Avoiding Medicare IRMAA

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Topic Author
acebick
Posts: 4
Joined: Mon Nov 19, 2018 6:15 pm

Avoiding Medicare IRMAA

Post by acebick » Mon Dec 02, 2019 7:53 pm

My wife has about 3 years to work until she is age 50 and can retire with her company pension and medical benefits until medicare. I am already retired and have my prior company's medical insurance until I am eligible for medicare in 3 years. We have a window of 3 years while she is working in which I'm trying to keep our AGI under $174k for the 2 year look back IRMAA income limit. She is currently on a leave of absence until late 2020 and this 3 year window will be for tax years 2021-2023 so I have some time to implement a plan to avoid IRMAA. Along with investing in traditional Vanguard ETFs and MFs in our Vanguard brokerage account, I'm looking for ETFs with very low dividend yields to invest about 30% of our after-tax brokerage money for this span of about 3 years. After she retires, the IRMAA income limit won't be an issue as I will have more control of our AGI and I would gradually (hopefully) tax gain harvest these additional ETFs/stocks and invest back into my desired long term ETFs/Funds.

I've compiled a list of large cap growth individual stocks with 0% dividends, but I'd prefer not to go this route. I've come up the following ETFs that might fit my criteria and split this 30% after-tax money into these: IHI (.33% div), VUG (1.27% div), VOT (.62% div), VBK (.73% div), IWM (1.22% div), QQQ (.76% div), IBB (.13% div), XBI (.016% div).

I've considered just paying the Medicare Part B and Part D IRMAA for up to 3 years which may cost $2500-$3000 over 3 years and then file appeal to lower my Medicare premium, but I'm frugal and like a mental challenge to try to get around this since I wouldn't be that far above the $174k limit. If I do attempt to limit my AGI, does anyone have other ETF suggestions to accomplish a lower AGI by reducing dividends?

mhalley
Posts: 7683
Joined: Tue Nov 20, 2007 6:02 am

Re: Avoiding Medicare IRMAA

Post by mhalley » Tue Dec 03, 2019 12:36 am

Saving money is great, but I think this is a little too much gyration, ie letting the tax tail wag the dog. (I consider IRMAA to be a success tax). Changing your aa for just a few years doesn’t seem prudent, what if there are a lot of cap gains in 3 years? When I consider the fact that our health insurance would be over 3k a MONTH if not on Medicare, the IRMAA doesn’t seem so bad.
Or you could just put it all in brk :oops:

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celia
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Re: Avoiding Medicare IRMAA

Post by celia » Tue Dec 03, 2019 1:46 am

acebick wrote:
Mon Dec 02, 2019 7:53 pm
I'm frugal and like a mental challenge to try to get around this since I wouldn't be that far above the $174k limit.
I'm frugal and like mental challenges too but I wouldn't want to mess around with money we would need for retirement. I haven't thought your plan through, but would be afraid something unexpected would happen to mess up the plan.
We have a window of 3 years while she is working in which I'm trying to keep our AGI under $174k for the 2 year look back IRMAA income limit.
....
After she retires, the IRMAA income limit won't be an issue as I will have more control of our AGI and I would gradually (hopefully) tax gain harvest these additional ETFs/stocks and invest back into my desired long term ETFs/Funds.
Why are you only focusing on avoiding the IRMAA surcharges for 3 years? I think the ones after age 70 would be more important since your assets (and RMDs) have lots of time to grow by then. How do you expect to avoid the IRMAA surcharges after she retires and you are about to start Medicare (at 65)?

I would, instead, focus on a Roth conversion plan to keep future large RMDs out of the way when you (and she) are post age 70.5. Avoiding IRMAA for all your years after age 70 would seem to me to be more important than avoiding them for the next 3 years.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

Topic Author
acebick
Posts: 4
Joined: Mon Nov 19, 2018 6:15 pm

Re: Avoiding Medicare IRMAA

Post by acebick » Tue Dec 03, 2019 9:25 am

I've already done a substantial amount of Roth Conversions so RMD isn't a concern for at least 25 years.

Topic Author
acebick
Posts: 4
Joined: Mon Nov 19, 2018 6:15 pm

Re: Avoiding Medicare IRMAA

Post by acebick » Tue Dec 03, 2019 9:31 am

mhalley wrote:
Tue Dec 03, 2019 12:36 am
Saving money is great, but I think this is a little too much gyration, ie letting the tax tail wag the dog. (I consider IRMAA to be a success tax). Changing your aa for just a few years doesn’t seem prudent, what if there are a lot of cap gains in 3 years? When I consider the fact that our health insurance would be over 3k a MONTH if not on Medicare, the IRMAA doesn’t seem so bad.
Or you could just put it all in brk :oops:
Point taken.

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