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Roth Conversions and Medicare
Old 09-05-2010, 08:44 AM   #1
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Roth Conversions and Medicare

I was reading on Vanguard last night and found this to be interesting. It seems that if you do Roth conversions during the 2 years before Medicare it will increase your cost of Medicare.as it increases your income. I think I read it right but maybe we can get some thoughts on this.

http://www.kiplinger.com/features/ar...are-costs.html

http://fairmark.com/2010/07/15/roth-...icare-premium/
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Old 09-05-2010, 12:06 PM   #2
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The Roth conversion calculus has more wrinkles that a hippo. Note the caution regarding the Minimum Required Distributions (MRD).
It boggles the mind when you start looking at all the variables, not the least of which is life expectancy.
So-o to figure out an optimal Roth conversion strategy you only need to know items like: life expectancy, marginal tax rates over your life, understand the trade-offs in using IRA funds withdrawals ahead of MRDs instead of your taxable accounts to fund annual expenses, etc, etc, etc.
Maybe the best line is to the one is that the Medicare premium kicker is not likely to change a sound Roth conversion strategy.
Managing the Roth trade-off analysis is starting to feel like w*rk ;-)
Nwsteve
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Old 09-05-2010, 12:20 PM   #3
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Quote:
Originally Posted by 73ss454 View Post
I was reading on Vanguard last night and found this to be interesting. It seems that if you do Roth conversions during the 2 years before Medicare it will increase your cost of Medicare.as it increases your income. I think I read it right but maybe we can get some thoughts on this.

A Roth Conversion Boosts Medicare Costs - Kiplinger

Roth Conversion and Medicare Part B Premium Fairmark.com
A Roth conversion from 2 years before Medicare, to anytime once you have begun receiving Medicare may or may not increase your part B premium. I have posted about this for several years. The magic number is a certain AGI as adjusted figure, with tiers of Medicare premium boost depending on that adjusted AGI. The main adjustment is to add back non-taxable interest income to AGI. Thus, deductions on Schedule A do not help with this calculation.

Depending on your income before the conversion, and the size of your planned conversion you may be able to convert an amount yearly and still stay below the thresholds. My memory is that for a single taxpayer in 2009. the Adj. AGI threshold is $85,000. However, best to check this, as well as to check the threshold for 2010, if it has been announced, before you make plans.

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