How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

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water2357
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How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by water2357 »

What is the method you rely on to keep your retirement income below IRMAA, NIIT, AMT and any other additional taxation that you perhaps did not need to worry about before retirement age?

Retirement often triggers RMDs from Traditional IRAs that you cannot totally avoid through e.g. Roth Conversions. There may also be other investments that mature or must be sold that potentially can push up income for a year or two. So, what is your main means of controlling your income so that you do not end up paying more in tax on your tax deferred retirement savings than you would have paid if you had not deferred it?

Do you just invest in stocks that do not produce dividend income? Do you invest in real estate, although that has property taxes?

Or do you just resign yourself to paying e.g. IRMAA, a "tax" that did not exist when 401ks/Trad IRAs were first pushed as the only way to save for retirement Those retiring now, no doubt recall that Roths did not initially exist and when first allowed did not allow any means to convert from Trad IRAs to Roths. So, difficult to convert everything to Roth unless there is sufficient time before IRMAA, etc. kicks in.
CletusCaddy
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by CletusCaddy »

I just did a Roth conversion, paying 44% tax rate on the balance.
dboeger1
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by dboeger1 »

I'm probably not the target audience for this question given that I'm a younger accumulator, but from the perspective of someone in my position, I think one of the most underrated ways to avoid these kinds of "problems" is to just increase spending earlier in life as opposed to trying to hamstring one's investments and letting the tax tail wag the total return dog. This helps with several other things, such as qualifying for student financial aid. If one creates a legitimate business and spends on legitimate legal business expenses, there are significant tax savings to be had there as well; I realize this is not apples-to-apples, but if the choice is between starting a business or maintaining a high enough savings rate to hit IRMAA and other thresholds in retirement, that may be a point in favor of starting the business earlier in life.

This of course likely depends on being able to dramatically cut one's spending in retirement, because presumably, someone hitting such thresholds is gearing up for a relatively high spending rate in retirement. Some forms of spending can be shifted earlier without much negative consequence, such as buying or paying off a home earlier. Others imply more significant lifestyle shifts, such as eating out or traveling more before retirement and then cutting back after. Personally, upon hitting FI, I intend to decide between retiring early or working to increase spending, and my long-term retirement spending equilibrium would stay pretty modest. Of course, whether that's suitable for any given person or family is entirely personal, but I think it's arguably one of the simplest, most efficient approaches in terms of taxes and fees. It attempts to stay below thresholds in the long term, but enable additional discretionary spending (and working) in a way that does not sacrifice long-term priorities.
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Eagle33
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by Eagle33 »

Once one hits RMD age and the RMD pushes one into IRMAA range, QCDs to reduce annual income and purchase I-bonds to defer some taxes to the future.
Bullhead5829
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by Bullhead5829 »

While I am opposed to these, in principle, because they penalize those who lived responsibly and below their means by making them pay more for equal benefits, an alternative view is that if you are in IRMAA, NIIT, or AMT territory, the additional amounts you may have to pay are small in comparison to the additional income levels that invoke them. Others might like to be in such a situation!
veggivet
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by veggivet »

QCDs are your friend for this goal. Potentially, you can zero out your entire RMD up to 100k if single, and up to 200k if married.
If you watch your pennies, your dollars will take care of themselves.
sailaway
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by sailaway »

Retire younger.

Give more.

Spend more pre RMD stage.

Universal life may meet your needs or just enrich your salesperson.
Big Dog
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by Big Dog »

Definitely no dividend stocks in taxable accounts. (And BRK)
DPT
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by DPT »

Using real estate generated paper losses to decrease reportable income and in that way have had zero income tax the last 3 yrs hence no IRMAA or the others. I have done over $600K in ROTH conversions and taken over $2M in distributions the last several yrs. to buy income producing real estate over the last 3 yrs and paid no tax on it because of using bonus depreciation cost segregation studies to generate paper losses to cover the distributions. I can do this since I file as a real estate professional since retiring. Unfortunately that tax law is sun-setting after this year.
birdbard
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by birdbard »

CletusCaddy wrote: Wed Apr 20, 2022 12:50 am I just did a Roth conversion, paying 44% tax rate on the balance.
That's a heavy hit. Can you elaborate on how you envision this working out as a better financial step long term?
lazynovice
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by lazynovice »

water2357 wrote: Wed Apr 20, 2022 12:40 am What is the method you rely on to keep your retirement income below IRMAA, NIIT, AMT and any other additional taxation that you perhaps did not need to worry about before retirement age?

