[Caymus]

Originally Posted by M2inOR

I'm going to be 70 this year, and started my Roth conversion planning 3 years ago when I moved to The Villages. Tip to start it from my Fidelity advisor.

After reading many articles, and doing some calculations, I got a 2nd opinion from Craig Wear. His business is to provide you with a multi-year conversion plan for a fixed fee after looking at your entire situation.

A Roth conversion does not make sense for everyone.

Yes, you will pay more in taxes during the conversion. Yes, the yearly process may subject you to IRMAA, raising your Medicare premiums. Yes it will cost you $$$ in the short term.

For me, it made sense in the long term. Wife and I have both significant IRA accounts AND taxable investment accounts. We paid taxes from our taxable accounts so full amount of IRA converted to Roth were maintained.

We've not taken Social Security yet. I just applied for benefits to start this year; wife will do it next year. Meanwhile, got 8% increase per year plus cost of living increases since deferring taking benefits.

The trigger for us was when we learned RMDs would be significant for us.

Finally, we have enough to live on well into our 90s. Our children and grand children will benefit from this conversion as they will get this money tax-free when we are gone from this earth.

Advice: read the regulations, and hire a conversion expert to make a plan for you.

I have a "mental block" trying to avoid IRMMA surcharges which I need to resolve. Maybe I will need a Psychoanalyst for that instead of a CFA or CPA. .

I added Craig Wear's Podcast to my list.

[M2inOR]

Re:IRMAA

Better to pay now, as with Washington, there's never enough. More will be needed in the coming years. Medicare premiums will increase, even without IRMAA. IRMAA will also increase.

With tax-free withdrawals from Roth accounts from principle and growth in the future, my plan is to worry less about the future increases.

At Kindle and Kindle Unlimited there is a helpful book from Craig Wear that helps overcome the psychological block.

[Packer Fan]

Originally Posted by CoachKandSportsguy

Thanks for your analysis of the difference in ages explanations. . seems that this piece of information is where the differences lie, and where several posters may assume that the rule they were told was based upon their current age or situation. .

since we are over 65, seems the 5 year rule would apply.

So the issue is when to take the income. . and what are you avoiding. . as you are paying taxes now versus in the future.

So by taking 401K now, and not taking social security for a year or two, one is increasing social security basis, and reducing RMD in the future, assuming that you have enough income to support the expenses, without getting hit with excess taxes while taking social security.

If you are making Roth conversions it should be long term anyway, so not sure why people obsess about this.

That said, I HIGHLY recommend listening to this Podcast-
The Retirement and IRA Show with Jim Saulnier and Chris Stein. It is highly entertaining and informative. One of the best podcasts out there. If you look back they have whole episodes on this subject.

[Boomer]

Originally Posted by Caymus

I have a "mental block" trying to avoid IRMMA surcharges which I need to resolve. Maybe I will need a Psychoanalyst for that instead of a CFA or CPA. .

I added Craig Wear's Podcast to my list.

Caymus,

I hearya.

Hello my name is Boomer — once burned. I learned.

You do not need a psychoanalyst, but I understand your angst about IRMAA. I doubt you need the advice I am about to write, but that’s OK. I feel like writing it anyway. (Confession: Avoiding work I should be doing instead.)

(Please note that my use of ‘you’ in the following info does not mean I am addressing Caymus alone — who probably already knows all this stuff. It’s just the easiest general form of address in informal writing.)

Anyway, here goes:

IRMAA’s thresholds are wicked traps, either/or. Once the taxable income crosses one of those thresholds, by even a small amount, IRMAA is gonna getcha — 2 years later.

That is one reason why it can be a good idea to do conversions to Roth along the way. There might be a sweet spot to be found…….after retirement but before Medicare age or before RMD age, especially if immediate post-retirement income drops.

Once RMD age arrives, it might be a good idea to start projecting taxable income early in the year, in case you might want to head off IRMAA. Try to think of everything that has changed during the year……

Did you get…..

