Her MAGI for IRMAA purposes becomes $145,000. That figure pushes her from the base Medicare premium bracket into a higher IRMAA tier. For 2025, she could face an additional $200 to $400 per month in combined Part B and Part D premiums—that’s $2,400 to $4,800 for the year.

A few key points for retirees to understand:

A single large conversion year can cause only one or two years of higher premiums. IRMAA looks back two years, so a conversion in 2023 affects 2025 premiums, and then your income returns to normal in subsequent years if you don’t do more conversions.

IRMAA can also be triggered repeatedly if you do big conversions every year without a plan. Doing $80,000 conversions for five straight years means five years of elevated Medicare premiums.

If a conversion year coincides with a major life event—like retiring, losing a spouse, or experiencing a significant income drop—you may be able to appeal your IRMAA determination using Form SSA-44.

Revolutionary Wealth regularly builds IRMAA-aware Roth conversion schedules. Sometimes the strategy is to stay just under key MAGI thresholds when the long-term benefit of smaller conversions makes sense. Other times, the math supports consciously accepting a higher bracket for a year when the long-term payoff is compelling. The point is to make an intentional decision, not a reactive one.

IRMAA is not a reason to avoid conversions entirely. It’s a factor to time and size conversions carefully.

Why Paying Some Extra IRMAA Now Can Save on Taxes and Health Costs Later (The Long-Term Gain)

When I first saw the IRMAA brackets, I wanted to avoid them at all costs. An extra $300 per month in Medicare premiums felt painful. But my planner at Revolutionary Wealth showed me how one higher-premium year could save me and my spouse tens of thousands of dollars in our 70s and 80s.

Here’s the long-term dynamic that changes the calculation.

At age 73 under current law, you must start taking required minimum distributions from your traditional IRA. If you’ve accumulated a large balance—say, $1 million or more—those RMDs can be substantial. A $1.5 million IRA at age 73 might require annual distributions of $60,000 or more, and those distributions grow each year as you age. That forced income pushes your MAGI higher, potentially triggering IRMAA surcharges year after year. It also makes more of your Social Security benefits taxable and can push you into a higher tax bracket.

Converting chunks of your traditional IRA balance into a Roth in your early to mid-60s shrinks the account that generates RMDs. Smaller RMDs mean lower future MAGI, which often means lower Medicare premiums for the rest of your life. For those in their 60s, making additional contributions—such as catch-up contributions for individuals aged 50 and older—can further maximize retirement savings and provide more flexibility in your overall strategy.

Consider this scenario. A couple retires at 63 in 2026 with $1.2 million in traditional IRAs, modest pensions, and plans to delay Social Security until age 70. They work with Revolutionary Wealth to execute $70,000 per year in Roth conversions from ages 63 to 67. Those conversions bump them into an IRMAA bracket for two or three of those years.

But at age 73, their RMDs are dramatically lower. Their MAGI stays under future IRMAA thresholds. They draw from their Roth for tax-free spending and healthcare costs, and they no longer face the annual grind of high premiums caused by involuntary RMD income.

When considering account choices and strategies, it’s important to evaluate the different investment products available within Roth IRAs and other retirement accounts. Understanding your investment options can help you maximize the benefits of your conversions and align your portfolio with your long-term goals.

The health insurance angle extends beyond Medicare. For pre-Medicare retirees on ACA marketplace plans—say, ages 60 to 64—large Roth conversions can reduce or eliminate premium tax credits in that specific year. Your Roth conversion increases your MAGI, and ACA subsidies phase out as income rises.

However, once you’re on Medicare, the dynamic shifts. Larger traditional IRA balances and the RMDs they generate can cause ongoing IRMAA surcharges year after year, potentially for 20 or more years of retirement. The tradeoff is often a single high-premium year in your 60s to avoid decades of high-premium years later.

Investing is a key component of retirement planning, and making informed decisions about conversions, contributions, and investment products can significantly impact your long-term financial security.

Revolutionary Wealth uses detailed software to model:

• Tax brackets now versus projected brackets after 2030 when current tax law provisions are scheduled to sunset

• Lifetime IRMAA costs across scenarios with and without conversions

• The breakeven point where an IRMAA hit today produces meaningful lifetime savings

This isn’t about avoiding all costs. It’s about making informed trade-offs with your eyes open.

Coordinating Roth Conversions with Social Security, RMDs, and Estate Goals

Roth conversion decisions in retirement don’t stand alone. They interact with when you claim Social Security, when RMDs kick in, and what you plan to leave to heirs. Getting the timing right can multiply the benefits.

