One thing not mentioned, but very important to think about, is what happens if your filling status changes. If you are filling married, but later their is a death or divorce so that the new status changes to single, that has a HUGE impact on your taxes. That easily blows by any analysis of jumping into a new IRMAA bracket. Also not mentioned is the NIIT tax that starts at $250,000. This also serves as a speed bump on your taxes.
This makes a complicated subject very clear. I was always afraid of making a big Roth conversion because of the Medicare penalty. Now I am armed with information on how much I can convert. Thank You!
Good video. The tax increase percentages for the IRMAA tiers that you present about the 11:00 minute mark are based off a single filer or, in the case of married filing jointly, both people being on Medicare. But if married filing jointly and only one person has reached Medicare age, the effective tax increase is just 1/2 of what is shown - for example 1.87% for the first tier up to a MAGI of $222K. Seems even more palatable for Roth conversions in those years when only one person in the couple is on Medicare. Hope I am viewing that correctly.
Also, I assume in many cases delaying (i.e. not going to a penalty bracket) is only a temporary fix. Once your now larger RMDs have to be taken, you are going to be subject to the increases then (as well as larger tax brackets on the RMDs)
My question is this. I need to plan my 2022 income based on an IRMAA bracket for 2024 that will not be released until late in calendar year 2023. Do I guess? Or do I just use the 2022 bracket to stay on the safe side? Has IRMAA brackets ever gone down? Actually, that’s a lot of questions.
Thanks for a very clear and informative video. My kids will be in higher tax brackets than me so I'm doing Roth conversions right to the edge of the cliff.
one mistake that I see people do is to complete a large roth conversion at age 63 and age 64.... they don't realize the IRS gives the medicare folks the IRMA data two years in advance of them going on medicare at age 65.... so they get to pay the extra medicare for the years of 65 and 66 .... can be a huge problem...
It is hard to estimate what your total income is going to be. It is also going to be hard to determine what your RMDs are going to be because you really do not know what your rate of return will be.
I unfortunately waited until last year at age 71 and took a large (about $330K (large to me, lol) conversion. My CPA told me not to do it, but I had watched several sources, including yours and several others and discovered that it was not only the outside tax burden, but the Medicare increases as well. Fortunately ofr not, I also receive several other pensions, one from the military and the rest from a small private company retirement. Another strategy that I am using is a deduction of a side hustle job and delaying filing for the allowed 6 month automatic delay for filing and filing as early as possible the following year to keep the medicare rebalance review to the minimum possible. I will also look at chunking in the future to keep the future conversions under the limits till I finally get the total IRA converted. The way it was, before the large conversion, would have killed me in taxes and medicare increased costs for the rest of my life.
If I am covered by an insurance policy that the Feds consider sufficient to exempt me from Medicare part B, does this make the whole IRMAA issue moot for me?
Thanks so much, Sir ! My wife & me ( both retired ) fall into 22% tax bracket for 2021. In order to avoid IRMAA ( no increase in Medicare premium after 2 years ), we can do Roth conversion to max MAGI of $176000.00. But this will shift the last $ 70000.00 into 24% bracket ( $16800.00 additional tax ) ! Please let me know if my understanding is correct in view of your excellent educational clip ! Thanks 🙏 HARI HARI 🙏
Good video but I keep hearing how IRMA is a cliff. Compared to the savings from say a 100K Roth conversion paying an extra 2K or 4K for Medicare seems pretty reasonable, especially jus for one year. Yes if you are a dollar off it could cost you a painful amount but estimating MAGI is tough. The biggest problem I have had is the unwillingness of Brokerage houses to handle Roth conversions quickly towards the end of the tax year.
I am considering a conversion to the 275k level. I am on social security, but my wife won't be in 2 years. I will then go through the Social security torpedo for 2 years to try to get my wife's traditional IRA to an acceptable level. Once she is drawing, I thought I could do a very small conversion one year and the next a larger conversion. This is my last year to convert and not have her social security affected. I have already converted all of my IRA, but should have started sooner. She has 800k left to convert and I have converted 150K already this year. After the first of the year I will convert more. This money will be for our children who will be in high tax brackets throughout life. Is my thinking sound.
