IRMAA Guess Question

[joesxm3]

My AGI is looking like it will be at least $138,100. I see that 2025 IRMA cut off for single filer is $133,000 and $167,000.

What say you? Should I stay pat or take another card?

That is to say, should I hope for a 4% increase in the 2026 IRMAA level or should I just add some AGI to get closer to the $167,000 level.

In hind sight after this week's market action I would have preferred to grab the extra $30,000 of LTCG and call it a year.

Thanks.

 

[audreyh1]

4% increase in IRMAA levels seems unlikely. We could have a stronger inflation spike, but 3 of the monthly inflation data points which determine the increase in IRMAA levels are already in.
2024 2025 2026 Medicare Part B IRMAA Premium MAGI Brackets

I’ve been using the midpoint between the FinanceBuff IRMAA 0% and 3% inflation projections for 2026. I figure inflation should at least be 2.5% and maybe 3%.

Oh that hindsight - no way to know of course. Someone else on another thread said “if they’d been smarter they would have bought more X”. Well, smarts has nothing to do with it obviously.

 

[Car-Guy]

Don't forget, taking out more of your tax deferred money "just because" you want to get closer to the next IRMAA tier, means you are taking that money out in a higher tax bracket too. Just something else to consider.

 

[Al18]

Withdraw some money from your Roth IRA to reduce your taxes

 

[audreyh1]

Withdraw some money from your Roth IRA to reduce your taxes

How does that help?

 

[joesxm3]

Audrey, thanks for the article. I had cut way back on mutual funds but the few I have surprised me and pushed me over the limit by a little. I was cutting it too close but the large gains on my risky stuff was scaring me.

Actually IRMAA is a nit compared to gains this year so I probably should focus more on taking profits before the roller coaster goes back down.

I would do some ROTH conversion except as discussed in another thread, almost all my income is LTCG and any ordinary income pushes some from 0% to 15% on top of the base 12%.

Well I should just thank God for a good year and maybe send a few more PLTR shares to the charitable giving fund.

 

[omni550]

And don't forget, to make it even more difficult to strategize which action(s) to take, IRMAA is based on your MAGI from 2 years prior.

omni

 

[TheWizard]

Relevant IRMAA thresholds for 2024 AGI are $135k and $169k or a bit more per that TFB link.
I would look at your income projections over the next 5+ years and try to stay in the same inflation adjusted IRMAA tier indefinitely; that's what I'm doing.

I just did a $16,000 Roth conversion for the year which is all I can do nowadays with RMDs active.
In future years my Roth conversion amount will likely shrink even further. Fortunately, I can use QCDs to contain my AGI as needed...

 

[TheWizard]

And don't forget, to make it even more difficult to strategize which action(s) to take, IRMAA is based on your MAGI from 2 years prior.

omni

That's why we use that TFB link, which addresses that problem...

 

[TheWizard]

Audrey, thanks for the article. I had cut way back on mutual funds but the few I have surprised me and pushed me over the limit by a little. I was cutting it too close but the large gains on my risky stuff was scaring me.

Actually IRMAA is a nit compared to gains this year so I probably should focus more on taking profits before the roller coaster goes back down.

I would do some ROTH conversion except as discussed in another thread, almost all my income is LTCG and any ordinary income pushes some from 0% to 15% on top of the base 12%.

Well I should just thank God for a good year and maybe send a few more PLTR shares to the charitable giving fund.

Hard to tell if you're getting CGDs from managed funds in taxable or whether you're selling shares to realize LTCGs.
The latter is better; the former is harder to predict...

 

[joesxm3]

I started out trying to gain harvest LTCG and stay in the 0% range. I thought my ordinary income would be less than the standard deduction. I estimated $2500 from funds which turned out to be too low.

With the market spiking and being overweight in high volatility items I felt the need to lock in gains. I accepted the idea of being in the second IRMAA tier but my worrying led to my AGI creeping close to and then into the third tier when I got surprised by the fund distributions. Less than 10% of my portfolio is in that type of fund.

The vast majority of my AGI is LTCG from selling individual items not from funds. The fund distribution is less than $8000 but I was too close to the cutoff.

 

[audreyh1]

Regardless I bet you are glad you took some gains off the table. Assuming you did so a few days ago.

 

[Koolau]

Withdraw some money from your Roth IRA to reduce your taxes

I know that would w*rk, but I w*rked SO hard to put money INTO my Roths that I hate to take money out while I have even a nickel left in my 401(k) (all tIRAs have been Rothed already.)

Yeah, I know. It's some kind of a hang-up on my part. I should get over it, but I just have a "thing" about Roths - especially MY Roths.

 

[SecondCor521]

I'm in the process of doing Roth conversions, but I agree it doesn't make sense in OP's situation.

Maybe look at capital gain harvesting if (a) you can do it in the 15% bracket, (b) no other limits are crossed like the next IRMAA tier, (c) you're not moving to a lower rate income tax state any time soon.

The month and year are not over, so it's possible you'll get more mutual fund distributions in the next two weeks. Check the 2024 distributions thread for resources for your particular funds.

 

[audreyh1]

Looks like I will have to do a large rebalancing move in Jan 2025. And I expect at least 50% will be taxable LTCGs. It’s time and really can’t be avoided.

Hello to a big 2027 IRMAA increase!

