Unintended Consequences - IRMAA

[pb4uski]

^^^ Thanks jimbee. I thought that was the case but didn't know one way or the other and didn't take the time to research it so I was silent on it.

[Hermit]

Quote:

Originally Posted by jimbee Your understanding and characterization of Medicare taxes is incorrect. The Medicare taxes you and your employer paid to the government cover your Part A benefit, not Parts B or D. Parts B and D are funded differently. The funding is explained here: https://www.medicare.gov/about-us/ho...edicare-funded

Well, sort of. According to your link Parts B and D are partially funded by interest on the Part A Trust Fund!

[Car-Guy]

Quote:

Originally Posted by RobbieB The United States is broke. Medicare is broke, SS is broke. We owe lotsa bucks. We the people are in a deep hole.

Sure can't disagree with any of the comments above...

[pb4uski]

Quote:

Originally Posted by Hermit Well, sort of. According to your link Parts B and D are partially funded by interest on the Part A Trust Fund!

The interest is interest earned on Part B Trust Fund investments, not Part A trust fund investments, so you're wrong again. Note that payroll taxes are all Part A, which makes his original point that you were off-base totally right.

[JoeWras]

Quote:

Originally Posted by pb4uski Absolutely. When I first retired, I was shocked and overjoyed at the idea of have a federal income tax bill of $0 after ~$50k in tax annually when I was working. But after giving it more thought I figured out that that low tax income was a golder opportunity to do more Roth conversions at a very low tax cost so I sucked it up, did the Roth conversions and wrote out the checks to the IRS (albeit not happily).

So this is what makes this forum great. If I had never visited here, I wouldn't have even thought of tIRA to Roth conversions, or even know about IRMAA.

Last year I had this grand plan to stay at or under the 12% bracket, because it just feels so good. This discussion and others has me thinking I at least need to bite into the 22% bracket, and consider being very aggressive next year. Next year, DW and I still have 13 years before RMDs so quite a bit of time to do conversions. Although, there's always the wildcard of tax law changes...

Now I just have to figure out whether filling out form 2210 is worth it, and similar for my state. If I just "nibble" into 22%, it may not matter. Next year I can go full guns upto the top of 22% at least and pay estimated taxes a bit more sanely. BTW, I'm younger than 59 1/2 so withholding from tIRA doesn't help for taxes.

[gerntz]

We're pretty well stuck with the $59/mo IRMAA. Not a complaint.

However, in trying to maximize Roth Conversions, I find we hit the next IRMAA step before we fill up the 22% bracket by several thousand bucks. That would cost us $2800 or so for the year, roughly equal to an added 3% income tax rate on our entire income. Net, using next IRMAA step as income limit, not next tax bracket.

[Gotadimple]

Quote:

Originally Posted by gerntz We're pretty well stuck with the $59/mo IRMAA. Not a complaint. However, in trying to maximize Roth Conversions, I find we hit the next IRMAA step before we fill up the 22% bracket by several thousand bucks. That would cost us $2800 or so for the year, roughly equal to an added 3% income tax rate on our entire income. Net, using next IRMAA step as income limit, not next tax bracket.

+1

[swabby01]

Get this in spades - retired in 2018 and company made the distributions since I didn't defer incentives - mostly paid in 2018 one 2019 - Bam IRMAA Part B - ADDITIONAL $306/month and Part D IRMAA additional $77 / month -- Lesson learned but not useful since I will never have that kind of income again to consider. by next year the impacts of all the plan payouts should be gone and expect IRMAA to drop way down (I hope)

[imnontrad]

Yes, at least the hit is only for one year. This is why if you need to take out a large sum, you withdraw part in December and the rest in January if that meets your needs and avoids IRMAA.

Married couples should also look at their finances and project what a spouse would face if the other one dies. Not only would they be in the higher tax bracket but the pre-tax retirement accounts (especially after RMD) may trigger IRMAA since the threshold for a single is 50% that of married - 87K.

[audreyh1]

Quote:

Originally Posted by imnontrad Married couples should also look at their finances and project what a spouse would face if the other one dies. Not only would they be in the higher tax bracket but the pre-tax retirement accounts (especially after RMD) may trigger IRMAA since the threshold for a single is 50% that of married - 87K.

Or you lower the RMDs by having the deceased spouse IRA go to other beneficiaries, which might be a good idea if the surviving spouse is already very well funded.

[Free]

DM died in October 2019. When she went into Assisted Living about 4 years earlier, we sold her house and put the proceeds into a fixed annuity earning about 4.5% with the ability to withdraw if she needed the funds for medical or senior care related expenses.

She had her three children named as beneficiaries. After she passed, the annuity distributed the funds to new annuity accounts in each of our names. We each had about $30,000 in taxable interest and another $60,000 from the principle. The IRS hit me with IRRMA for the entire amount in their MAGI calculations.

I'm the oldest sibling and just started Medicare, so it'll be more expensive for both me and DW for next year. The two other siblings are four and six years younger than me, so they will see no IRRMA impact.

