Tax Planning / The Compound Effect
Your 2026 Roth Decision Is a 2028 Medicare Decision
| 6 min | By Heath J. Harris
The Roth conversion you run this year does not just change your 2026 tax bill. It sets your 2028 Medicare premium. Here is how the two-year lookback actually works, and the planning windows most people miss.
Most people think of a Roth conversion as a tax decision. Pay the income tax now at a rate you can see, move the money into a Roth, and never owe tax on it again. Clean.
What gets missed is that the same conversion also sets your Medicare premium two years later. Not approximately. Exactly. And the gap between the bottom bracket and the top one, per person, per month, is roughly $487.
Here is the mechanic.
The two-year lookback
Medicare Part B and Part D premiums use a tool called IRMAA, which stands for Income-Related Monthly Adjustment Amount. IRMAA looks back two years at your Modified Adjusted Gross Income and places you in one of six income tiers. The tier you land in determines what you pay for the next twelve months.
The 2026 Medicare premium you are paying right now was set by your 2024 return. That return was due last week. If you just filed it, the decision is already locked.
Which means the return you are about to file for 2026 is setting your 2028 premium. You are making a 2028 decision today, whether you realize it or not.
Why conversions amplify this
Roth conversions add directly to your MAGI in the year you do them. A $100,000 conversion does not just generate income tax. It can also push you across an IRMAA threshold, and the premium step-up applies to both spouses for the full twelve months, two years later.
A real example, run with the current brackets. A married couple with $200,000 of baseline income runs a $100,000 Roth conversion. The conversion itself is straightforward. What most people miss is that the $300,000 MAGI puts them in the third IRMAA tier. Instead of the base Medicare premium in 2028, they pay the tier-three premium. For two people. For twelve months. That is real money on top of the conversion tax.
None of this makes the conversion wrong. Roth conversions are one of the most powerful tools in retirement planning. It just means the full cost has to be measured, not just the income tax line.
The planning windows most people miss
Three windows open up when you map the two-year lookback onto a real client timeline.
Window one: the gap between retirement and age 72. This is the sweet spot for most people. Wages have stopped. Required minimum distributions have not started. MAGI is often the lowest it will ever be. This is when Roth conversions do the most work per dollar of tax paid, and it is also when you have the most room to run conversions without blowing through an IRMAA bracket.
Window two: before Medicare enrollment. If you are under 65, IRMAA does not apply yet. You can run a larger conversion without touching a premium. The two-year lookback still matters, though. A conversion at 63 sets your premium at 65. Plan accordingly.
Window three: capital gains and conversions in the same year. Both count toward MAGI. Both hit the same two-year lookback. Stacking them in the same year can push you across two brackets at once. Spreading them across years is often cheaper, even if the total dollar amount is identical.
What to actually do this week
Pull up the return you just filed. Find your MAGI. Look up the 2026 IRMAA brackets. See which tier you landed in. If you are within $5,000 of a bracket threshold and had a qualifying life event, you can file Form SSA-44 and request a reconsideration. If you are well inside a bracket, you have runway. Use it.
Then look at 2026. What is your projected income? Are you planning a conversion? A sale? A bonus? Model the MAGI impact now, before the year is out, while you still have levers to pull. By the time you file in April 2027, the 2028 premium is set. No amending your way out.
A note on whose problem this is
If you are under 63, this feels academic. It is not. Every conversion you run between now and Medicare enrollment sets the premium you will pay two years after enrollment. The planning window is wider than it looks.
If you are already on Medicare, the lookback works the same way, just compressed. Any conversion you run this year directly affects your premium the year after next.
This is the kind of coordination that shows up in a tax projection but not in a tax return. It is one of the reasons we run both for clients, and one of the reasons a good Roth conversion plan takes more than a calculator.
If you want help modeling your IRMAA exposure alongside a conversion plan, we invite you to schedule a complimentary Retirement Clarity Assessment. As a fee-only fiduciary, Compound Advisory coordinates the tax, Medicare, and investment pieces as one plan.
Compound Advisory is a registered investment advisor. This content is for educational purposes and is not individualized tax or legal advice. IRMAA brackets are adjusted annually. All investing involves risk, including the possible loss of principal.