Timing with Social Security

Conversions before claiming Social Security often produce the lowest MAGI because you’re not yet adding taxable Social Security benefits to the mix. Once you start receiving benefits, each additional dollar of income from conversions can make more of your Social Security taxable. Up to 85% of your benefits can become taxable income when your combined income crosses certain thresholds. This compounds your MAGI increases and accelerates the tax hit.

For married couples, one common strategy is to delay one spouse’s benefit to age 70 while the other claims earlier. During the delay period, you have more room to execute conversions without triggering the full Social Security taxation cascade.

Interaction with RMDs

Traditional IRAs require minimum distributions starting at age 73 under current law. Once RMDs start, you must take them before you can convert additional amounts from that same account. This creates a “use it or lose it” window between retirement and age 72. Doing conversions during this period can dramatically reduce the size of future RMDs, cutting both tax and IRMAA exposure for years.

If you wait until RMDs start, you’re playing catch-up. You can still convert beyond your RMD amount, but the math gets harder as the account continues to grow and your required distributions increase.

Estate and Legacy Considerations

Under the SECURE Act’s 10-year rule, most non-spouse heirs must empty inherited IRAs within 10 years of your death. If your children or grandchildren inherit large traditional IRA balances, they could be forced into much higher tax brackets during their peak earning years. They might also face their own IRMAA surcharges if those distributions push their MAGI over Medicare thresholds.

Leaving more assets in Roth form gives heirs up to 10 years of tax-free withdrawals instead. A Roth inheritance doesn’t increase their AGI, doesn’t affect their IRMAA, and provides maximum flexibility for managing their own retirement savings and income.

Revolutionary Wealth can coordinate Roth conversion levels with the year you plan to start Social Security, map conversions across the gap years between retirement and RMD age, and integrate beneficiary ages and projected incomes into your conversion strategy. The goal is to make sure your children or grandchildren don’t face surprise tax spikes because of decisions you made—or didn’t make—decades earlier.

Impact on College Age Children and Financial Aid

If you have college age children, be aware that income from Roth conversions is included in the calculation of your Modified Adjusted Gross Income (MAGI) for FAFSA purposes. This can significantly impact your child’s eligibility for need-based financial aid. Timing Roth conversions before your child enters college or after they graduate can help avoid inflating your income during the years that matter most for financial aid assessments.

Why Work with Revolutionary Wealth for Roth Conversion and MAGI Planning?

Roth conversions and MAGI calculations aren’t just lines on tax forms. They directly affect your lifestyle, healthcare choices, and the legacy you leave over the next 20 to 30 years of retirement. Getting these decisions wrong can cost tens of thousands of dollars in unnecessary taxes and Medicare premiums.

Revolutionary Wealth](https://www.revolutionary-wealth.com/) brings specific expertise to this area:

Year-by-year tax projection modelingthat tracks AGI and each major version of MAGI separately—including the formulas for IRMAA, ACA premium tax credits, net investment income tax, and Roth contribution eligibility. This isn’t about applying a single rule. It’s about understanding how each calculation works and optimizing across all of them.

IRMAA-aware conversion laddersthat intentionally manage which brackets you hit in each year rather than leaving it to chance. Some years, staying just under a threshold makes sense. Other years, a larger conversion that crosses a bracket delivers better long-term results. The key is making these decisions deliberately.

Coordination with Social Security claiming, pension elections, and RMD timingto sequence your income sources in the most tax-efficient order. Retirement income planning isn’t just about investment returns. It’s about which accounts you tap, when, and in what amounts.

Here’s how the planning process might work for a new retiree client:

First, Revolutionary Wealth gathers your current balances across traditional IRAs, Roth accounts, 401(k)s, taxable accounts, and HSAs. They also look at pension options, Social Security estimates, and expected retirement spending.

Next, they project RMDs and IRMAA brackets under a “no conversion” baseline, then model several alternative strategies—small annual conversions, front-loaded conversions, or bracket-filling approaches that maximize conversions within specific tax rates.

Finally, they incorporate realistic healthcare cost projections, including Medigap or Medicare Advantage premiums, Part D drug costs, long-term care probabilities, and potential surviving spouse scenarios where tax brackets and IRMAA thresholds change.

