My Dad and IRMAA - just over a threshold (probably)

He isn't holding some of your assets for you, is he? If so, any interest on that money isn't part of his income (although it's reported as his). If he has income that is somebody else's, he can take it off his income, but has to send a 1099-INT to whoever's income it is, and THEY need to pay the taxes on it. Probably not a common thing, but I had nominee interest from my kids' assets and took that off my taxes for many years.
 
@harllee, he might have dementia but I don't (yet). I was aware enough of his financial situation all year to where I don't feel like him having dementia is a reasonable excuse.

@sengsational, no, he isn't. I'm familiar with nominee interest but in this case it doesn't apply.
 
Thanks to all for the comments and suggestions and thoughts.

Even though we talk about it a lot (or maybe I just read all the threads because it interests me), the "cliffyness" of IRMAA apparently varies quite a bit in terms of the relative increases in the premium surcharges.

I went and did the math, and in my Dad's case, yes, it's an increase, but the dollar amount isn't really that big in proportion to the rest of his finances. Given that it's not that big of a deal for him, and he's probably over the threshold anyway, I think I will probably do a medium sized Roth conversion to fill up the current tax bracket. If it turns out in 2026 that he was somehow under the limit - his taxes are moderately complicated and $574 isn't that much to be off by - then pushing him over a smallish cliff with the Roth conversion isn't that bad and still might have been a smart move.

He does have mid- to late-stage dementia, and the only woman he would marry lives in Portland, has already turned his proposal of marriage down, and is probably as well off as he is and maybe even more so.

I've never dealt with options and trying to learn and execute something like that correctly in a week or two seems risky.

I would be willing to try the IRMAA appeal, except for me I would have to have at least some rationale for a sob story that I think they might buy. "I wasn't really paying attention and my Dad's four income streams put him just over an IRMAA tier" doesn't really do that in my mind.

Good point about how next year and the years after will play out. His RMD will likely go up multiple $K next year even after the Roth conversion because the divisor is smaller and his traditional IRA went up in value this year. So his 2025/2027 IRMAA situation will not even be close to the threshold that is in play this year. Next year would then just be a smaller Roth conversion to the top of the same tax bracket most likely.

The thinking on the Roth conversion is that the money has to come out of the traditional IRA at someone's marginal rate, either my Dad's or an average of my siblings and mine. Because of his large medical deductions, his rate is likely a bit lower or at least on the low end, so the Roth conversion means a bit of tax arbitrage (maybe a few percentage points). The taxes paid on the Roth conversion from his taxable just lowers his taxable estate by that amount - not much in the big scheme of things but still directionally correct.

QCDs I would have to discuss with my siblings. I manage my Dad's finances but with the fiduciary obligation embedded in the POA I wouldn't feel right giving away a portion of their inheritance (regardless of the relative size) without advance discussion. Also, I'm supposed to manage his money per his wishes and I'm not 100% sure what his charitable preferences would be. He was quite charitable throughout his adult life but became less so in the last few years (possibly dementia related, who knows).

Being FIREd, I have time to handle this and his other needs that arise. He's in memory care so they do most of the heavy lifting.
Once you're in IRMAA territory, it is NOT a good idea to Roth convert to the top of your current tax bracket.
Instead, convert enough to get your AGI up close to, but not over, the next higher IRMAA threshold...
 
I just wrote SS asking for an exemption to IRMAA for 2025. The reason my income was high in 2023 was because I had to take money out of my IRA to pay the entrance fee into a CCRC. I probably will not get the exemption but I figured it would not hurt to ask. I will post on the forum when I hear back from SS.
This shows one of the reasons for doing Roth conversions even though there's no tax arbitrage benefit. You then have a pool of tax-free money that you can use for occasional large expenses without increasing your AGI for the year...
 
QCDs I would have to discuss with my siblings. I manage my Dad's finances but with the fiduciary obligation embedded in the POA I wouldn't feel right giving away a portion of their inheritance (regardless of the relative size) without advance discussion. Also, I'm supposed to manage his money per his wishes and I'm not 100% sure what his charitable preferences would be. He was quite charitable throughout his adult life but became less so in the last few years (possibly dementia related, who knows)...
Ok, but had he been able to do a strategic QCD of $800 right now before taking the remainder of his RMD as a taxable distribution, then he would have saved more than $800 by avoiding that higher IRMAA tier...
 
If I am still alive at 88, I’d be very grateful I’m alive and not worry about an extra $1K in taxes that might happen in 13 months. It means I made a lot of $$$ in my lifetime and still have it!
 
Ok, but had he been able to do a strategic QCD of $800 right now before taking the remainder of his RMD as a taxable distribution, then he would have saved more than $800 by avoiding that higher IRMAA tier...
+1. Since your net cash out would be less with a $800 QCD saving more than $800 in Part B and Part D premiums then it's a no-brainer to do the QCD. Too late this year since the RMD has happened but an arrow in the OPs quiver for managing 2025 IRMAA income.
 
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If I am still alive at 88, I’d be very grateful I’m alive and not worry about an extra $1K in taxes that might happen in 13 months. It means I made a lot of $$$ in my lifetime and still have it!.
They are two entirely separate things. OP is not letting IRMAA make them unhappy, just seeing if anything can be done.
 
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When handling DF’s finances I very conscientiously followed what he had been doing and stuck to that.

But his income didn’t exceed IRMAA levels and he didn’t have to deal with RMDs as he had cashed out and reinvested his IRAs decades before.
 
Ok, but had he been able to do a strategic QCD of $800 right now before taking the remainder of his RMD as a taxable distribution, then he would have saved more than $800 by avoiding that higher IRMAA tier...

