Medicare, Taxes, and Retirement

Medicare Part B and Part D premiums are not fixed. They're income-tested — meaning higher-income retirees pay significantly more. The Income-Related Monthly Adjustment Amount (IRMAA) adds surcharges to standard premiums based on your Modified Adjusted Gross Income (MAGI) from two years prior.

In 2026, the standard Part B premium is approximately $185/month. But a couple with MAGI above $212,000 pays $259/month each — and at higher income levels, the surcharge can push combined premiums above $800/month for the couple. Over a 20-year retirement, that's a significant additional cost.

The two-year lookback means that income decisions made at 63 affect Medicare premiums at 65. A large Roth conversion, a business sale, or a required minimum distribution in the wrong year can trigger IRMAA surcharges that persist for years. Planning ahead — ideally starting at 62 or 63 — can avoid or minimize these surcharges.

For many retirees, the years between retirement and age 73 — when Required Minimum Distributions begin — represent a valuable window for Roth conversions. During this period, income may be lower than it was during peak earning years, and lower than it will be once RMDs kick in.

A strategic Roth conversion during this window can reduce the size of future RMDs, lower lifetime taxes, reduce IRMAA exposure, and leave a more tax-efficient inheritance for heirs. The key is converting enough to fill lower tax brackets without pushing income into higher brackets or triggering IRMAA surcharges.

This is not a one-size-fits-all strategy. The optimal conversion amount depends on current and projected future tax rates, the size of your traditional IRA balances, your Social Security income, and your estate planning goals. But for many couples, the Roth conversion window is one of the most valuable planning opportunities in retirement.

Medicare enrollment has strict timing rules — and missing them can result in permanent premium penalties. Most people must enroll in Medicare Part B within a specific window around their 65th birthday. If you delay enrollment without qualifying coverage (such as employer-sponsored insurance through active employment), you'll pay a 10% penalty for each 12-month period you were eligible but not enrolled — for life.

Part D (prescription drug coverage) has a similar late enrollment penalty. And choosing the wrong Part D plan — or failing to review it annually during open enrollment — can mean paying significantly more for medications than necessary.

COBRA coverage does not count as qualifying coverage for Medicare purposes. Retirees who leave employer coverage before 65 and elect COBRA should be particularly careful about their Medicare enrollment timing.

Required Minimum Distributions from traditional IRAs and 401(k)s begin at age 73 under current law. For retirees who have spent decades accumulating in tax-deferred accounts, RMDs can be substantial — and they're fully taxable as ordinary income.

Large RMDs can push retirees into higher tax brackets, trigger IRMAA surcharges, cause more Social Security income to become taxable, and reduce eligibility for certain deductions. For couples with significant traditional IRA balances, the RMD tax burden can be one of the largest expenses in retirement.

Strategies to manage RMD exposure include Roth conversions during the pre-RMD window, Qualified Charitable Distributions (QCDs) for charitably inclined retirees, and careful coordination of other income sources to manage bracket exposure. The earlier you start planning, the more options you have.

Medicare planning, tax planning, and retirement income planning are not separate disciplines — they're deeply interconnected. A Roth conversion that makes sense from a tax perspective might trigger IRMAA surcharges that offset the benefit. A Social Security claiming strategy that maximizes lifetime benefits might push income into a higher bracket in certain years.

The couples who navigate these decisions most effectively tend to work with advisors who take an integrated, holistic approach — looking at all the pieces together rather than optimizing each in isolation. The interactions between these decisions are where the real planning value lives.