Retirement often triggers RMDs from Traditional IRAs that you cannot totally avoid through e.g. Roth Conversions. There may also be other investments that mature or must be sold that potentially can push up income for a year or two. So, what is your main means of controlling your income so that you do not end up paying more in tax on your tax deferred retirement savings than you would have paid if you had not deferred it?

Do you just invest in stocks that do not produce dividend income? Do you invest in real estate, although that has property taxes?
…..
I don’t think we will spend enough in retirement to trigger NII. Part of the reason is that we have a sizable taxable account and we will have some combination of capital gains and withdrawals from tax deferred. We do pay NII now, however, as non-retirees.

We hold our fixed income allocation in tax deferred and it makes up 100% of those accounts. That will help control the growth of those accounts resulting in smaller RMDs.

We don’t own any investments that have to be sold as of certain times as you describe. We only own index funds.

We plan to do small Roth conversions in early retirement up to possibly 72. We are resigned to the first level of IRMAA.

We are gifting to our kids now rather than waiting for a time when we have to sell investments to do so. We could also give them investments later if we wanted and let them pay the taxes though.

As we are in the top tax bracket now and have been for over a decade, there is little question whether we should continue to defer. Our taxes will go down in retirement almost no matter what we do.
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LilyFleur
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by LilyFleur »

Big Dog wrote: Wed Apr 20, 2022 4:25 pm Definitely no dividend stocks in taxable accounts. (And BRK)
I spend my dividends from taxable. I'm 62 and retired. They are qualified dividends, so I pay the LTCG rate for federal, and regular income taxes on them for California state income taxes.

I don't view IRMAA as a horrible thing. If I am blessed with a higher retirement income than around $90,000 as a single person (that is 2022's first IRMAA cliff for singles), then I don't really mind paying higher taxes. It's also an option to strategize to take more income one year and pay the associated IRMAA, and then stay below the cliff the next year or two.

I was feeling stressed about doing more Roth conversions (currently only about 13% of my portfolio is in Roth), and next year I'm 63, so that year's income will be the baseline for my first year of Medicare and IRMAA.

I ran the Schwab RMD calculator using several different numbers for estimated yearly earnings, and I decided that earnings are really the biggest wild card. But earnings reveal themselves year by year, and I plan a portfolio review once a year.

This year I'm starting to withdraw and enjoy life a bit more. I still haven't decided about a Roth for this year. I have planned future large gifts to my children for house down payments and weddings, and I match their Roth contributions.
Chardo
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by Chardo »

We can try to minimize IRMAA, but let's face it. IRMAA is a sign of success. If you're affected by IRMAA, you've won the game. You earned a lot and/or invested well. Give yourself a pat on the back.
averagedude
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by averagedude »

sailaway wrote: Wed Apr 20, 2022 4:20 pm Retire younger.

Give more.

Spend more pre RMD stage.

Universal life may meet your needs or just enrich your salesperson.
+1. Hindsight is 20/20 though, and lets not forget the 2019-2021 stock market returns. As you move up the income and net worth ladder, you have to think about these things every several years. Your tax situation is what it is, but asking questions at this websight and asking the right questions to your tax accountant, is a good way to see how to optimize your tax situation in future years. If your tax situation gets worse due to success or luck, you will be thinking of ways to give more, spend more, or how to leave a lasting legacy for yourself as opposed to paying taxes. Just saying, but most people who are ambitious to have way more than enough, want to see their money not wasted, but see their money go where it benefits their loved ones or society in an optimized way.
Last edited by averagedude on Wed Apr 20, 2022 6:18 pm, edited 2 times in total.
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pahkcah
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by pahkcah »

Chardo wrote: Wed Apr 20, 2022 5:02 pm We can try to minimize IRMAA, but let's face it. IRMAA is a sign of success. If you're affected by IRMAA, you've won the game. You earned a lot and/or invested well. Give yourself a pat on the back.
+1
DW and I have pensions that push us into IRMAA territory, there is nothing we can do about that. We haven't touched our investments yet, but will start performing Roth conversions in the next few years (prior to starting RMDs) and set up QCDs as others have mentioned to try and stay in a lower IRMAA tier. No complaining for us, it's a "good" problem to have.
delamer
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by delamer »

One pretty basic step to reduce the taxes you mention is to avoid having to take large sums out of savings in any one year.