If I've made a roth conversion that pushes medical premium increase, how long do I have to pay that $860+ premium? Will Medicare change it back normal or do I have to pay this increase for my entire retirement life?
My wife and I are 63. We can get health insurance through my union until Medicare. If I were to do Roth conversions, could we wait to take Medicare until we are out of penalty because of the two year lookback?
It depends. If you qualify for an exception and are allowed to delay Medicare without penalty, then yes. If you do not qualify, you may be permanently penalized (ex. forced to pay higher medicare costs) for delaying Medicare.
@@SafeguardWealthManagement Yes. My story: Be sure that your health coverage meets the Medicare test for "creditable" (not "credible," as people say) coverage. I delayed starting my Medicare coverage until I retired, more than three months after my 67th birthday. Before I said "no" to starting Medicare (and taking Part D drug coverage) at age 65, I verified with my employer's health plan that it met the "creditable" litmus test -- and got this in writing (and saved the letter). Sure enough, when I started with Medicare, I got a letter from Medicare stating that I was subject to penalties for not having begun at age 65. I whipped out that letter I had saved, and proof of my continued coverage after 65, and sent it in. Got a reply a month or so later saying I was in the clear. "Trust, but verify."
I'm 68 (single) and will retire in 6 months. My total income will be slightly more than 100k per year, do to my pension and SS combined. I have 500k in my 401k. If I convert to a Roth then I'll pay a big chunk in taxes, my medicare premium will increase, and I won't have access to my Roth money for 5 years. Some times I think I'll be better off not making the Roth conversion.
So do they average the two years prior? If someone has high earnings in year one, then retires in year two and has significantly lower income, does the income get averaged out?
the new Biden tax plan is calling for a tax on Roth IRA and 401K Roth to pay for his massive plan...of paying for new migrants, forgiving student loans and paying for people not to work and sit on their kiester..google this new proposed tax.. Senator Wyden worth 30 mil and who will get a 6 figure retirement plan on the tax payer dime has deemed that he is the tsar that can determine how much onw can have in a Roth IRA. No young investor will want to have a retirement account as if he grows it it will get taxed. Many of the seniors who have grown their retirement accounts can no longer work and will just get reamed. This will also add to inflation as where will the retirment accounts go likely real estate through investment firms. The average cost for a house in Cali is now over 800K to go up even higher..Good luck for the students in buying a house to go along with their student debt. .No wonder the students at the foot ball games are chanting ...Biden
@@cerbico12 Well my question was about the Medicare premiums but your comment brings up an interesting discussion. Guess it will depend on where they set the limits. They will most likely try to deal with a situation like Peter Thiel where he put $2k in a Roth 401k or IRA, got special allotment of founder shares in PayPal for pennies per share and then grew the account to $5 billion. I guess I could see why they would do that, buy hey he figured out a way to beat the system, so congratulations to him. As for real estate you might be right about it being bought up and put in various funds. Part of the great reset, right. As for the price of housing, that might be the prices on the coasts, but modest housing in the middle of the country goes for much less, for 1/2 of what you list, or less.
Dan, they take your single tax return from two years ago. Not average. Retirement is classified as an appeal event, however. Let's say you were earning $250,000 then retired. Medicare hits you with an IRMAA letter. You can appeal this and they almost always reward the appeal in a case like this.
@@SafeguardWealthManagement I was wondering about that, as our joint return will be higher this year as both my wife and I are still working. We'll probably look to retire next year at 64, so our income will be lower. So they will use our income at age 63 from 2021, and then we can appeal based on 2022 income when I turn 65 in 2023. Thought they might look at the year by year income, but an appeal can work as well. Was hoping to live off cash for 3 or 4 years while doing some Roth conversions. Should have a much lower premium in the years ahead.
@@dancasey9660 when you appeal, they will basically take out your working income and assess if you were still over the IRMAA step up. For the vast majority of families, when you take out working income, they are no where near the step up thresholds. Does that make sense?