[Hermit]

Quote:

Originally Posted by pb4uski The interest is interest earned on Part B Trust Fund investments, not Part A trust fund investments, so you're wrong again. Note that payroll taxes are all Part A, which makes his original point that you were off-base totally right.

I hope you are feeling absolutely victorious! To be quite clear, I could care less about your pettiness. If it makes you feel better enjoy gloating or whatever you want to call it. Your penchant for proving other people wrong and you right no matter how small the tidbit might be reminds me of my son when he was about 12. He grew up. There is an ignore button and I am happy to report that you have earned the second time I have used it in the last 10 years. Congradulations!

[2retireearly]

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Originally Posted by jazz4cash It is my understanding that you can file a request to have your premium calculation re-evaluated if your income has dropped from two years prior and you can substantiate. It may just require a tax return from one year prior instead of the 2 yrs prior that is used for the initial determination. I am barely familiar with this and trying to get up to speed. I expect one of the forum "experts" will be along shortly, but in the meantime here is something on the topic: https://www.marketwatch.com/story/sh...ges-2020-10-05

I felt compelled to pay off my mortgage, in 2020. I had a note to myself to not use my IRA to do this, because of IRMAA...I had such large growth, in 2020, and stupidly didn't read my note, so I did it. I had a good reason to do it, but no point in going over that, here. Well, in 2021 I will be 65, so on Medicare. Fine. In 2022, I will be hit with IRMAA...unless I can write the Form well, to have them please look at my income for the last number of years, I'm stuck with a huge Medicare part B and maybe D premium. So much higher than my group insurance I currently pay. I retired at 56, where I mapped out my income for life, for me...and have kept my income low , on purpose, for tax reasons...and then I went and did this...ARGH. I sure hope I can plead my 'case' well, in 2021 for 2022, convincingly. Thanks Pres Bush for creating this ridiculous double whammy tax and medicare hit.

[swabby01]

Quote:

Originally Posted by imnontrad Yes, at least the hit is only for one year. This is why if you need to take out a large sum, you withdraw part in December and the rest in January if that meets your needs and avoids IRMAA. Married couples should also look at their finances and project what a spouse would face if the other one dies. Not only would they be in the higher tax bracket but the pre-tax retirement accounts (especially after RMD) may trigger IRMAA since the threshold for a single is 50% that of married - 87K.

Actually the company had prescribed distribution points and it hit both 18 and 19. Im hoping that is the worst of it and then about half that from then on due to investments and pension

[ivinsfan]

Quote:

Originally Posted by 2retireearly I felt compelled to pay off my mortgage, in 2020. I had a note to myself to not use my IRA to do this, because of IRMAA...I had such large growth, in 2020, and stupidly didn't read my note, so I did it. I had a good reason to do it, but no point in going over that, here. Well, in 2021 I will be 65, so on Medicare. Fine. In 2022, I will be hit with IRMAA...unless I can write the Form well, to have them please look at my income for the last number of years, I'm stuck with a huge Medicare part B and maybe D premium. So much higher than my group insurance I currently pay. I retired at 56, where I mapped out my income for life, for me...and have kept my income low , on purpose, for tax reasons...and then I went and did this...ARGH. I sure hope I can plead my 'case' well, in 2021 for 2022, convincingly. Thanks Pres Bush for creating this ridiculous double whammy tax and medicare hit.

You really hold a grudge going back to Bush in your case it wasn't necessary for you to hit the IRMMA...and you admit you ignored or forgot your own advice. You might need to fix your map. It's OK you are only human and you should be able to get back to the regular rack rate for Medicare. OTOH you don't have a mortgage anymore..

[pb4uski]

Quote:

Originally Posted by Hermit I hope you are feeling absolutely victorious! To be quite clear, I could care less about your pettiness. If it makes you feel better enjoy gloating or whatever you want to call it. Your penchant for proving other people wrong and you right no matter how small the tidbit might be reminds me of my son when he was about 12. He grew up. There is an ignore button and I am happy to report that you have earned the second time I have used it in the last 10 years. Congradulations!

And to think you're characterizing me as being petty! How ironic! At least I'm willing to admit when I am wrong without being spiteful about it. I guess there is a lot of that going around these days. Too bad you won't be able see this response since you put me on Ignore. FWIW, I have yet to use Ignore, but I guess that I have a thicker skin.

[SecondCor521]

Quote:

Originally Posted by Hermit I hope you are feeling absolutely victorious! To be quite clear, I could care less about your pettiness. If it makes you feel better enjoy gloating or whatever you want to call it. Your penchant for proving other people wrong and you right no matter how small the tidbit might be reminds me of my son when he was about 12. He grew up. There is an ignore button and I am happy to report that you have earned the second time I have used it in the last 10 years. Congradulations!

I usually just say <Plonk!>.

Like this:

<Plonk!>

[jimbee]

Quote:

Originally Posted by SecondCor521 I usually just say <Plonk!>. Like this: <Plonk!>

Usenet style.

[Gumby]

Or we could all just wander off in our own direction and let things be.

[Livefree]

Just got my January Medicare bill yesterday and it dropped to $148..we had been paying a $388 penalty since March when I signed up for Medicare due to 2018 income.