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 pointed out something most people miss when they imagine retirement: the balance on a traditional IRA statement is not the money you actually get…
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On her Women & Money podcast, Suze Orman dedicated a full “Suze School” masterclass to the Roth five year rule, and the core warning she delivered is one that most retirement savers have never fully absorbed: 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 the first half of the problem. Every dollar pulled from a traditional 401(k) or IRA also lands inside 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 solution is the Roth five year rule: a qualified Roth withdrawal sidesteps both the income tax and the Medicare surcharge entirely. And because the 2026 standard Part B premium rose nearly 10% from $185.00 in 2025 to $202.90, the dollars at stake are larger than ever.
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.
For 2026, the surcharge kicks in at $109,000 for single filers and $218,000 for joint filers. Those thresholds rose roughly 3% from 2025, but the surcharge amounts themselves jumped about 9%, making it more painful than ever to slip over the line. Tier 1 alone adds $81.20 per month to Part B and $14.50 per month to Part D, per person. For a couple with both spouses on Medicare, that single-tier breach costs $1,148 per person, or about $2,297 for the household over twelve months.
Orman’s core rule is clear: “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 living 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 is added in. That puts them just over the 2026 first IRMAA tier for joint filers, which begins 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 the year, 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 income, and keep every dollar of the $160,000. The same lifestyle, funded from a different account, saves 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 conversion tax is the gap between your current tax rate and your expected retirement rate, including the IRMAA cliff. If you sit in the 24% bracket today and expect 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. Even so, the IRMAA savings tip the math toward Roth for most middle-income retirees, because the surcharge is a cliff rather than a slope. One extra dollar of MAGI can cost the household over $2,000 in higher premiums.
The calculus changes 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. Worth noting: the top IRMAA tier (Tier 5) remains frozen at $500,000 for single filers and $750,000 for joint filers through at least 2028, while the lower tiers continue to adjust with inflation each year.
What To Do This Week
- 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 available.
- 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).
- 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.
- 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 separates a retirement where every withdrawal triggers a tax bill and a premium hike from one where the IRS and Medicare leave you alone. Start the clock now so the door is open when you actually need it.
Editor’s note: This pass added context on the 2026 standard Part B premium increase (from $185.00 in 2025 to $202.90, a nearly 10% jump), the year-over-year IRMAA changes (income brackets up roughly 3%, surcharge amounts up roughly 9%), the per-person Tier 1 annual surcharge of $1,148, and the Tier 5 bracket freeze through at least 2028 at $500,000 single/$750,000 joint. The Suze Orman podcast episode referenced was the September 14, 2025 “Roth Five Year Rule Masterclass” on Women & Money.
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I've spent more than 15 years inside enterprise software, working alongside the finance, sales operations, and HR leaders who run the revenue engines at some of the largest tech companies in the country.
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The headline numbers are easy. The interesting stuff is underneath: how companies make money, what executives are worried about, and what any of it means for the person checking their 401(k) on a Sunday afternoon. I write about personal finance and business as someone who has spent her career inside the rooms where these decisions get made.
