Picture a man named Dave. Dave is 63, freshly retired, and feeling clever.
His advisor told him to do Roth conversions in the low income years between retiring and starting Social Security. Great advice. Textbook advice. Dave converts $120,000 from his traditional IRA, pays the tax, and goes to bed feeling like a tax ninja.
Two years later Dave turns 65, enrolls in Medicare, and opens a letter from the Social Security Administration explaining that his Part B premium will be significantly higher than the standard rate.
Dave calls his advisor. His advisor says "ah."
The Roth conversion was correct. The year he did it was not. Nobody mentioned that Medicare reads your tax return from two years ago and charges you accordingly.
This is IRMAA. It is the least understood surcharge in American retirement, it has no phase-in, and one single dollar can cost you over a thousand.
Today we take it apart.