Conventionally, reliability analysis of fault-tolerant (FT) power converters is carried out using a Markov Chain (MC) model, which is only applicable for components with a constant failure rate. However, modern power electronics are expected to operate even until the components start to wear-out, e.g., due to aging/degradation, where the failure rate of the components is no longer constant, and thus the traditional MC model cannot be applied. To address this issue, a method to evaluate the reliability of FT power converters considering wear-out failure is proposed in this paper. The proposed solution employs the method of stages to incorporate the wear-out failure states in the MC model, which includes the failure rates during pre-fault and post-fault conditions. By doing so, the wear-out failure can be taken into account in the reliability analysis of FT power converters, which has been demonstrated with a case study of a three-phase inverter with FT topology for PV application.