So if you expect to buy a $50,000 car for cash in 4 years, take $12,500 out of your IRA in each intervening year. You’ll reduce the likelihood of going over an income limit, relative to taking it out all at once.

Or, continuing the car example, if you can get a low interest loan to pay for the car then use it rather than paying the taxes.

There is never any guarantee that you’ll pay lower tax rates in retirement than when you were working. That’s why so many advocate here for a balance between tax-deferred, taxable, and Roths. There are not many who suggest converting all tax-deferred accounts to Roths.

We ended up paying a small amount in NIIT for 2022. While the 3.8% sounded significant, it applied to only a small percentage of our actual income.

Use tax software to estimate the effect of Roth conversions, realizing capital gains, etc. BEFORE you take any action.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
friar1610
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by friar1610 »

Retired, so no chance of an unexpected pay raise or hefty Christmas bonus.

Pension, SS and RMDs are entirely predictable at the beginning of the year. Interest on CDs and individual bonds are also predictable. QCD amount is under my control. CG distributions are unlikely with the index equity funds I hold. So the only real unknowns are the taxable dividends from mutual funds. I make an educated guess (based on the previous year’s numbers) as to what those will be and add it all up. The difference between that number and the next IRMAA level is my first cut at Roth conversions. Of course, I throw in a healthy fudge factor so I don’t inadvertently go over the cliff. I wait until as late in the year as possible to do the conversions lest I have an unanticipated need for a big MF redemption to buy a new car or something like that.
Friar1610 | | I have recently concluded that when it comes to investing I am a satisficer, not an optimizer.
Good Listener
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by Good Listener »

I've gone through these mental gymnastics at one point.I wouldn't bother and just pay it. That makes life simpler and if you're at that age who needs more hassles. If you've started social security you won't even notice it and if you haven't it'll be a deduction I believe of a maximum of 656.20 a month this year.
CletusCaddy
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by CletusCaddy »

birdbard wrote: Wed Apr 20, 2022 4:53 pm
CletusCaddy wrote: Wed Apr 20, 2022 12:50 am I just did a Roth conversion, paying 44% tax rate on the balance.
That's a heavy hit. Can you elaborate on how you envision this working out as a better financial step long term?
It won’t work out.

I miscalculated, and can’t undo the mistake with recharacterization.

That being said, with my maturing I bonds, EE bonds, SS, and RMDs hitting all at once in my 70s, I wouldn’t be shocked if my traditional IRA withdraws are taxed at over 30% .
Last edited by CletusCaddy on Wed Apr 20, 2022 8:19 pm, edited 2 times in total.
Point
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by Point »

If you have the option, when you bump into the next Irma range,
Maximize it to the top of the range.
RetiredAL
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by RetiredAL »

Bullhead5829 wrote: Wed Apr 20, 2022 3:22 pm While I am opposed to these, in principle, because they penalize those who lived responsibly and below their means by making them pay more for equal benefits, an alternative view is that if you are in IRMAA, NIIT, or AMT territory, the additional amounts you may have to pay are small in comparison to the additional income levels that invoke them. Others might like to be in such a situation!
"...have to pay are small in comparison to the additional income levels that invoke them." Think again!

Mom and Dad were IRMAA-0. After Mom passed, Dad went to IRMAA-3, on less income than they had before as her SS and Retirement stopped. His costs hardly went down.

After I got him to dump his advisor to get rid of all of those programmed trades that generated income, he's now at IRMAA-2 but will never be lower.

There are lots of what I feel are unfairness items with becoming the 'last one standing'.
ralph124cf
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by ralph124cf »

Point wrote: Wed Apr 20, 2022 8:01 pm If you have the option, when you bump into the next Irma range,
Maximize it to the top of the range.
This.