+1. Since your net cash out would be less with a $800 QCD saving more than $800 in Part B and Part D premiums then it's a no-brainer to do the QCD. Too late this year since the RMD has happened but an arrow in the OPs quiver for managing 2025 IRMAA income.

I understand and appreciate your points, thank you.

As I mentioned elsewhere, the increase in the IRMAA varies quite a bit between the various IRMAA tiers. After analyzing it more yesterday afternoon, it's actually probably worth going over the IRMAA threshold (even though, as mentioned, he's probably already over it) in order to enable that additional $XXK of Roth conversions.

In other words, a blessing in disguise. Or a rationalization for the cynical types. ;-)
 
Once you're in IRMAA territory, it is NOT a good idea to Roth convert to the top of your current tax bracket.
Instead, convert enough to get your AGI up close to, but not over, the next higher IRMAA threshold...

In my Dad's case, the top of the current tax bracket is below the next higher IRMAA tier, but I understand your point.
 
I also requested Ann exemption for a one withdrawal to pay entrance into CCRC. The Part D IRMAA was waived. Waiting to hear about the rest.
 
I also requested Ann exemption for a one withdrawal to pay entrance into CCRC. The Part D IRMAA was waived. Waiting to hear about the rest.
Interesting. I requested a waiver for the same reason but have never gotten a response.
 
Hi all.

I think I know what to do, but I'm double checking.

My 88 year old Dad has several sources of unavoidable income in 2024: dividends in a taxable account, RMDs, a small pension, and SS. Totaling them all up, they look like they will be about $574 over one of the 2026 IRMAA breakpoints listed at 2024 2025 2026 Medicare Part B IRMAA Premium MAGI Brackets using the 3% inflation column (the rightmost one).

I see these options:

1. "Squeak under the wire" option. Do nothing, hope inflation runs a bit hotter than 3% and that with rounding and what not the threshold ends up being $1K higher than predicted, and he stays in the IRMAA bracket below the threshold.

2. Try to find some way to reduce his AGI. I already took a look at Schedule 1 page 2 (adjustments to income) and none of those apply to him. If I had been more on the ball, I could have done a small QCD, but it's too late for that now. He has no unrealized capital losses currently, and no earned income so no deductible traditional IRA contribution. Not HSA eligible.

3. "Accept our fate" option. Assume that he's going to be just over the IRMAA threshold. If I take this approach, it will probably make sense to do a fairly sizeable Roth conversion. He has a lot of itemized deductions (a ton of medical expenses), so his AGI is "high-ish" but his taxable income is more moderate. He has the cash to pay the taxes on the conversion, it would be at a reasonable-ish rate, and it would modestly help with estate tax exposure because of the taxes paid on the conversion.

4. Other?

He does have dementia and is in relatively poor health for his age, but I know he would prefer that we assume for planning purposes that he will live through the end of 2026 at least, so 2026 IRMAA is still a consideration.

All input and thoughts welcome.
 
Hi all.

I think I know what to do, but I'm double checking.

My 88 year old Dad has several sources of unavoidable income in 2024: dividends in a taxable account, RMDs, a small pension, and SS. Totaling them all up, they look like they will be about $574 over one of the 2026 IRMAA breakpoints listed at 2024 2025 2026 Medicare Part B IRMAA Premium MAGI Brackets using the 3% inflation column (the rightmost one).

I see these options:

1. "Squeak under the wire" option. Do nothing, hope inflation runs a bit hotter than 3% and that with rounding and what not the threshold ends up being $1K higher than predicted, and he stays in the IRMAA bracket below the threshold.

2. Try to find some way to reduce his AGI. I already took a look at Schedule 1 page 2 (adjustments to income) and none of those apply to him. If I had been more on the ball, I could have done a small QCD, but it's too late for that now. He has no unrealized capital losses currently, and no earned income so no deductible traditional IRA contribution. Not HSA eligible.

3. "Accept our fate" option. Assume that he's going to be just over the IRMAA threshold. If I take this approach, it will probably make sense to do a fairly sizeable Roth conversion. He has a lot of itemized deductions (a ton of medical expenses), so his AGI is "high-ish" but his taxable income is more moderate. He has the cash to pay the taxes on the conversion, it would be at a reasonable-ish rate, and it would modestly help with estate tax exposure because of the taxes paid on the conversion.

4. Other?

He does have dementia and is in relatively poor health for his age, but I know he would prefer that we assume for planning purposes that he will live through the end of 2026 at least, so 2026 IRMAA is still a consideration.

All input and thoughts welcome.
Maybe President Trump can eliminate this IRMMA madness. We got stung one year due to my ignorance, I now watch the limits to stay low.
 
^^^ Don't get your hopes up... IRMMA isn't on anybody's list that I have heard of and if it would take an act of Congress they can't seem to get anything discretionary done.
 
I also requested Ann exemption for a one withdrawal to pay entrance into CCRC. The Part D IRMAA was waived. Waiting to hear about the rest.
I also requested a waiver for a one time withdrawal to pay my CCRC entrance fee and just got a letter today from SS denying my appeal, letter said that a withdrawal to pay a CCRC entrance fee was not one of the allowable exceptions to IRMAA.
 
I just wrote SS asking for an exemption to IRMAA for 2025. The reason my income was high in 2023 was because I had to take money out of my IRA to pay the entrance fee into a CCRC. I probably will not get the exemption but I figured it would not hurt to ask. I will post on the forum when I hear back from SS.
Please let me know how it worked out as we are moving into a CCRC this year or next.
 
Please let me know how it worked out as we are moving into a CCRC this year or next.
As reply #42 says, a CCRC entrance fee is not one of the seven life-changing events that permit an IRMAA exception...
 
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