Suze Orman’s Roth Five Year Rule Quietly Saves Retirees Thousands in Medicare Premiums and Most People Have Never Started the Clock

On her Women & Money podcast episode breaking down the Roth five year rule, Suze Orman flagged something most people miss when they picture retirement: the balance on a traditional IRA statement is not the money you actually get to spend. “In comparison to traditional IRAs, what you see there, the numbers on the paper, doesn’t mean that’s what you get when you go to withdraw the money, because it will always be taxed to you as ordinary income at whatever tax bracket happens to be in effect at that time.”

That tax bill is only half the problem. Every dollar pulled from a traditional 401(k) or IRA also flows into the income figure Medicare uses to set your Part B premium two years later. Cross the wrong threshold by a single dollar and your premium jumps for the entire year. Orman’s fix is the Roth five year rule: a qualified Roth withdrawal sidesteps both the income tax and the Medicare surcharge entirely.

The Math Is Brutal

The Income Related Monthly Adjustment Amount, or IRMAA, is the surcharge Medicare tacks onto your Part B and Part D premiums when your modified adjusted gross income clears certain tiers. The lookback is two years, so your 2026 premium is set by your 2024 tax return. Traditional IRA withdrawals, traditional 401(k) withdrawals, Roth conversions, pension income, and the taxable portion of Social Security all flow into MAGI. Qualified Roth IRA withdrawals do not.

Orman’s rule is simple. “Any money that you have in a Roth retirement account, no matter what kind it is, the Roth retirement account has to have been opened for at least five years. And you have to be 59 and a half years of age or older for you to withdraw all the money from that Roth retirement account without any taxes or penalties whatsoever.” Hit both bars and the IRS treats the withdrawal as if it never happened from an income standpoint.

Consider a 68-year-old couple collecting $85,000 a year from Social Security and needing another $160,000 to cover expenses. If they pull the full $160,000 from a traditional IRA, their MAGI lands around $232,000 once the taxable share of Social Security gets layered in. That puts them just over the 2026 first IRMAA tier for joint filers, which starts at $218,001. At that tier, each spouse pays an extra $81.20 per month on Part B plus $14.50 per month on Part D. For a couple both enrolled in Medicare, that cliff costs about $2,297 in additional premiums over twelve months, on top of the federal income tax owed on the $160,000 withdrawal itself.

Now run the same retirement with that $160,000 coming from a Roth IRA that cleared the five-year window. MAGI drops to roughly $72,250 (the taxable portion of Social Security at lower income levels). The couple stays well below the 2026 IRMAA entry point of $218,000 for joint filers. They pay the standard Part B premium of $202.90 per person per month, owe little or no federal tax on their Social Security, and keep every dollar of the $160,000. The same lifestyle, funded from a different bucket, saves them thousands in Medicare premiums and a much larger figure in income tax every single year of retirement.

When Roth Conversions Don’t Make Sense

The factor that decides whether Roth dollars are worth the upfront tax is the gap between your working tax rate and your retirement tax rate, including the IRMAA cliff. If you sit in the 24% bracket today and expect a retirement income that comfortably stays below the 2026 joint IRMAA threshold of $218,000, the conversion cost can look steep in the year you execute it. The IRMAA savings still tip the math toward Roth for most middle-income retirees, because the surcharge is a cliff, not a slope. One extra dollar of MAGI can cost the household over $2,000 in higher premiums.

The calculus flips if you genuinely expect to retire into the 12% bracket with total income nowhere near those IRMAA thresholds. At that point, paying 24% now to dodge 12% later is a losing trade, and the IRMAA risk is minimal because your MAGI never approaches the entry tier anyway.

What To Do This Week

1. Open a Roth IRA today if you do not already have one, even with a $100 contribution. The five year clock starts on January 1 of the tax year of your first contribution, so starting early is the cheapest move.
2. Pull your most recent tax return and find your MAGI. Compare it to the current IRMAA tiers published on Medicare.gov to see how close you already are to the 2026 joint threshold of $218,000 (or $109,000 for single filers).
3. Model a partial Roth conversion in the years between retirement and age 73, when required minimum distributions begin. Fill up the 12% or 22% bracket deliberately, stop before you trigger the next IRMAA tier, and repeat annually.
4. If you are still working and your employer offers a Roth 401(k), redirect new contributions there. Under SECURE 2.0, catch-up contributions for workers who earned more than $150,000 in the prior year must go to Roth starting in 2026.

Orman’s five year rule is the difference between a retirement where every withdrawal triggers a tax bill and a premium hike, and one where the IRS and Medicare leave you alone. Start the clock now so the door is open when you need it.

Editor’s note: This article was updated to correct a factual error in the worked example. The original scenario placed a couple with roughly $108,000 MAGI inside an IRMAA surcharge tier, but the 2026 first IRMAA tier for joint filers begins at $218,001. The example was rebuilt using 2026-accurate income figures, and the IRMAA threshold referenced in the conversions section was updated to reflect the current $218,000 joint filer entry point. The 2026 standard Part B premium of $202.90 per month and the Tier 1 annual couple surcharge of approximately $2,297 were also added.

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