Or to the next higher tax bracket, by converting TIRA to Roth. Refigure each year.

Ralph
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Harry Livermore
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by Harry Livermore »

Bullhead5829 wrote: Wed Apr 20, 2022 3:22 pm
While I am opposed to these, in principle, because they penalize those who lived responsibly and below their means by making them pay more for equal benefits, an alternative view is that if you are in IRMAA, NIIT, or AMT territory, the additional amounts you may have to pay are small in comparison to the additional income levels that invoke them. Others might like to be in such a situation!
I agree with your first phrase; and I struggle with accepting the rest... The Ant And The Grasshopper comes to mind. I cannot say more, lest the moderators spank me... :beer
Cheers
prd1982
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by prd1982 »

I consider IRMAA, NIIT, etc. as giving to a non-profit that does a lot of good work. Plus, unlike most of my charitable giving, I get to benefit from their work. While I do try to minimize my taxes, I don’t agonize over them.
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Harry Livermore
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by Harry Livermore »

prd1982 wrote: Thu Apr 21, 2022 6:22 am
I consider IRMAA, NIIT, etc. as giving to a non-profit that does a lot of good work. Plus, unlike most of my charitable giving, I get to benefit from their work. While I do try to minimize my taxes, I don’t agonize over them.
Great way to look at it... I suppose I do the same...
Cheers
delamer
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by delamer »

Harry Livermore wrote: Thu Apr 21, 2022 7:10 am
prd1982 wrote: Thu Apr 21, 2022 6:22 am
I consider IRMAA, NIIT, etc. as giving to a non-profit that does a lot of good work. Plus, unlike most of my charitable giving, I get to benefit from their work. While I do try to minimize my taxes, I don’t agonize over them.
Great way to look at it... I suppose I do the same...
Cheers
It’s odd, but I find myself resenting the complexity of the interactions of these taxes with income more than the extra dollars involved.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Tib
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by Tib »

I "fill the bracket" in an effort to delay the time when the NIIT can no longer be avoided. With inflation high and the NIIT not indexed to inflation, both my spending needs/wants and my willy-nilly income may soon liberate me from this task.
Good Listener
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by Good Listener »

CletusCaddy wrote: Wed Apr 20, 2022 7:53 pm
birdbard wrote: Wed Apr 20, 2022 4:53 pm
CletusCaddy wrote: Wed Apr 20, 2022 12:50 am I just did a Roth conversion, paying 44% tax rate on the balance.
That's a heavy hit. Can you elaborate on how you envision this working out as a better financial step long term?
It won’t work out.

I miscalculated, and can’t undo the mistake with recharacterization.

That being said, with my maturing I bonds, EE bonds, SS, and RMDs hitting all at once in my 70s, I wouldn’t be shocked if my traditional IRA withdraws are taxed at over 30% .
[it works out in cases for people where it's a legacy issue and they just want to leave their as a tax-free part of their estate. That's why I'm doing it and I'm doing it up to 35% Federal and 7% New Jersey.
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LilyFleur
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by LilyFleur »

RetiredAL wrote: Wed Apr 20, 2022 8:20 pm
Bullhead5829 wrote: Wed Apr 20, 2022 3:22 pm While I am opposed to these, in principle, because they penalize those who lived responsibly and below their means by making them pay more for equal benefits, an alternative view is that if you are in IRMAA, NIIT, or AMT territory, the additional amounts you may have to pay are small in comparison to the additional income levels that invoke them. Others might like to be in such a situation!
"...have to pay are small in comparison to the additional income levels that invoke them." Think again!

Mom and Dad were IRMAA-0. After Mom passed, Dad went to IRMAA-3, on less income than they had before as her SS and Retirement stopped. His costs hardly went down.

After I got him to dump his advisor to get rid of all of those programmed trades that generated income, he's now at IRMAA-2 but will never be lower.

There are lots of what I feel are unfairness items with becoming the 'last one standing'.
I am sorry your dad lost his wife, and you your mom.