Oh my gosh, please dont do that! If you have a one million dollar IRA portfolio you will up in a 37% tax bracket plus be subject to a NIT (net investment income tax) of an additional 3.8%. Throw in any capital gains from a brokerage account and now you’ve just pushed them into a 20% tax instead of 15%. And then of course you’ve just added in hefty IRMAA penalties. It will take you years to recoup all that money you will lose with a massive conversion like that. Go talk to your CPA or tax planner before doing anything rash.
When should I move money from a Traditional IRA to a Roth, (in kind transfer), when the stock is at a new high, or when the stock is at a lower price? Which is the bigger bang for the buck to help reduce RMD’s in the future? Thanks, Don.
It all depends on what the stock is going to do next (which is near impossible to predict). If you think there is significant growth ahead, you want that growth to be in the Roth. If lower prices are ahead, then you want that to stay in the traditional IRA
I don’t mean to be obdurate, but at these income levels, the extra expense from IRMAA doesn’t seem worth getting too excited over. Sure, I don’t like paying an extra $2k/year if I’m spending over $111k/year, but it’s also doesn’t seem like anything to jump through a lot of hoops about. It’s kind of “meh” to me?
All depends on how you look at it. Your taking an effective tax rate view of it, which is fine. I personally urge retirees to take a marginal tax rate view. For example... Say a IRMAA threshold level is at $111k. This is tax cliff which means you owe the full penalty if you show $1 over that threshold. So say your income need/withdrawal is $113,000 and you now owe $1,000 extra for medicare. Sure $1,000 on $113,000 is less than a 1% rate. But in reality, it's not the $113,000 that caused you to owe the penalty, it's the $2,000 over $111k. In this context, the penalty alone was a 50% penalty. I would personally try to strategically avoid this penalty in this instance but everyone's different.
I've heard that even prior to going on Medicare, one must be careful with Roth Conversions pushing you into a higher income bracket because you could be subject to an increased Medicare tax. Is this true?
David, not only for medicare should you be concerned, but a few years ago during Obamacare and the PTC (Premium Tax Credit) that I once qualified for, I lost all my PTC because I did a ROTH conversion. When doing so, you must include the ROTH amount in adjusted gross income. So where I once qualified for lower premiums, once I "included" the ROTH conversions, that made me look super wealthy, and I became disqualified. I was not able to spend that money, I was merely taking it from one bucket and putting it into another. I agree the tax must be paid on the ROTH when converting, but the federal govt. should've allowed poor folks like me to not loose my ability for health insurance by allowing an adjustment for conversions. They never asked what I had in the bank, but as soon as you show it, you are calculated out of the game. If you inherited a million dollars, but only earned 25,000 you still can get the premium tax credit. Why penalize someone who's got retirement income, AND you can't spend it because you're not of age yet. You gain no cash benefit upon conversion, and it doesn't put any immediate money in your pocket, and in fact, it cost you more in taxes when you do the conversion, and you actually have less disposable income for which to afford health insurance, thus more qualified for the Obamacare insurance. This was one major fault in qualifying for the PTC. But in hindsight, I'll get my due, when I end up w/ a million in ROTH investment and the government gets none of it.
@@SafeguardWealthManagement What about the last two years before you start Medicare? Wouldn't Roth conversions in years -2 and -1 affect Medicare rates in years 0 and 1? (Unless you can wipe the slate with a life-changing event of course)
Doesn't take much of a conversation, to push a Medicare premium increase. Single person with Year end distribution, doesn't leave much room for conversion, until you hit the first IRMAA premium step. Couple of years ago, I sold my small business, a one time event. Had to pay max IRMAA of around $548 per month. Ouch
Craig, it is too late to now but selling your business would be a life-changing event that would have allowed you to appeal the charge and possible have had it reversed.
Your best bet to do Roth conversions is before one of you leave to be with the Lord. The tax brackets are much better for a married couple than a single. I have warned my wife, single you are going to have to be smarter with your money.
