[Boilerman]

Originally Posted by CoachKandSportsguy

My financial expertise is in building models for future decision making about whatever the topic is, doesn't matter, there are thousands of financial decision topics.

So, since I (Sportsguy) am now retired and my wife (CoachK) is still working but will retire next year, I have built out the retirement model even further to include medical insurance premiums and Roth Conversions to understand when to take Social Security and what is the status of our IRA savings and investment savings to weather the future expenses in TV, for taxes and a cash flow statement to see when additional withdrawals may be required. (I have not factored in the latest increase in AUTO insurance premiums )

After researching IRMAA, a hot topic du jour for some, I modeled out a married couple, with both at current max social security, again maybe us , with IRAS with RMDs, as everyone has. With the model being dynamic, the starting point is we are both 65 at the end of this year, start taking Social security on Jan 2025, when I qualify for full retirement benefits for both. At that time, i am assuming 5 k in additional taxable income above SS from any other sources, investments, part time work, etc.

Using inflation and other annual increasing assumptions (IRMAA threshold increased at nearly 6 % and Social security increased at 4%+ for CY24) and market returns for investments are 6% out for 20 years, the effect of RMDS can be seen in AGI and in taxes and tax brackets.

By entering an CY22 ending IRA balance as a total for a married couple, here is the age and year we would have to pay IRMAA penalties based upon current RMD percentages, based on max SS, RMD and taxable income year by year

Conclusion: Its not worth ROTH conversions and paying taxes now to save future IRMAA penalties in the future for married couples with IRAs less than $3,000,000

certainly its a non issue for us, and i suspect many others.

I am more than willing to share the workbook after I detail out the IRMAA penalties by taxable income bracket, I just used the max penalty in the example, and since its per person for a couple, it gets a bit detailed to calculate out which person in a couple, so i just doubled the per person penalty. . (may need to research the married couple scenario a bit as well), however, i am still looking for a CFP willing to review it for reasonableness. There are a few financial types here who can PM me to discuss validation of formulas, but not assumptions)

But there are several reasons for doing Roth conversions besides avoiding IRMAA. Like being pushed into higher tax brackets. Or being subject to NIT. Or the risk that tax rates will be higher in the future than today’s rates. Or the risk that Social Security benefits might be means tested in the future. Or the psychological benefit of having tax free money to spend from a Roth (my parents refuse to spend their IRA money because of the taxes they would pay.) I’ll say that all these reasons mostly apply to large IRAs, but I don’t agree that $3M is the threshold.