Quote:
Originally Posted by kbace6
We are in the planning stages for some retirement income and watched a financial video on YT that alluded to an increase in the cost of medicare depending on your income.
The question I have for you more seasoned folks is, have any of you been on the edge of income where you paid a particular price for medicare one year and then more the next year due to a spike in your income, and then the cost of medicare went back down again the next year because the spike in your income may have been just a one-time thing?
I'm not talking about the government changing the costs, but rather where your individual situation was the catalyst.
Thank you in advance for your informed answers.
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IRMAA's two-year lookback at your MAGI can cause the income threshold to sneak up on you. Cross it big or cross it by only a tiny amount -- no difference -- IRMAA is lurking there to get you -- two years later.
(I recently read an article that explained IRMAA pretty well. I will see if I can locate it and link it in here later.)
We reach Medicare age at 65, but the age when the RMD kicks in is now 72. (They keep raising the age, so that is good thing for you if you have IRAs.)
There are a couple of things that might help you dodge IRMAA:
If you have IRAs, you might want to look into converting them to Roth IRAs, especially while you are in the years between Medicare and the RMD and have retired to a lower income for a while, with other taxable sources of income outside your tax-deferred accounts.......
It could make sense to take a tax hit earlier in retirement, ahead of the RMD age. If you don't need the income, the conversion to Roth allows your money to continue to grow but withdrawals will not be taxed. If you decide to do this, get the advice of a tax accountant, so you take the steps perfectly. (I did conversions for a while. I regret not doing more of them.)
Once you get to RMD age and find that the RMD is going to cause you to get hit with IRMAA -- and if you are charitably inclined and/or maybe would rather give money away than give it to the government -- you can take your RMD as a QCD (Qualified Charitable Distribution). A QCD has certain steps that must be taken, but when done correctly, the donated amount is not included at all in the AGI. (A QCD must go directly to a qualified charity. It cannot go to a donor-advised fund.)
Disclosure: Take this as a starting point and get advice from a qualified accountant before you do anything. What I am giving you here can be used as a starting point with enough vocabulary and basic info to prepare for a discussion with a professional. For all you know, I could be your old high school English teacher.
Boomer
PS: Later, I will try to find that article I mentioned.