The SS increase?

Dividend increases on stocks held in taxable accounts?

And, now, for the first time in years, more significant interest on CDs and/or money markets in taxable accounts?

Did you sell a primary residence (that you had lived in for at least 2 years) for a huge gain, part of which exceeded a clear profit above the exclusions of $250,000/$500,000? (Always keep records of improvements to close that gap if you ever need to. This can be especially important if selling a secondary residence, which will not have those rather generous exclusions on any gain.)

Did you capture a gain by selling a stock held in a taxable account?………

(That’s the one that got me. I had never heard of IRMAA. That gain I grabbed was very nice, until…..the letter arrived, 2 years later……..

And that was what turned me into some kind of evangelist blathering about how to dodge IRMAA.)

If IRMAA is looming and you owe the RMD and want to avoid the Medicare premium increase, you can decide to give the income that exceeds an IRMAA threshold to a qualified charity in the form of a QCD. (Qualified Charitable Deduction)

Just be sure to follow all the rules and keep good records. The amount you give away with a QCD does not get added into taxable income.

For those at RMD age and who have always been charitably inclined, but now use the standard deduction since the tax law changes did away with the old way of handling charitable contributions, the QCD can be especially important to know about…….

But remember that the QCD does not apply to donor-advised funds. (I wonder how much this has affected contributions to donor-advised funds. My guess is there is lobbying going on to include them.)

Sooo, there you have all I know about avoiding IRMAA. At RMD age, the decision could boil down to giving the money to the devil you know, aka, the government, or giving it to a qualified charity of your choice.

That’s all I got on this. I will check back in to see if I have been corrected because although I have some letters I could put after my name, they have nothing to do with financial stuff.

Boomer

PS: Almost forgot to say that I am pretty sure married filing separately cannot avoid IRMAA. Does not seem fair. Heaps insult upon injury. Maybe I am wrong about this. Somebody here will correct me if I am wrong about any of it. I thank that person in advance.

[M2inOR]

Originally Posted by Boomer

...
Boomer

PS: Almost forgot to say that I am pretty sure married filing separately cannot avoid IRMAA. Does not seem fair. Heaps insult upon injury. Maybe I am wrong about this. Somebody here will correct me if I am wrong about any of it. I thank that person in advance.

Yes, there is help for those filing separately or as a single:

IRMAA 2023 for Medicare Part D and Part B | Humana

[Boomer]

Originally Posted by M2inOR

Yes, there is help for those filing separately or as a single:

IRMAA 2023 for Medicare Part D and Part B | Humana

Yes, I know that filing jointly gives more leeway in overall income before both of you get hit by IRMAA.

But somewhere along the line, I picked up the idea that if the income that is throwing you over the line is in one name only, IRMAA will drag both of you across the threshold anyway. (I hope I am wrong about that. But I am not so sure I am.)

Maybe there is somebody here who knows for sure and will tell us.

That 2 year lookback comes with assumptions as to what the IRMAA thresholds will be in 2025 based on 2023 income.

I used to do conversions to Roth -- should have done more. My accountant asked me why I wanted to pay my kids' taxes. I told him maybe I was saving the money for me to tap for me, later in life, tax free. I really liked my old accountant, but in that case, I thought he was being a bit myopic.

Boomer

[M2inOR]

Boomer, that chart does indicate thresholds for single filers as well as couples filing separately.

The thresholds are lower, and may still help some people.

Unfortunately, federal tax rates might be more costly to those single and separate filers.

TurboTax could help some figure out what's better.

Unfortunately, math and problem solving are required.

[Boomer]

Originally Posted by M2inOR

Boomer, that chart does indicate thresholds for single filers as well as couples filing separately.

The thresholds are lower, and may still help some people.

Unfortunately, federal tax rates might be more costly to those single and separate filers.

TurboTax could help some figure out what's better.

