Do Roth IRA Withdrawals Count as Income for Medicare?
Not all retirement income affects Medicare costs equally. Understand the unique treatment of qualified Roth IRA withdrawals for your premium calculation.
Many people planning for retirement are surprised by how their income can influence their healthcare costs. A significant factor is the cost of Medicare premiums, which are not fixed for everyone and can increase based on your income. This leads to an important question for those with Roth IRAs: do withdrawals from these accounts count as income that could increase Medicare premiums?
Understanding Medicare Premiums and Income
While most beneficiaries pay a standard monthly premium for Medicare Part B (medical insurance) and Part D (prescription drug coverage), individuals with higher incomes are subject to an additional charge. This surcharge is known as the Income-Related Monthly Adjustment Amount, or IRMAA. The Social Security Administration (SSA) determines who pays IRMAA based on income information from the Internal Revenue Service (IRS).
The specific income figure used is your Modified Adjusted Gross Income (MAGI). For Medicare, MAGI is your Adjusted Gross Income (AGI) from your tax return plus certain untaxed income, most commonly tax-exempt interest. Your AGI includes wages, investment income, pension payments, and withdrawals from traditional retirement accounts.
Your Medicare premiums for the current year are determined by your MAGI from two years prior. For example, your 2025 premiums are based on the MAGI from your 2023 tax return. For 2025, individuals with a 2023 MAGI of $106,000 or less (or $212,000 for married couples filing jointly) pay the standard Part B premium.
As income rises above these thresholds, IRMAA surcharges are applied in increasing tiers. For instance, in 2025, an individual with a MAGI between $106,001 and $133,000 would pay the standard premium plus an additional amount. The highest tier applies to individuals with a MAGI over $500,000.
How Roth IRA Withdrawals Are Treated
The treatment of Roth IRA withdrawals for Medicare premium calculations depends on whether the withdrawal is a “qualified distribution.” A qualified distribution is one taken after the Roth IRA has been open for at least five years and the owner is age 59½ or older. Because these distributions are tax-free, they are not included in your Adjusted Gross Income (AGI).
Since qualified Roth IRA distributions do not increase your AGI, they also do not increase your MAGI and therefore do not affect your Medicare premiums. The funds are withdrawn without being reported as income to the IRS, making them invisible to the IRMAA calculation. This feature makes Roth IRAs a useful tool for managing retirement income.
The situation changes with a “non-qualified distribution,” which occurs if you withdraw funds before meeting both the five-year rule and the age 59½ requirement. In this scenario, the portion of the withdrawal representing your original contributions is returned tax-free and does not impact your MAGI. However, the portion consisting of investment earnings is considered taxable income.
This taxable earnings portion is included in your AGI and MAGI. This can potentially push you into a higher IRMAA bracket, leading to increased Medicare premiums two years later. For example, if a $20,000 non-qualified distribution included $5,000 in earnings, that $5,000 would be added to your income for the year.
The Impact of Roth Conversions on MAGI
A Roth conversion is different from a withdrawal and has a distinct impact on your income. A conversion involves moving funds from a pre-tax retirement account, such as a Traditional IRA or 401(k), into a post-tax Roth IRA. While future qualified withdrawals from the converted funds will be tax-free, the conversion itself is a taxable event.
The entire amount you convert is generally considered taxable income in the year the conversion occurs. This directly increases your AGI and, consequently, your MAGI for that year. A substantial conversion can significantly inflate your MAGI.
This spike in MAGI has a delayed consequence for your Medicare premiums due to the two-year lookback rule. A large Roth conversion can push you into a higher IRMAA bracket two years later. For example, converting $100,000 from a Traditional IRA will increase your MAGI by that amount, which could trigger a significant premium increase.
Financial planning for Roth conversions often involves strategies to mitigate this IRMAA impact. Some individuals perform a series of smaller conversions over several years to keep their annual MAGI below the IRMAA thresholds. Others may execute a conversion more than two years before enrolling in Medicare so the income spike does not affect their initial premiums.
Other Retirement Income Sources That Affect MAGI
The favorable treatment of qualified Roth IRA withdrawals contrasts with how most other retirement income sources are handled. Most traditional forms of retirement income are counted in the MAGI calculation, which can increase your potential IRMAA liability.
Withdrawals from pre-tax retirement accounts are fully taxable as ordinary income and therefore increase your MAGI. This includes Required Minimum Distributions (RMDs), which you must begin taking after reaching a certain age. The following income sources also contribute to your MAGI:
- Payments from pensions and most annuities
- Interest earned on savings accounts and bonds
- Dividends from stocks
- Realized capital gains from the sale of investments like stocks or real estate