The single tax brackets are difficult, no matter how you got there. I got into the single tax brackets through divorce, and lost my head of household status in 2019. At least health care premiums are tax deductible, after subtracting 7.5% of your income off the total. I'll probably fall off one or more IRMAA cliffs when the time comes.
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LilyFleur
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by LilyFleur »

Harry Livermore wrote: Thu Apr 21, 2022 5:52 am
Bullhead5829 wrote: Wed Apr 20, 2022 3:22 pm
While I am opposed to these, in principle, because they penalize those who lived responsibly and below their means by making them pay more for equal benefits, an alternative view is that if you are in IRMAA, NIIT, or AMT territory, the additional amounts you may have to pay are small in comparison to the additional income levels that invoke them. Others might like to be in such a situation!
I agree with your first phrase; and I struggle with accepting the rest... The Ant And The Grasshopper comes to mind. I cannot say more, lest the moderators spank me... :beer
Cheers
Well, if the Ants you speak of are the educated and higher earners* (with enough money to pay the bills and save for retirement), their life expectancy can be greater by as much as ten years than that of the Grasshoppers. So the earlier mortality of the Grasshoppers means they use fewer years of Medicare, albeit at a lower cost per year. I guess the Grasshoppers need to do a better job of selecting their parents:

"Confounding America's self-image as a land of unique mobility, studies have found that young people in the United States are less likely than young people in any other advanced nation to obtain more education than their parents. 'You've got a system that is promoting the intergenerational transmission of class,' says Anthony Carnevale, director of the Georgetown University Center on Education and the Workforce."
https://www.theatlantic.com/education/a ... ed/360532/

*just Google longevity and education and longevity and income level. Lots of research.
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Harry Livermore
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by Harry Livermore »

LilyFleur wrote: Thu Apr 21, 2022 10:33 pm
Harry Livermore wrote: Thu Apr 21, 2022 5:52 am
Bullhead5829 wrote: Wed Apr 20, 2022 3:22 pm
While I am opposed to these, in principle, because they penalize those who lived responsibly and below their means by making them pay more for equal benefits, an alternative view is that if you are in IRMAA, NIIT, or AMT territory, the additional amounts you may have to pay are small in comparison to the additional income levels that invoke them. Others might like to be in such a situation!
I agree with your first phrase; and I struggle with accepting the rest... The Ant And The Grasshopper comes to mind. I cannot say more, lest the moderators spank me... :beer
Cheers
Well, if the Ants you speak of are the educated and higher earners* (with enough money to pay the bills and save for retirement), their life expectancy can be greater by as much as ten years than that of the Grasshoppers. So the earlier mortality of the Grasshoppers means they use fewer years of Medicare, albeit at a lower cost per year. I guess the Grasshoppers need to do a better job of selecting their parents:

"Confounding America's self-image as a land of unique mobility, studies have found that young people in the United States are less likely than young people in any other advanced nation to obtain more education than their parents. 'You've got a system that is promoting the intergenerational transmission of class,' says Anthony Carnevale, director of the Georgetown University Center on Education and the Workforce."
https://www.theatlantic.com/education/a ... ed/360532/

*just Google longevity and education and longevity and income level. Lots of research.
Thank you for the link. I will check it out. I think much of these things go hand in hand; if you have less financial worry, you will stay healthier, both mentally and physically. The "credentialing" phenomenon of the last 40 years has led to an economy where, in order to earn a middle-class (or above) income, you must have a degree (often a master's) means that higher levels of education. Clearly, all of it is tied together and folks who struggle do in fact need assistance.
I can't really say more on this forum, not only because I don't want to sound smug or judgey, but also because it's a "no politics" zone.
prd1982 put it best, above. I should look at these special charges as a form of charity. I'll probably have a healthier outlook on life that way :beer
Cheers
SGM
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by SGM »

We converted all our traditional tax deferred accounts to Roth accounts before I took delayed SS until 70. We also set up a family charitable account with an individual stock that had a large capital gain. We have enough guaranteed income streams and dividends that we are stuck with high IRMAA payments. We are not heavy users of Medicare and our payments are much higher for medical insurance than they were when I was working. I resent making the extra payments but I don't dwell on it. I am happy I have no RMDs that I don't need and would increase our taxes even further.

I will probably add to the family charitable trust. Although we made several distributions to our favorite charities, a bull market has left a lot in the trust.

