The $4.2 Million Couple Left New York to Save on Roth Conversions. One Medicare Bill Followed Them to Florida.

A married couple in their early sixties has $4.2 million in traditional retirement accounts. They want to shrink future required minimum distributions (RMDs), so they sketch out roughly $350,000 in annual Roth conversions over 12 years. Then they look at the state-tax column.

Living in a New York City suburb means most of each conversion would enter New York taxable income. Florida does not tax the income of individuals. If the couple establishes Florida residency before beginning the plan, the move could save tens of thousands of dollars in state taxes each year. New York does offer residents age 59½ and older an exclusion of up to $20,000 apiece on qualifying pension and individual retirement account income. Against a $350,000 conversion, however, that is a cushion, not an escape hatch.

The state savings are real. The complication begins when they approach 65.

Medicare Starts Watching at 63

Medicare’s Income-Related Monthly Adjustment Amount (IRMAA) uses modified adjusted gross income (MAGI) from two years earlier to set Part B and Part D premiums. The tax return from the year the couple turns 63 will generally help determine what they pay at 65. That makes the early conversion years especially valuable. Money converted before the Medicare lookback reaches them can still generate federal and state income tax, but it will not normally create an IRMAA surcharge because they are not yet enrolled.

Once the lookback catches up, Florida cannot help. IRMAA is federal and follows the income reported to the IRS, not the address printed on the return. Assume the couple converts $350,000 and reports another $75,000 from interest, dividends, and other sources. Their MAGI approaches $425,000.

Under the 2026 Medicare schedule, joint income greater than $410,000 but below $750,000 adds $446.30 a month to each spouse’s Part B premium and $83.30 to Part D. Together, those surcharges run approximately $12,710 for the year, before either spouse pays a Part D plan premium. The thresholds and premiums will change over a 12-year conversion plan. The federal reach will not.

Social Security Joins the Conversion Ladder at 70

Once the couple claims Social Security, Medicare premiums are generally deducted from their benefit checks. The familiar deposit can therefore shrink even though the gross benefit has not changed. Delaying Social Security can keep those benefits off the tax return during the first conversion years while also earning delayed-retirement credits. That helps, but only until 70. Their 12-year Roth plan outlasts their ability to delay.

If they begin converting at 62, Social Security will likely overlap with the final years of the ladder. Up to 85% of those benefits may enter taxable income, adding another layer to MAGI. The cleaner approach may be to complete larger conversions before 70, then reduce them once Social Security begins.

The Federal Bracket and Medicare Tier Do Not Share a Line

A conversion plan cannot be sized from the federal tax bracket alone. In 2026, the 24% federal bracket for a married couple filing jointly covers taxable income above $211,400 through $403,550. IRMAA uses modified adjusted gross income instead, with its own dividing lines.

Those rates measure different things. A conversion that fits comfortably inside the 24% bracket can still cross an IRMAA threshold and add a full year of Medicare surcharges two years later. That does not necessarily make the conversion a mistake. Paying one year of higher premiums may be worthwhile if it prevents larger RMDs, future tax bills, and years of higher IRMAA later. The surcharge belongs in the price of the conversion, not outside the calculation.

What to Settle Before the First Conversion

Three adjustments can improve the plan:

1. Use the years before Medicare carefully. Conversions completed before the two-year lookback reaches the couple may carry no IRMAA cost, making those early years especially useful.
2. Size each conversion against both systems. Compare the federal tax bracket with the nearest IRMAA line, then leave room for year-end dividends, capital gains, and interest.
3. Choose the tax-payment source deliberately. Paying from cash outside the retirement account keeps more money inside the Roth. Selling appreciated investments to raise that cash can generate additional gains and push modified adjusted gross income higher, so the sale belongs in the same calculation.

The move may still leave this couple comfortably ahead. Florida can remove New York income tax from the conversion. It cannot remove the income from the federal return Medicare reads two years later.

Contact [email protected] for any questions or corrections.