Is the IRMAA MAGI re-evaluated by SSA every year? We've done large conversions for 2020 and 2021 already, and I will go on Medicare in 1st quarter of 2022. No more Roth conversions will be needed in 2022 and beyond. Wife is already on SSI and Medicare. MAGI will be in the $350K range for 2020 and 2021. Spouses retirement plan covers the Part D insurance for both of us via its own private coverage paid out of her state retirement pension. So I assume that per your chart, we will be hit by the IRMAA Increases for the both of us on part B only in 2022 and 2023 and then in 2024 the IRMAA impact should be greatly reduced or eliminated, when the major sources of income are SSI and the Wife's state pension plan, plus inherited IRA RMD for 2022. LMK Please.
Thank you for a very well done video. Are the zone boundaries inflation adjusted? A search on the web uncovered this: In 2020, the income brackets that determined Medicare IRMAA costs were indexed according to inflation. This change could mean fewer Medicare beneficiaries will pay IRMAA surcharges, and those who do will most likely see the rise in their Part B and Part D premiums slow. Medicare IRMAA costs could impact your 2020 Medicare premiums. Is that accurate?
I don’t believe this applies to people who are retired and not working. Case in point, they hit me with an IRMA premium penalty because I worked most of 2019 and my income threw me into the penalty level. I filed an SSA-44 indicating that I retired in November of that year which exempted me from the IRMA penalty.
So between playing whack a mole between income taxes, Medicare hits and RMDs, you are pretty much screwed for Roth conversations except for the window between 59.5 and 63.
I am 59 and have been converting my 401k over to a Roth before I retire. Doing a little each year.
One thing not mentioned, but very important to think about, is what happens if your filling status changes. If you are filling married, but later their is a death or divorce so that the new status changes to single, that has a HUGE impact on your taxes. That easily blows by any analysis of jumping into a new IRMAA bracket. Also not mentioned is the NIIT tax that starts at $250,000. This also serves as a speed bump on your taxes.
This makes a complicated subject very clear. I was always afraid of making a big Roth conversion because of the Medicare penalty. Now I am armed with information on how much I can convert. Thank You!
Glad our content could help!
Another great job covering an important topic. I wish I had moved more $ from our IRAs to the Roths when we were younger and just bit the bullet.
Good video. The tax increase percentages for the IRMAA tiers that you present about the 11:00 minute mark are based off a single filer or, in the case of married filing jointly, both people being on Medicare. But if married filing jointly and only one person has reached Medicare age, the effective tax increase is just 1/2 of what is shown - for example 1.87% for the first tier up to a MAGI of $222K. Seems even more palatable for Roth conversions in those years when only one person in the couple is on Medicare. Hope I am viewing that correctly.
Also, I assume in many cases delaying (i.e. not going to a penalty bracket) is only a temporary fix. Once your now larger RMDs have to be taken, you are going to be subject to the increases then (as well as larger tax brackets on the RMDs)
My question is this. I need to plan my 2022 income based on an IRMAA bracket for 2024 that will not be released until late in calendar year 2023. Do I guess? Or do I just use the 2022 bracket to stay on the safe side? Has IRMAA brackets ever gone down? Actually, that’s a lot of questions.
Thanks for a very clear and informative video. My kids will be in higher tax brackets than me so I'm doing Roth conversions right to the edge of the cliff.
Great reason to perform conversions!
one mistake that I see people do is to complete a large roth conversion at age 63 and age 64.... they don't realize the IRS gives the medicare folks the IRMA data two years in advance of them going on medicare at age 65.... so they get to pay the extra medicare for the years of 65 and 66 .... can be a huge problem...
Finally the topic I've been researching...unfortunately I'm 66. Thanks...good video.
Thank you!
It is hard to estimate what your total income is going to be. It is also going to be hard to determine what your RMDs are going to be because you really do not know what your rate of return will be.
Very good and useful video. It would not have affected by 2021 conversions but will likely reduce my 2022 planned conversions.
I unfortunately waited until last year at age 71 and took a large (about $330K (large to me, lol) conversion. My CPA told me not to do it, but I had watched several sources, including yours and several others and discovered that it was not only the outside tax burden, but the Medicare increases as well. Fortunately ofr not, I also receive several other pensions, one from the military and the rest from a small private company retirement. Another strategy that I am using is a deduction of a side hustle job and delaying filing for the allowed 6 month automatic delay for filing and filing as early as possible the following year to keep the medicare rebalance review to the minimum possible. I will also look at chunking in the future to keep the future conversions under the limits till I finally get the total IRA converted. The way it was, before the large conversion, would have killed me in taxes and medicare increased costs for the rest of my life.