Revolutionary Wealth’s approach is conservative and evidence-based. They use current IRS IRMAA tables and tax brackets, plus reasonable assumptions about scheduled 2026 tax law changes. They test multiple what-if scenarios, including bear markets, longer-than-expected retirements, and changing spending needs. Revolutionary Wealth relies ondata from third party providers and party providers for investment and financial analysis, but always emphasizes the importance of consulting professional advisors to ensure decisions are tailored to your unique situation.

If you’re considering Roth conversions, schedule a conversion assessment for 2025 or 2026. The earlier you start—particularly in your early 60s—the more flexibility you have to manage AGI, MAGI, IRMAA, and long-term healthcare costs. Waiting until RMDs start at 73 means you’ve already lost your best conversion window.

FAQ: Roth Conversions, MAGI, and IRMAA in Retirement

If I’m already paying IRMAA, is it too late to start Roth conversions?

It’s rarely too late. Even if you’re already in an IRMAA surcharge bracket, Roth conversions can still shrink your future RMDs and reduce the years you spend in elevated premium tiers. The optimal strategy for someone already paying IRMAA may involve smaller, bracket-aware conversions rather than large lump-sum conversions. Revolutionary Wealth can model whether additional conversions make sense given your current situation, your projected longevity, and your beneficiary goals.

Can I avoid IRMAA altogether by converting everything to Roth at once?

Converting your entire traditional IRA in a single year would almost certainly push you into the highest tax bracket and the top IRMAA tier. You’d pay maximum federal and state income taxes on the conversion, plus the maximum Medicare surcharges for the following one to two years. A staged, multi-year conversion plan is almost always more efficient and less financially painful. The goal is to fill up lower tax brackets strategically over several years, not to trigger the worst possible outcome in one calendar year.

Do Roth conversions affect the taxability of my Social Security benefits?

Yes. Roth conversions increase your provisional income, which is the formula used to determine how much of your Social Security benefits are subject to federal income tax. Depending on your total income, up to 85% of your benefits can become taxable. This is why timing conversions before you claim Social Security—or carefully sizing conversions after benefits begin—is so important. Revolutionary Wealth factors Social Security taxation into every conversion projection they build.

How do Roth conversions impact my Affordable Care Act health insurance credits before age 65?

For retirees who aren’t yet on Medicare and rely on ACA marketplace plans, Roth conversions increase the MAGI used to calculate premium tax credits. A large conversion can wipe out your subsidies for that year, making your health insurance dramatically more expensive. Revolutionary Wealth coordinates conversion amounts with ACA planning for clients in the pre-Medicare window, often recommending smaller conversions during ACA years and larger conversions once Medicare coverage begins.

What records do I need to keep when I do Roth conversions each year?

Keep copies of Form 1099-R, which reports your IRA distributions including conversions. Keep Form 5498, which shows contributions and conversions reported by your custodian. Retain year-end Roth IRA statements and notes documenting the date and amount of each conversion. These records matter for tax filing, for tracking the five-year holding period on converted funds, and for estate planning purposes. IRS Publication 590-A and 590-B provide guidance on record-keeping requirements, and Revolutionary Wealth can help you stay organized across multiple conversion years.

What happens if I contribute too much to my Roth IRA?

If you contribute more than the annual limit to your Roth IRA, the IRS imposes a 6% penalty on the excess contribution for each year it remains in the account. To avoid this penalty, you must withdraw the excess contribution and any earnings on it before your tax filing deadline. If you do not withdraw the excess in time, the penalty will continue to apply each year until the excess is removed or applied to a future year's contribution limit.

Disclosures:

This blog contains general information that may not be suitable for everyone. The information contained herein should not be construed as personalized investment advice. There is no guarantee that the views and opinions expressed in this blog will come to pass. Investing in the stock market involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security. Revolutionary Wealth LLC does not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstance. For more educational materials, visit ourResource Center.Past performance is no guarantee of future results.

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Maximizing your Social Security Benefits assumes foreknowledge of your date of death. If as an example you wait to claim a higher monthly benefit amount but predecease your average life expectancy, it would have been better to claim your benefits at an earlier age with reduced benefits.

Converting an employer plan account or Traditional IRA to a Roth IRA is a taxable event. Increased taxable income from the Roth IRA conversion may have several consequences including but not limited to, a need for additional tax withholding or estimated tax payments, the loss of certain tax deductions and credits, and higher taxes on Social Security benefits and higher Medicare premiums. Be sure to consult with a qualified tax advisor before making any decisions regarding your IRA.

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