 

[Midpack]

And don't forget, to make it even more difficult to strategize which action(s) to take, IRMAA is based on your MAGI from 2 years prior.

omni

The OP understands, that's why he's asking us to guesstimate 2026/2024. And while it's conservative, I kept my 2024 MAGI about $2K under the recently published 2025/2023 IRMAA thresholds even though 0% inflation is highly unlikely. Since IRMAA is a cliff, there's no way I would risk going over. That said, the OP took some money off the table for other reasons, nothing wrong with that.

 

[TheWizard]

Looks like I will have to do a large rebalancing move in Jan 2025. And I expect at least 50% will be taxable LTCGs. It’s time and really can’t be avoided.

Hello to a big 2027 IRMAA increase!

Maybe it's time to let rebalancing go.
It served a purpose prior to and in the first few years of retirement.
But those times are over.

It is now time to let things ride and embrace eventual stepped up basis in your taxable account...

 

[audreyh1]

Maybe it's time to let rebalancing go.
It served a purpose prior to and in the first few years of retirement.
But those times are over.

It is now time to let things ride and embrace eventual stepped up basis in your taxable account...

I’m probably not going to let rebalancing go yet.

I can also spend down some of our income generating taxable nest egg. And I have some plans for 2025 that will help with this.

We’ll see. I’m considering all options.

 

[copyright1997reloaded]

Looks like I will have to do a large rebalancing move in Jan 2025. And I expect at least 50% will be taxable LTCGs. It’s time and really can’t be avoided.

Hello to a big 2027 IRMAA increase!

It's starting to look that way for me also. I wrote Jan 25 $240 calls on Apple when it was $232 (for $13.xx each) to purchase my new place as I wanted to defer IRMAA impact to 2025. Well, Apple closed today at $259. I have rolled some of those to June $260's (at a slight debit cost). If they get called I can kiss my current IRMAA level goodbye.

However, it is a good problem to have as the stock being called still only represents a smallish portion of my Apple holdings..but still a problem not only because of IRMAA and income taxes on realized gains, but also increased single stock risk.

Overall, I don't need to rebalance because I'm too conservatively invested (for what has happened over the last year), but still too tech heavy (unless they continue growing to the sky).

 

[joesxm3]

I just gave up and took some more profits.. I think my AGI is up to $149,000 as of today.

I don't want to overreact and sell too much of stuff that could still go up more. So I may not try to push really close to $169,000 and wait until later next year to sell more.

 

[teejayevans]

Can the IRMAA threshold ever go down? Assuming deflation (economic downturn).

 

[Gumby]

Here is the language of the statute regarding IRMAA inflation adjustment --- Social Security Act, Sec. 1839. [42 U.S.C. 1395r]

(i)...

(5) Inflation adjustment.—

(A) In general.—Subject to subparagraph (C), in the case of any calendar year beginning after 2007 (other than 2018 and 2019), each dollar amount in paragraph (2) or (3) shall be increased by an amount equal to—

(i) such dollar amount, multiplied by

(ii) the percentage (if any) by which the average of the Consumer Price Index for all urban consumers (United States city average) for the 12-month period ending with August of the preceding calendar year exceeds such average for the 12-month period ending with August 2006 (or, in the case of a calendar year beginning with 2020, August 2018).

(B) Rounding.—If any dollar amount after being increased under subparagraph (A) or (C) is not a multiple of $1,000, such dollar amount shall be rounded to the nearest multiple of $1,000.

(C)Treatment of adjustments for certain higher income individuals
(i)In general
Subparagraph (A) shall not apply with respect to each dollar amount in paragraph (3) of $500,000.
(ii)Adjustment beginning 2028 In the case of any calendar year beginning after 2027, each dollar amount in paragraph (3) of $500,000 shall be increased by an amount equal to—
(I)
such dollar amount, multiplied by
(II)
the percentage (if any) by which the average of the Consumer Price Index for all urban consumers (United States city average) for the 12-month period ending with August of the preceding calendar year exceeds such average for the 12-month period ending with August 2026.

There is no explicit language for "deflation" or "decreased", but I suppose it is theoretically possible. Although the CPI metric used has not been negative in the last 10 years.

 

[audreyh1]

Maybe it's time to let rebalancing go.
It served a purpose prior to and in the first few years of retirement.
But those times are over.

It is now time to let things ride and embrace eventual stepped up basis in your taxable account...

After a long hard think on this and much review I think I am going to do as you suggest and not worry about a build up in the equity allocation in the taxable account.

This is a huge departure for me so it will probably take some getting used to. But in this case I think it makes sense to allow the tax tail to wag the dog, ha ha.

 

[MarieIG]

After a long think on this and much review I think I am going to do as you suggest and not worry about a build up in the equity allocation in the taxable account.

This is a huge departure for me so it will probably take some getting used to. But in this case I think it makes sense to allow the tax tail to wag the dog, ha ha.

When I hear that expression, I think about getting "tail whipped" by our pup, a pit. Her tail makes me think of an iron cord.

One thing about capital gains is the potential opportunity for tax loss harvesting, in the event of a market drop . . .

Good luck!

 

[TheWizard]

One thing about capital gains is the potential opportunity for tax loss harvesting, in the event of a market drop . . .

Good luck!

Right.
I'm using up all remaining capital loss carry-over with my upcoming tax return.
So 'twould be nice if we could have a decent market correction before too long.

I try to keep around 5% of my taxable account in settlement fund cash. This makes it possible to sell a certain amount of VOO at a loss and then buy a comparable amount of VTI all within a ten minute span, using market orders.
Otherwise it takes two days(?) for the VOO sale to settle with funds available to reinvest...