Do you have an online calculator that will perform this analysis?
The screen shots are easy to follow!
Thanks M Lee!
Excellent as always.
This also apllies as you work to take your 10year inherited ira.
If I am covered by an insurance policy that the Feds consider sufficient to exempt me from Medicare part B, does this make the whole IRMAA issue moot for me?
I am more confused about conversions to ROTH IRA now in regards to the Medicare premiums than I was before l watch this video.
Thanks so much, Sir ! My wife & me ( both retired ) fall into 22% tax bracket for 2021. In order to avoid IRMAA ( no increase in Medicare premium after 2 years ), we can do Roth conversion to max MAGI of $176000.00. But this will shift the last $ 70000.00 into 24% bracket ( $16800.00 additional tax ) ! Please let me know if my understanding is correct in view of your excellent educational clip ! Thanks 🙏 HARI HARI 🙏
You're welcome! Although maxing your MAGI to avoid IRMAA will place you in the 22% bracket, not the 24%.
Good video but I keep hearing how IRMA is a cliff. Compared to the savings from say a 100K Roth conversion paying an extra 2K or 4K for Medicare seems pretty reasonable, especially jus for one year. Yes if you are a dollar off it could cost you a painful amount but estimating MAGI is tough. The biggest problem I have had is the unwillingness of Brokerage houses to handle Roth conversions quickly towards the end of the tax year.
I am considering a conversion to the 275k level. I am on social security, but my wife won't be in 2 years. I will then go through the Social security torpedo for 2 years to try to get my wife's traditional IRA to an acceptable level. Once she is drawing, I thought I could do a very small conversion one year and the next a larger conversion. This is my last year to convert and not have her social security affected. I have already converted all of my IRA, but should have started sooner. She has 800k left to convert and I have converted 150K already this year. After the first of the year I will convert more. This money will be for our children who will be in high tax brackets throughout life. Is my thinking sound.
If I've made a roth conversion that pushes medical premium increase, how long do I have to pay that $860+ premium? Will Medicare change it back normal or do I have to pay this increase for my entire retirement life?
My wife and I are 63. We can get health insurance through my union until Medicare. If I were to do Roth conversions, could we wait to take Medicare until we are out of penalty because of the two year lookback?
It depends. If you qualify for an exception and are allowed to delay Medicare without penalty, then yes. If you do not qualify, you may be permanently penalized (ex. forced to pay higher medicare costs) for delaying Medicare.
@@SafeguardWealthManagement Yes. My story: Be sure that your health coverage meets the Medicare test for "creditable" (not "credible," as people say) coverage. I delayed starting my Medicare coverage until I retired, more than three months after my 67th birthday. Before I said "no" to starting Medicare (and taking Part D drug coverage) at age 65, I verified with my employer's health plan that it met the "creditable" litmus test -- and got this in writing (and saved the letter). Sure enough, when I started with Medicare, I got a letter from Medicare stating that I was subject to penalties for not having begun at age 65. I whipped out that letter I had saved, and proof of my continued coverage after 65, and sent it in. Got a reply a month or so later saying I was in the clear. "Trust, but verify."
Your videos are the best!!
Thanks M Lee!
Great flexibility in your analysis. Thanks!
Thanks John!
I'm 68 (single) and will retire in 6 months. My total income will be slightly more than 100k per year, do to my pension and SS combined.
I have 500k in my 401k. If I convert to a Roth then I'll pay a big chunk in taxes, my medicare premium will increase, and I won't have access to my Roth money for 5 years. Some times I think I'll be better off not making the Roth conversion.
