Future taxes and IRMAA

L

lawman

Thinks s/he gets paid by the post
Joined
Jul 26, 2008
Messages
1,213
Location
Weatherford, Texas
I am 67 years old. I want to avoid paying IRMAA tier 2 in the future if possible. What I want to do if I can is to take as much money from my Rollover IRA as possible without throwing me into tier 2 IRMAA table. We have pensions and investment income but neither myself or my wife have jobs. Can I take $25,000.00 from my rollover IRA and put it in my Roth IRA?
 
We are in the middle of a financial plan with a guy from Schwab to see what the optimal Roth conversion amounts to minimize taxes and IRMAA payments would be. We are also concerned with the widow tax trap.
I doubt anyone here can give you a reliable answer, especially with the limited information you gave. There will be a variety of opinions.
I suggest you use a financial planner that includes tax considerations in the plan. Ours is free, but most will charge from $300-$2000.
 
Dash man said:
We are in the middle of a financial plan with a guy from Schwab to see what the optimal Roth conversion amounts to minimize taxes and IRMAA payments would be. We are also concerned with the widow tax trap.
I doubt anyone here can give you a reliable answer, especially with the limited information you gave. There will be a variety of opinions.
I suggest you use a financial planner that includes tax considerations in the plan. Ours is free, but most will charge from $300-$2000.
Click to expand...

I use Schwab for all my investment accounts. Who qualifies for free financial planning?
 
lawman said:
I use Schwab for all my investment accounts. Who qualifies for free financial planning?
Click to expand...
Ask Schwab. IIRC their "Pinnacle" level customers get a specific rep assigned. Balances need to total $1M. So if you have a rep ask him/her. Otherwise you are probably stuck with the general support phone number.
 
OldShooter said:
Ask Schwab. IIRC their "Pinnacle" level customers get a specific rep assigned. Balances need to total $1M. So if you have a rep ask him/her. Otherwise you are probably stuck with the general support phone number.
Click to expand...
I've had free "rep's" assigned to my account at Schwab for "years". Some were ok and other's, not so much. Overall, I've found the general support folks to be "as good" or even better than my assigned rep. If I can't get answers or don't feel comfortable with what they tell me, I'll call my rep, but that's pretty rare. YMMV
 
Last edited:
lawman said:
I use Schwab for all my investment accounts. Who qualifies for free financial planning?
Click to expand...


My accounts were transferred from USAA, and we are allowed free financial plans. Their normal charge is $300. I’d ask your guy if you can get one free of charge. He might make it happen.
 
lawman said:
I am 67 years old. I want to avoid paying IRMAA tier 2 in the future if possible. What I want to do if I can is to take as much money from my Rollover IRA as possible without throwing me into tier 2 IRMAA table. We have pensions and investment income but neither myself or my wife have jobs. Can I take $25,000.00 from my rollover IRA and put it in my Roth IRA?
Click to expand...

Did you do your tax return last year ?

I'm not sure why you cannot look at your income from last year and see how much room there exists to do roth conversions.

I just add up our interest, dividends, capital gains, pension, etc and then see how close we are to the IRMAA limit, and do roth conversions to get closer. I Leave a little room in case of a surprise. Does force me to do Roth conversions at the end of the year.
 
My questions have been answered..I just didn't realize that I can convert from IRA to Roth without limitations...How can I delete this thread?
 
It is not that simple. You will have to pay tax on that conversion. And it counts against IRMAA limits, at least in 2 years it will, assuming the rollover and all other "income" exceed whatever the IRMAA 2 (or IRMAA 3) bracket is that year.
 
