This post has taken a long time to write (mostly rewrite) to try to make it coherent. I hope the rewrites were successful. Sorry for the acronyms, but you can't talk about taxes with using them.
MAGI for IRMAA and NIIT - This is your modified adjusted gross income. It is your total income, including investment distributions, IRA withdrawals, the taxable portion of Social Security benefits. It includes tax-exempt interest. Student loan interest and pretax IRA contributions are NOT deducted. Roth IRA withdrawals are not included. IRMAA and NIIT use this number and higher means more Medicare and tax. BEWARE - other taxes may calculate MAGI differently.
RMDs - Required Minimum Distributions - Starting around age 73 (depends on your birth year), you are required to withdraw a percentage of your IRA (or 401K, etc.) and pay taxes on it. It starts at about 4% and goes up every year. This money cannot be converted to a Roth IRA. You pay income tax on it at your marginal rate since it is in addition to your regular income. And sometimes it increases your marginal rate. If you don't need this money, you can invest it, and pay taxes on the distributions.
IRMAA - Income Related Monthly Adjustment Amount - Medicare penalizes you for making too much money. And the amount is a very nonlinear function of your MAGI. Below around $100k (unmarried), no penalty. Above about $183k, about $5000/year. Then this would be multiplied by how many years it takes to convert your IRA. It sounds good to do it all at once, pay a big penalty, and be done with it in one year. But ...
Tax Bracket - When you top around $200k (unmarried) your marginal tax rate pops up to 32%, a nice jump from 24%. So it would be good to keep your Roth conversions below $200k minus your income. But if your income is, for example, $50k, that leaves you converting just $150k per year.
NIIT - Net Investment Income Tax - This is an additional tax on your investment income (interest, dividends, capital gain) if your MAGI is above $200k (unmarried). The amount of the tax is 3.8% of the lesser of your investment income or your MAGI minus $200k (unmarried).
You want low RMDs (RMDs are a percentage of the total IRA). You want low MAGI for lower Medicare premiums. You want low income for lower taxes. And you want low MAGI to avoid an NIIT tax bump. But you want to convert a lot of assets from IRA to Roth IRA and this counts as income and MAGI.
(Unmarried) it looks to me like it is best to keep your MAGI under $197k to stay out of the 32% tax bracket. This "spreadsheet" assumes you have an income of $44k. It show four levels of MAGI, each obtained by adding a Roth conversion amount to your income. The Medicare penalty percentage is minimized by pushing the MAGI to the top of (but not past) each IRMAA bracket. (Such evaluations would be so much easier with a continuous curve instead of stepped brackets, but our representatives in Congress apparently do not understand mathematics.)
income – includes conversion MAGI Medicare penalty penalty
Social Security *.85, amount per month per month per year
RMDs, for 2025 based as a % of
pretax IRA contributions, on 2023 MAGI conversion
investment distributions
44,000 65,000 109,000 185 0 0.0%
93,000 137,000 273 88 1.1%
127,000 171,000 405 220 2.1%
147,000 191,000 538 353 2.9%
This shows that faster conversion gives higher Medicare penalties. But it reduces RMDs faster. RMDs can bump your MAGI into higher Medicare penalties. And you have to pay income tax on them at your marginal rate (since they are on top of your other income). And once an RMD is withdrawn, it can't go to your Roth unless you have earned income. So - choose your poison.
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