So do they average the two years prior? If someone has high earnings in year one, then retires in year two and has significantly lower income, does the income get averaged out?
the new Biden tax plan is calling for a tax on Roth IRA and 401K Roth to pay for his massive plan...of paying for new migrants, forgiving student loans and paying for people not to work and sit on their kiester..google this new proposed tax.. Senator Wyden worth 30 mil and who will get a 6 figure retirement plan on the tax payer dime has deemed that he is the tsar that can determine how much onw can have in a Roth IRA. No young investor will want to have a retirement account as if he grows it it will get taxed. Many of the seniors who have grown their retirement accounts can no longer work and will just get reamed. This will also add to inflation as where will the retirment accounts go likely real estate through investment firms. The average cost for a house in Cali is now over 800K to go up even higher..Good luck for the students in buying a house to go along with their student debt. .No wonder the students at the foot ball games are chanting ...Biden
@@cerbico12 Well my question was about the Medicare premiums but your comment brings up an interesting discussion. Guess it will depend on where they set the limits. They will most likely try to deal with a situation like Peter Thiel where he put $2k in a Roth 401k or IRA, got special allotment of founder shares in PayPal for pennies per share and then grew the account to $5 billion. I guess I could see why they would do that, buy hey he figured out a way to beat the system, so congratulations to him. As for real estate you might be right about it being bought up and put in various funds. Part of the great reset, right. As for the price of housing, that might be the prices on the coasts, but modest housing in the middle of the country goes for much less, for 1/2 of what you list, or less.
Dan, they take your single tax return from two years ago. Not average. Retirement is classified as an appeal event, however.
Let's say you were earning $250,000 then retired. Medicare hits you with an IRMAA letter. You can appeal this and they almost always reward the appeal in a case like this.
@@SafeguardWealthManagement I was wondering about that, as our joint return will be higher this year as both my wife and I are still working. We'll probably look to retire next year at 64, so our income will be lower. So they will use our income at age 63 from 2021, and then we can appeal based on 2022 income when I turn 65 in 2023. Thought they might look at the year by year income, but an appeal can work as well. Was hoping to live off cash for 3 or 4 years while doing some Roth conversions. Should have a much lower premium in the years ahead.
@@dancasey9660 when you appeal, they will basically take out your working income and assess if you were still over the IRMAA step up. For the vast majority of families, when you take out working income, they are no where near the step up thresholds. Does that make sense?
Does it make sense to go ahead to convert the whole amount toRoth IRA since taxes are most likely to increase?
Oh my gosh, please dont do that! If you have a one million dollar IRA portfolio you will up in a 37% tax bracket plus be subject to a NIT (net investment income tax) of an additional 3.8%. Throw in any capital gains from a brokerage account and now you’ve just pushed them into a 20% tax instead of 15%. And then of course you’ve just added in hefty IRMAA penalties. It will take you years to recoup all that money you will lose with a massive conversion like that. Go talk to your CPA or tax planner before doing anything rash.
When should I move money from a Traditional IRA to a Roth, (in kind transfer), when the stock is at a new high, or when the stock is at a lower price? Which is the bigger bang for the buck to help reduce RMD’s in the future? Thanks, Don.
It all depends on what the stock is going to do next (which is near impossible to predict). If you think there is significant growth ahead, you want that growth to be in the Roth. If lower prices are ahead, then you want that to stay in the traditional IRA
If you feel the stock is at a low....that's a good time to do a Roth conversion as you will pay less taxes than when it's at it's high.
I don’t mean to be obdurate, but at these income levels, the extra expense from IRMAA doesn’t seem worth getting too excited over. Sure, I don’t like paying an extra $2k/year if I’m spending over $111k/year, but it’s also doesn’t seem like anything to jump through a lot of hoops about. It’s kind of “meh” to me?
All depends on how you look at it. Your taking an effective tax rate view of it, which is fine. I personally urge retirees to take a marginal tax rate view. For example... Say a IRMAA threshold level is at $111k. This is tax cliff which means you owe the full penalty if you show $1 over that threshold.
So say your income need/withdrawal is $113,000 and you now owe $1,000 extra for medicare. Sure $1,000 on $113,000 is less than a 1% rate. But in reality, it's not the $113,000 that caused you to owe the penalty, it's the $2,000 over $111k. In this context, the penalty alone was a 50% penalty.
I would personally try to strategically avoid this penalty in this instance but everyone's different.
But how do you calculate the magi that exactly? Who knows how much interest dividends income they will have before the end of the year?