CRLLS said:
It is not that simple. You will have to pay tax on that conversion. And it counts against IRMAA limits, at least in 2 years it will, assuming the rollover and all other "income" exceed whatever the IRMAA 2 (or IRMAA 3) bracket is that year.
Click to expand...
Yes, I can make up to $204,000.00 without going to tier 2..What I was unsure about was regarding Roth conversions..My goal is to be able to avoid paying IRMAA penalties once I am required to take RMD's
 
Two considerations that haven't been mentioned above, IRMAA is not on taxable income, you have to add back some items. 2 come to mind, 1) any muni income that isn't taxable and 2) If you are drawing SS and only a portion of it is taxed. DW is drawing SS and I have to use the full amount for the IRMAA computation not the 85% that is taxed.

The other consideration is someone once said don't let the tax tail wag the dog. If you have to pay higher IRMAA but can save more in future taxes, not a deal breaker for me.

For 2023, CMS.GOV says you can earn up to $194K with no IRMAA, up to $246K will cost $72 per person per month. If you will save more in taxes by converting why not convert ?
 
Last edited:
I think IRMMA is determined by income tax returns 2 years prior to the current year. So, doesn't this mean 2023 tiers are determined by 2021 tax returns? My premium tier hasn't changed even though the table based on project 2023 taxes would put me at 3 or more times my premium last year.

Of course, the IRS hasn't even assigned my 2021 tax return to a manual processor yet (something they do when one of the joint dies before they get to the processing). Maybe they are keeping the refund to apply to the non-charged IRMMA but just not telling me.
 
Tadpole said:
I think IRMMA is determined by income tax returns 2 years prior to the current year. So, doesn't this mean 2023 tiers are determined by 2021 tax returns?....
Click to expand...

Yes. MAGI in 2021 affects surcharges for 2023.
 
Last edited:
lawman said:
That $206,000.00 assumes 0% inflation for 2025
Click to expand...
Actually, it assumes 0% inflation between now and August 2024. It could be higher, or we could have deflation and it could be lower. I always give myself some margin for error, so I wouldn't go right up to the currently estimated limit. But, for me, the tax benefit of Roth conversion now versus RMD later is marginal in any event. So I'm not looking to squeeze out every drop.
 
Gumby said:
Actually, it assumes 0% inflation between now and August 2024. It could be higher, or we could have deflation and it could be lower. I always give myself some margin for error, so I wouldn't go right up to the currently estimated limit. But, for me, the tax benefit of Roth conversion now versus RMD later is marginal in any event. So I'm not looking to squeeze out every drop.
Click to expand...

I’m sure you have considered already, but biggest problem for me is when one of us must file as single rates.
 
RetireBy90 said:
I’m sure you have considered already, but biggest problem for me is when one of us must file as single rates.
Click to expand...

I modeled it out. We are currently in the 22% marginal bracket. We will remain in the 22% bracket for RMDs and will not go into the 24% bracket until our 90s even if we do not convert. And even if we have converted the maximum we can without triggering IRMAA, the survivor always will be in the 24% bracket and will not go into the 32% bracket. We have no heirs, so I don't have any concerns about maximizing the estate.
 
Gumby said:
I modeled it out. We are currently in the 22% marginal bracket. We will remain in the 22% bracket for RMDs and will not go into the 24% bracket until our 90s even if we do not convert. And even if we have converted the maximum we can without triggering IRMAA, the survivor always will be in the 24% bracket and will not go into the 32% bracket. We have no heirs, so I don't have any concerns about maximizing the estate.
Click to expand...

Interesting.. The same probably applies to us..Are you considering converting some to Roth?
 
You must log in or register to reply here.

Similar threads

usafmd
IRMAA, Filing Separately, Younger Spouse
Replies
3
Views
499
Sunset
Sunset
H
Tax Surprise-Section 199A Dividends
Replies
9
Views
745
Midpack
Midpack
A
Appeal IRMAA or not appeal?
Replies
10
Views
1K
averagebum
A
F
1099R form when both Roth Rollover and regular distribution occurred
Replies
3
Views
357
fiyesno
F
M
IRMAA & Tax Rates & Roth
Replies
1
Views
1K
SecondCor521
SecondCor521

Latest posts

Back
Top Bottom