A combination of initial RMD postponed from 2024, 2025 RMD, and capital gain distributions pushed us into the IRMMA range for 2025. I don’t think any of that can be considered a “qualifying life changing” event so we’ll have to take the Medicare premium bump in a couple of years.
Edit - looked at the wrong surcharge, we’re going to be paying much more. About $2000 extra for the year for the two of us.
I thought the part B & part D combined monthly surcharge per person was almost $100 for the first income threshold? Or maybe this is different with Medicare advantage plans? I have not looked at the pricing for those.
I will be paying it myself when the time comes in a few years. It takes some advance planning to look at the interplay among the different taxes, their brackets, phase outs, LTCG, etc. Ideally, if you’re going to convert to Roth and trigger IRMAA, you would want to convert up to the upper limit of a surcharge range, but easier said than done finessing each component.
As mentioned earlier (somewhere), besides the tax arbitrage, conversions will reduce your tIRA and thus, RMD. For example, for many with a large tIRA balance, RMD’s can put them into IRMAA territory, particularly when both spouses are taking RMD’s. (the ‘tax bomb’ noted by bus driver)
If you can do some conversions in the early years before RMD’s hit, any bomb will be smaller. And don;t forget, those tax brackets halve when the first spouse dies yet RMD’s keep coming.
Roth conversions are no longer an option for us, long retired in our 70’s, just dealing with pensions, SSA, IRA’s and 401(K)’s and mutual funds and stocks and such. A substantial share of my assets were inherited, including Mom’s IRA before the ten year limit. Selling anything now would be massive capital gains. Postponing much of the initial RMD in 2024 seemed like a good idea at the time. In retrospect, maybe not.
So sounds like my best financial planning involves keeping husband alive as long as possible.
It can very much surprise some people how they are in a higher tax bracket in retirement than while working. Your list of income streams, including your inherited IRA, can definitely add up. Even more so for people who inherit an IRA these days (post secure act).
The Roth conversion may pay off after the first spouse dies… which will hopefully be many decades from now!
This was the issue that is causing us to defer my RMD until next year. DH retired and we were able to get the IRMAA exception this year. It made a big difference. And that is why we are working to keep our income down this year so we can apply again next year. After that taxes and IRMAA are going to be ugly.
I think it’s somewhat psychological too. We were in a high tax bracket when we were working, but we were earning decent money and could afford to pay the taxes. We didn’t “feel” the pain as much as we will now, when we start taking out that money we didn’t pay taxes on and have to pay taxes on it while not earning (except passively) any longer.
one thing many do is to convert $$ to fulfill a tax bracket or IRMAA cliff.
For example, the 24% bracket goes up to $403k MFJ. If your “pensions, SSA, IRA’s and 401(K)’s and mutual funds and stocks and such” total $300k, then you could convert $103k more and remain inside the 24% bracket. (ignoring qualified, cap gains, deductions/credits for simplicity) That would lower future RMD’s.
Of course, that would also put you in a higher IRMAA category for one year. So perhaps you only covert up to the IRMAA Tier limit of $342k. (But don’t go one dollar over!)
That’s what both my husband and DDs financial planner told her. Better to take the tax break now. And get the employer match as well. She also has a Roth.
One of the other things we are doing with my RMD is making several donations from my IRA. I got Schwab to send me a checkbook and I make the donations directly from the IRA (wrote 3 checks today). So that will lower what I have to take as income (and we are happy to donate).
IMHO it might be worth investigating if your RMD in future years won’t put you into IRMMA range. If you have a FA very familiar with your situation or tax person. IDK if you can get answers from federal sources, but someone here might have some insight and experience with IRMMA and not having continuing years reaching IRMMA and therefore avoiding the Medicare premium.
Defer what? RMD? IRMMA-triggered increased premiums? I don’t think that’s possible. We only hit the income level for the one year because essentially we had most of two years’ RMD plus some substantial capital gain distributions on a couple of my mutual funds. Based on our estimates, that should be a one time only situation.
We don’t meet any of the qualifying life events for an exemption. “Life-changing events include marriage, divorce, the death of a spouse, loss of income, and an employer settlement payment.” One year bump in income from investments etc. do not count.
We are making QCD’s from our IRA’s to help reduce taxable RMD. We also are using both Federal and state tax withholding on the RMD’s to cover our safe harbor amount. Of course that is still taxable income, but at least we don’t have to make quarterly estimated tax payments.
I never suggested it was devastating, or even a problem per se. Just joining in the discussion about what kind of retirement income could trigger it. We are very fortunate with our income streams. Granted part of it is because I no longer have my parents and they were good investors.