If we enter a bear market–say like Sept '08-March '09–that could be an excellent time to convert as much as you could bear to Roth. Usual caveats about tax brackets, IRMAA, etc.
I couldn’t hazard a guess to the other questions w/o knowing ages, the #s in pension & IRA accounts, your current spending, tax brackets now, etc
Forgive my ignorance, but isn’t it bad to move things around when the market is down? Don’t you just let it ride? Maybe I’m not using the correct terms.
You are technically converting a smaller amount so your tax liability is smaller. Just pay your taxes out of another source without selling any IRA funds.
I’m “laughing” at your Medicare statement, bc our “hedge” against Medicare failing is our federal employee health benefits, which were a significant part of why I worked for the government for many years. Right now our position is we may not take Medicare part B because we have very good insurance even if we don’t. BUT, I suspect that may change.
As Bunsen said.
You would be withdrawing funds that had declined in value (I think it was 50% on March 9, 2009 maybe?), and therefore paying taxes on this reduced amount, in the hopes that the market would recover the day after you converted (HA!) and you would never owe taxes on the future gains realized on the converted funds.
Let’s say you did not convert IRA $ to Roth when the market was down, and the market then recovers to its pre-decline levels…To make it easier, say a $100K IRA drops to $50K in value. If you converted $50K, you would owe tax then but never again on any earnings.
If you did not convert and the account fully recovered in a few years to $100K, you would now be paying taxes on your RMDs from that $100K and on all future growth on that $100K.
I have not explained this well at all.
It’s good you are considering various options. But to prep for the FA meeting, your big task will be to gather all your info and have a good way to present it. You may want to send it ahead of the meeting.
Do the math - How much income will you get in those 10 years while you wait vs. getting 12K more a year starting at age 72 until your death (keeping in mind current US life expectancy is 77-78 years old).
Let’s assume you get $50K a year if you take it at 62 and then $62K a year at 72. (I am making up the $50K amount as I don’t know the real number - just using it for an example)
$50K for 17 years is total $850K
$62K for 7 years is total $434K
Add in the assumption that you can live without that $50K (since you are willing to forego it for 10 years), and you could invest $50K a year for those 10 years and get interest on it as well. Interest alone on this could be another $100K in your pocket.
I actually understood that! Thanks!
Oh, my numbers are much smaller, and I would only take the pension in the next year if we needed it to pay bills in order to avoid dipping into the IRA. No way that it’s extra that we could invest. I wish.
It’s definitely worth more if I let it sit until 72 and working the numbers to age 90, more than $100k more. Both my parents lived into their 90s so I am planning to be around 30ish more years.
Thanks, all. It helps to bounce it around.
It’s definitely something to worry about because it’s exactly what has happened in the private sector.
My husband worked his entire career for one company. For the pension, one. But also because of the promise of retiree healthcare in order to retire early and through retirement. It’s all changed and the little that they offer now could be gone at any time.
Yes, I believe you may be correct about Advantage and it is not what I want. My in-laws have it and can’t switch now because of cost due to health issues and need to take a physical at this point. They are very unhappy with their coverage. My husbands grandparents had to sell their house before Medicaid would pay for a state nursing home in Tennessee back in the 1980s - so, not having to do that now surprises me. Maybe it’s a state thing. Anyway, you don’t want to go to a state nursing home in Tennessee!
I have come to resent Advantage plans that I will no longer accept a patient on such a plan, example 1, I must submit weekly notes every session, which is time consuming and expensive. 2, after 6 months arguing about a patients need for therapy, I was paid 200, for 6 months of treatment. It is just not me, it is so many in my profession.
An MA provider must pay for procedures that Medicare pays for. They do not have to approve the procedures, though - and if they choose not to approve, they will not pay. Original Medicare doesn’t require approval. It is for this reason that I will save extra for medical. I may need to pay for procedures myself. If my doctor feels that I need a procedure, I want to be able to get it. If that means that I must pay for it myself, I want to have money set aside for that purpose.
In recent years, my father had to pay down the nursing home with all his savings (which at that point was not much) before Medicaid would pay. The rule is not state specific and has not changed much - you can’t have assets and get Medicaid to pay for a nursing home (which will accept Medicaid as not all do). There is some exception now about having a living spouse (or disabled adult child) who still needs that house as a place to live. Note the nursing home stay needs to be permanent - what they would consider your final home (they will not pay for a short term nursing home stay).
Based upon what others were saying, I assume that the assets placed in an irrevocable trust set up more than 5 years before Medicaid is needed would not be considered your assets in that calculation. But, that could be changed by Congress (or possibly by regulators if there are any left).
“In New York, the home, personal belongings, and one car are exempt from Medicaid assets.”
The maximum monthly income is 1800 for one and 2400 for two. Most of us who will get the maximum SS will not be eligible for medicaid even if we moved all of our assets into a trust. Can we put our SS payments into a trust?
My college roommate was so frustrated trying to manage her parents’ finances when they were on Medicaid.
Her mom was in a nursing home, and her dad was still in their small family home. The Covid stimulus payments put them at risk of having too much money! Then she got contacted by an attorney working on a land sale and learned her parents owned a small easement from decades ago. It was so stressful to her, because she said if you had one nickel too much they’d kick you out.
A cliff approach for this type of program seems wrong to me.
@kelsmom, I guess the issue that @bookworm raises is that some MA plans must be doing what some of the HMOs did/do. They systematically deny claims, request lots of justification, and are non-responsive in the hope that a number of the claimants will get tired and give up. With enough persistence, they eventually do pay, so they technically cannot be accused of not paying for Medicare-approved procedures but their profits go up if 30% of claimants give up and if they delay those payments they do make for a year. When my father had a stroke/got lung cancer as he was recovering and my mother went into the hospital for Guillane-Barre syndrome at the same time, I hired a person whose job was getting claims paid by recalcitrant health insurers. She was worth it.
In Massachusetts, the major insurers BCBS, Harvard Pilgrim and Tufts have been very good at paying claims, but I think some of the for profits follow the other model (deny, delay, throw up roadblocks, be unresponsive).
Great reminder. I jumped on the covid downturn to do Roth conversions at a “discount”.
You are right. Unicare (now Wellpoint?) was a for-profit company forced on many teachers in MA. In fact, Gov. Baker was on the verge of allowing it to be the only option for teachers until there was a huge grass-roots campaign to object to sending all our MA public money out of state to a for-profit nonsense company. I would correct only “get tired and give up” to “get tired, die, give up, get too sick to keep fighting, or negotiate the bill directly with the provider”. Meanwhile, these crooks get the float on the money.
It is relevant to this thread because “how much do you think…” depends DIRECTLY on whether the for-profit healthcare “industry” retains/increases its outrageous hold on USAmericans in the next decades.