I've heard that even prior to going on Medicare, one must be careful with Roth Conversions pushing you into a higher income bracket because you could be subject to an increased Medicare tax. Is this true?
Yes but this would only be for earned wages. So this will not apply to the vast majority of retirees
David, not only for medicare should you be concerned, but a few years ago during Obamacare and the PTC (Premium Tax Credit) that I once qualified for, I lost all my PTC because I did a ROTH conversion. When doing so, you must include the ROTH amount in adjusted gross income. So where I once qualified for lower premiums, once I "included" the ROTH conversions, that made me look super wealthy, and I became disqualified. I was not able to spend that money, I was merely taking it from one bucket and putting it into another. I agree the tax must be paid on the ROTH when converting, but the federal govt. should've allowed poor folks like me to not loose my ability for health insurance by allowing an adjustment for conversions. They never asked what I had in the bank, but as soon as you show it, you are calculated out of the game. If you inherited a million dollars, but only earned 25,000 you still can get the premium tax credit. Why penalize someone who's got retirement income, AND you can't spend it because you're not of age yet. You gain no cash benefit upon conversion, and it doesn't put any immediate money in your pocket, and in fact, it cost you more in taxes when you do the conversion, and you actually have less disposable income for which to afford health insurance, thus more qualified for the Obamacare insurance. This was one major fault in qualifying for the PTC. But in hindsight, I'll get my due, when I end up w/ a million in ROTH investment and the government gets none of it.
@@SafeguardWealthManagement What about the last two years before you start Medicare? Wouldn't Roth conversions in years -2 and -1 affect Medicare rates in years 0 and 1? (Unless you can wipe the slate with a life-changing event of course)
Doesn't take much of a conversation, to push a Medicare premium increase.
Single person with Year end distribution, doesn't leave much room for conversion, until you hit the first IRMAA premium step.
Couple of years ago, I sold my small business, a one time event. Had to pay max IRMAA of around $548 per month. Ouch
Craig, it is too late to now but selling your business would be a life-changing event that would have allowed you to appeal the charge and possible have had it reversed.
Your best bet to do Roth conversions is before one of you leave to be with the Lord. The tax brackets are much better for a married couple than a single. I have warned my wife, single you are going to have to be smarter with your money.
I feel like it’s my first day in prison, and I’m told “You can get screwed now, or you can get screwed later. Which do you want?”.
Is the IRMAA MAGI re-evaluated by SSA every year? We've done large conversions for 2020 and 2021 already, and I will go on Medicare in 1st quarter of 2022. No more Roth conversions will be needed in 2022 and beyond. Wife is already on SSI and Medicare. MAGI will be in the $350K range for 2020 and 2021. Spouses retirement plan covers the Part D insurance for both of us via its own private coverage paid out of her state retirement pension. So I assume that per your chart, we will be hit by the IRMAA Increases for the both of us on part B only in 2022 and 2023 and then in 2024 the IRMAA impact should be greatly reduced or eliminated, when the major sources of income are SSI and the Wife's state pension plan, plus inherited IRA RMD for 2022. LMK Please.
Not an expert, but I recall that they don't lower it unless you request it.
It is my understanding there is a form to appeal it if your income changes.
Well done!!!
Thanks Tor!
Thank you for a very well done video. Are the zone boundaries inflation adjusted? A search on the web uncovered this:
In 2020, the income brackets that determined Medicare IRMAA costs were indexed according to inflation. This change could mean fewer Medicare beneficiaries will pay IRMAA surcharges, and those who do will most likely see the rise in their Part B and Part D premiums slow. Medicare IRMAA costs could impact your 2020 Medicare premiums.
Is that accurate?
I don’t believe this applies to people who are retired and not working. Case in point, they hit me with an IRMA premium penalty because I worked most of 2019 and my income threw me into the penalty level. I filed an SSA-44 indicating that I retired in November of that year which exempted me from the IRMA penalty.
It will certainly apply to those that are retired. Especially with large Roth Conversions. Working is an exemption to the penalty though
So between playing whack a mole between income taxes, Medicare hits and RMDs, you are pretty much screwed for Roth conversations except for the window between 59.5 and 63.