Unfortunately, math and problem solving are required.

I think I am not communicating my specific question clearly.

If one spouse brings in significantly more income than the other…..

……and both are on Medicare…..

……and their joint income exceeds IRMAA….

both have to pay the higher premium.

Therefore…..

it just seems reasonable that married filing separately could avoid the higher premium for the lower income spouse — if that spouse is under the IRMAA threshold but the other spouse is over.

I realize that the operative word in that question is ‘reasonable’ and married filing separately usually does not help — in general, so the numbers have to be run both ways………and we pay a CPA to do that.

(When I drop the stuff off at the accountant’s office, I know they must love how I do things. Everything they need is there, and it’s all numbered and cross-referenced. I know they have clients who drop off shoeboxes full of papers. But that’s not me.)

Could I handle Turbo Tax? Of course. But I don’t want to. Besides, I want that CPA’s signature.

Anyway, about my specific question above — I am even confusing Google with it. Although I have learned other interesting tax facts from my search, I cannot make “The Google” talk about this one. (And, btw, I taught research technique — back in the prehistoric era when Google wanted the Boolean search method. I also taught how to recognize legitimate sources for information.) (sigh)

Oh well, my question is actually a product of my tendency to think too much. And, for now, it’s moot anyway.

Thanks for trying to help though.

Boomer.

[M2inOR]

The way I interpreted things was that SSA bases IRMAA based on income of the IRS tax filer, by their social security number.

That return wouldn't necessarily show the joint income, of income sources were categorized and identified separately.

That joint income complicates things, though I have seen people set up income accounts separately instead of jointly. If done with diligence it could work.

Yes our tax and benefit systems aren't simple.

I would find it difficult to separate our accounts do to income from our joint, taxable accounts.

[Caymus]

Originally Posted by Packer Fan

If you are making Roth conversions it should be long term anyway, so not sure why people obsess about this.

That said, I HIGHLY recommend listening to this Podcast-
The Retirement and IRA Show with Jim Saulnier and Chris Stein. It is highly entertaining and informative. One of the best podcasts out there. If you look back they have whole episodes on this subject.

I have been listening to them for a few months now. As you wrote they are very informative and appear to give honest answers. I may consider becoming a client if they open to new customers.

[PugMom]

Originally Posted by CoachKandSportsguy

According to my Fidelity advisor,

The 5 year Roth IRA contribution - withdrawal clock starts when the account is opened,
even if there is no money in the account. . .

So for anyone who hasn't opened a ROTH ira for for conversions, and that is in your plans, open the ROTH IRA today and get the tax free penalty free clock starting now!

If others have differing opinions from their advisors or tax advisors, would love to hear them to be sure i am not relaying bad information. .

not a CFP guy

they've said the same to me

[PugMom]

Originally Posted by CoachKandSportsguy

I don't remember seeing a TOTV poster named michael whitaker??

Now what am i missing?

inside joke, i think there's threads which cover this guy & his 'company'. am pretty sure he's one of those that promote the free dinner. i tried searching here, but cannot locate the threads

[Boomer]

Thanks for the re-boot of this thread. I am going to give it a re-read and also check out the podcast that was mentioned.

Meanwhile………CONVERT! Younger boomers, CONVERT, IF YOU CAN!……

or, at least look into what I am talking about.

Boomer of the Hindsight

[ElDiabloJoe]

I'm following my Fee-Only investment advisor's advice. She is also my CPA for tax filing. Since I was aged 50, she advocated opening a Roth and slowing moving funds each year from my IRA to a Roth, moving only as much each year as to not push me into a higher tax bracket for that year. Whole thing oughta take about a dozen years.

[Stu from NYC]

Originally Posted by PugMom

inside joke, i think there's threads which cover this guy & his 'company'. am pretty sure he's one of those that promote the free dinner. i tried searching here, but cannot locate the threads

Maybe cousin brucie knows him.