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Old 07-25-2021, 09:24 AM   #61
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Has anyone seen an analysis of how much we should leave in tax-deferred accounts to pay for health care costs down the road? I read elsewhere that one person was planning to leave $300,000 in his tax-deferred account, but not whether this was based on any research.
Could have been me, as that's what I believe. It's not based on research, other than having investigated nursing home placements for a relative, and the cost per year.

The nursing homes I found charged in the range of $100K/yr for "acceptable" ones, and this is very dependent upon location.

These nursing homes, would only accept a person if they had 3 yrs worth of money to pay before switching to medicaid, so the $300K number conveniently is close.
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Old 07-25-2021, 09:29 AM   #62
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Run it by a tax program, but the answer is YES. How much more is the key.

Rough thinking:
Currently income $140K + (add in 50K for fun)
Deductions: Married = $25K , medical (reduced by 190x.075 = 14.25K) is $105.75K deduction.

So net values is $190K income - $130.75 deductions = $59.25K taxable income the marginal rate is well within 12%

Without the medical deduction they are well into the 22% bracket

So my simple example would save paying at least $5K taxes on that $50K assuming it gets withdrawn in the future.
Aren't you double counting the married deduction, since they would already be using the itemized deduction vs. the standard deduction?
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Old 07-25-2021, 09:43 AM   #63
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Could have been me, as that's what I believe. It's not based on research, other than having investigated nursing home placements for a relative, and the cost per year.

The nursing homes I found charged in the range of $100K/yr for "acceptable" ones, and this is very dependent upon location.

These nursing homes, would only accept a person if they had 3 yrs worth of money to pay before switching to medicaid, so the $300K number conveniently is close.
$300k is probably as good a guess as any, but I look at it another way.

I want to have enough set aside for our NH self-insurance that it's unlikely that having either of us be in one for years would leave the other impoverished. (I consider spending down to Medicaid leaving the healthy spouse impoverished.) So, while I can continue to make the plan work, we have roughly one million bux set aside.

Without the spousal dependency, the $300k number sounds fine. Of my one million (for a couple) suggestion, having $600k in tax deferred sounds good tax-wise.

It's all a crap shoot. It's end of life planning..........
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Old 07-25-2021, 09:47 AM   #64
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Aren't you double counting the married deduction, since they would already be using the itemized deduction vs. the standard deduction?
You are Right Good of you to point that out.

That would change the numbers, putting them nearer the top of the 12%.

They would have a property tax deduction, but it would only be a small amount.

Which is why running it through a tax program, even last year's program would give a better estimate.
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Old 07-25-2021, 10:38 AM   #65
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You are Right Good of you to point that out.

That would change the numbers, putting them nearer the top of the 12%.

They would have a property tax deduction, but it would only be a small amount.

Which is why running it through a tax program, even last year's program would give a better estimate.
Yeah just ran it through a basic tax calculator and there wouldn't be much room over the 50k you used for the top of the 12% bracket.
Their natural RMD is ~42k already.
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Old 07-26-2021, 12:05 AM   #66
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Was also wondering about this concept.
Using one example, my parents will have about 120k of unreimbursed medical expenses this year, as my father who is 91 y.o. has 24/7 home care.
Between SS/Pensions/Investment income and natural RMD distributions, the sum is already 140k.
Thus I was wondering if they should take more RMD's to maximize lower brackets this year, plus expected future years.
The TIRA balances are 490k.
Keep in mind the need to avoid increasing the overall income so much income that both parents are hit with that surcharge for Medicare premiums. I think thatís been about 2 x $88,000, or $176,000. So although I havenít run the numbers through a tax software program, I think you would not want to take more than another $35,000 from the tIRA, keeping the overall income at about $175,000 just to be sure you donít exceed $176,000. You should first doublecheck whether there might be any unexpected income at the end of the year, like substantial dividends or capital gains, and perhaps see how late in the year you can make the last withdrawal from the tIRA.
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Old 07-26-2021, 05:27 AM   #67
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Keep in mind the need to avoid increasing the overall income so much income that both parents are hit with that surcharge for Medicare premiums. I think thatís been about 2 x $88,000, or $176,000. So although I havenít run the numbers through a tax software program, I think you would not want to take more than another $35,000 from the tIRA, keeping the overall income at about $175,000 just to be sure you donít exceed $176,000. You should first doublecheck whether there might be any unexpected income at the end of the year, like substantial dividends or capital gains, and perhaps see how late in the year you can make the last withdrawal from the tIRA.
Good thought on the IRMAA and it is 176k, although based on one's income from 2 years prior.
There aren't any unexpected capital gains/dividends, as all their stock exposure is in deferred accounts.
I do have their RMD's taken out in Dec, not to mention the tax withholding for the year.
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