How tax strategies can impact medicare premiums

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How tax strategies can impact medicare premiums

Postby larryswedroe » Mon Dec 17, 2012 5:20 pm

Thought this would be a valuable heads up for older investors

[url]
http://www.cbsnews.com/8301-505123_162- ... -premiums/[/url]
Best wishes
Larry
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Re: How tax strategies can impact medicare premiums

Postby sscritic » Mon Dec 17, 2012 6:38 pm

A few of us write about IRMAA from time to time, so regular readers, as well as those already paying it, should be familiar with IRMAA, but a reminder never hurts.

A few points:
IRMAA is a step function. One extra dollar of income can cost you $1500 or more in premiums. What's your marginal tax (and IRMAA) rate on that dollar?

If you are in Medicare and want to convert $1 million in an IRA to a Roth, do you do it all in one year or spread it over five? Obviously, your regular tax will play a big role, but one way you pay the top IRMAA for one year, the other you pay some level of IRMAA for five.
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Re: How tax strategies can impact medicare premiums

Postby elgob.bogle » Tue Dec 18, 2012 10:43 pm

I posted a ROTH conversion scenario in the Personal Section recently (topic=105706). My plan takes advantage of the fact that my spouse plans to work until I am 70, at which time she will be 63. This will allow me to utilize her Medical coverage family plan and delay signing up for Medicare Parts B & D. Conversions will occur beginning in 1.5 years at my ages 66, 67 & 68 after which we will have the two-year window needed to get back down to a lower MAGI. Upon reaching age 70.5, I will sign up for both Social Security and Medicare Parts B & D. Apparently, there are no tax consequences as a result of signing up for only Medicare Part A at age 65. Please LMK if I am missing anything. Thanks.

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Re: How tax strategies can impact medicare premiums

Postby 2beachcombers » Wed Dec 19, 2012 6:10 pm

elgob.bogle wrote:I posted a ROTH conversion scenario in the Personal Section recently (topic=105706). My plan takes advantage of the fact that my spouse plans to work until I am 70, at which time she will be 63. This will allow me to utilize her Medical coverage family plan and delay signing up for Medicare Parts B & D. Conversions will occur beginning in 1.5 years at my ages 66, 67 & 68 after which we will have the two-year window needed to get back down to a lower MAGI. Upon reaching age 70.5, I will sign up for both Social Security and Medicare Parts B & D. Apparently, there are no tax consequences as a result of signing up for only Medicare Part A at age 65. Please LMK if I am missing anything. Thanks.

elgob


elgob,
I have already executed the Roth plan that you suggest. Worked fine and I will also wait till 70 for SS. This made an agressive improvement in balancing my income over the years via reduced RMD payments and spreading SS out. I also made a large Charatible contribution one year and used that deduction to offset the conversion tax for that year.
Also in the 25% bracket and manage my income every year to control both B and D taxes

Question: What is significance of 70.5 vs 70?

jerry
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Re: How tax strategies can impact medicare premiums

Postby elgob.bogle » Thu Dec 20, 2012 7:26 pm

Nothing significant about 70.5 - I guess I was overthinking the issues. Thanks for the tip on charitable deductions to offset.

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Re: How tax strategies can impact medicare premiums

Postby 2beachcombers » Thu Dec 20, 2012 10:19 pm

The reason I asked was in fact that if I could delay my payments -5 months w/o losing the benefit, I could grab another way to modify my income one year and put it into the next. I would guess there is some safety zone in claiming that the payments would be made retroactivly ?
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Re: How tax strategies can impact medicare premiums

Postby elgob.bogle » Fri Dec 21, 2012 8:53 pm

Apparently it is the Tax Year that is important for the window, which for me is Jan-Dec. I have not read anywhere that it can be different from Jan-Dec.

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