Originally Posted by MasterBlaster
I skimmed this thread and I didn't see the mention of this
The other Big reason to spend down the Qualified money (401ks, IRAa) is that once you start taking Medicare you can get hit with highly punitive IRMAA means-tested taxes on your (and spouses) Medicare per your income level.
Early Roth conversions are a great way around this.
I also concur with spending some time with the advanced version of the Optimal retirement Planner (I-Orp.com) to model the outcome.
Originally Posted by Rianne
Please explain the bold area. Are you saying if we can keep our income low that will benefit us regarding Medicare means testing? We're 62. When Medicare kicks in we'll have a higher income than now as SS and Pension start (if we take SS at that time). But we can keep our income lower and take SS at 70. We can use our I bonds and cash to supplement expenses.
Simply asking how does income affect Medicare? What year do they base the MAGI on? Does it change as your income changes in the future?
Sorry for the delay in my response...
It's not just the income taxes that are affected by Roth conversions. It's also the IRMAA taxes on your Medicare cost. Think of those IRMAA taxes as extra income taxes to be avoided by ROTH conversions
The Medicare means tested taxes (The IRMAA charges) are proportional to your income (MAGI income). If you have quite a bit in 401ks and IRAs (ie. qualified accounts) then your RMD and other distribution may be such that you start paying extra for Medicare.
Roth withdrawals don't affect your MAGI income so you can spend that kind of money at will. In other words ROTH withdrawals don't affect your MAGI income and hence don't push you into paying extra IRMAA tax on your medicare. And really you don't need all that much income to start paying extra IRMAA taxes. Singles with $87k MAGI income pay extra Medicare charges. In brackets those charges go up with income.
if you have previously converted qualified money (401ks and IRAs) into ROTH accounts then the IRMAA surcharges may be nothing or may be less.