I have an overfunded 529 and am reluctant to take it out as the owner because of additional taxes. I will distribute it to others.
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LilyFleur
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by LilyFleur »

Harry Livermore wrote: Fri Apr 22, 2022 4:40 am
LilyFleur wrote: Thu Apr 21, 2022 10:33 pm
Harry Livermore wrote: Thu Apr 21, 2022 5:52 am
Bullhead5829 wrote: Wed Apr 20, 2022 3:22 pm
While I am opposed to these, in principle, because they penalize those who lived responsibly and below their means by making them pay more for equal benefits, an alternative view is that if you are in IRMAA, NIIT, or AMT territory, the additional amounts you may have to pay are small in comparison to the additional income levels that invoke them. Others might like to be in such a situation!
I agree with your first phrase; and I struggle with accepting the rest... The Ant And The Grasshopper comes to mind. I cannot say more, lest the moderators spank me... :beer
Cheers
Well, if the Ants you speak of are the educated and higher earners* (with enough money to pay the bills and save for retirement), their life expectancy can be greater by as much as ten years than that of the Grasshoppers. So the earlier mortality of the Grasshoppers means they use fewer years of Medicare, albeit at a lower cost per year. I guess the Grasshoppers need to do a better job of selecting their parents:

"Confounding America's self-image as a land of unique mobility, studies have found that young people in the United States are less likely than young people in any other advanced nation to obtain more education than their parents. 'You've got a system that is promoting the intergenerational transmission of class,' says Anthony Carnevale, director of the Georgetown University Center on Education and the Workforce."
https://www.theatlantic.com/education/a ... ed/360532/

*just Google longevity and education and longevity and income level. Lots of research.
Thank you for the link. I will check it out. I think much of these things go hand in hand; if you have less financial worry, you will stay healthier, both mentally and physically. The "credentialing" phenomenon of the last 40 years has led to an economy where, in order to earn a middle-class (or above) income, you must have a degree (often a master's) means that higher levels of education. Clearly, all of it is tied together and folks who struggle do in fact need assistance.
I can't really say more on this forum, not only because I don't want to sound smug or judgey, but also because it's a "no politics" zone.
prd1982 put it best, above. I should look at these special charges as a form of charity. I'll probably have a healthier outlook on life that way :beer
Cheers
I like your attitude.
Tib
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by Tib »

Harry Livermore: "I should look at these special charges [IRMAA] as a form of charity. I'll probably have a healthier outlook on life that way."
LilyFleur: "I like your attitude."

Well, that's generous of you. I think of charity as voluntary and prefer to pick my own beneficiaries. Some years ago, the annual Medicare book used to include information on what percentage of the actuarially expected expenses of their Medicare-provided care are borne by those in each of the five IRMAA brackets. For IRMAA1-IRMAA5, the percentages, as I recall, were 20%, 40%, 60%, 80%, 100%.
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GerryL
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by GerryL »

I use QCDs to manage my MAGI and avoid IRMAA.

I try to leave a generous gap between estimated income and the threshold, but it is a little tricky given that the thresholds are not known two years out. And this past year my plan failed when my taxable account -- held mostly in Vanguard Balanced Index -- got an unexpectedly large infusion of cap gains $$. I estimate that it put me just a couple of hundred dollars over the limit and that I will be paying IRMAA in a couple of years. :(

By the time I figured this out, there was no opportunity to use some of the space up to the next threshold to make some investment moves that would add to my MAGI.
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LilyFleur
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by LilyFleur »

Tib wrote: Fri Apr 22, 2022 1:36 pm Harry Livermore: "I should look at these special charges [IRMAA] as a form of charity. I'll probably have a healthier outlook on life that way."
LilyFleur: "I like your attitude."

Well, that's generous of you. I think of charity as voluntary and prefer to pick my own beneficiaries. Some years ago, the annual Medicare book used to include information on what percentage of the actuarially expected expenses of their Medicare-provided care are borne by those in each of the five IRMAA brackets. For IRMAA1-IRMAA5, the percentages, as I recall, were 20%, 40%, 60%, 80%, 100%.
Darn. Harry was getting his zen on.
That is very interesting that only these retirement income brackets are actually paying their way: singles with income greater than $500,000 and married couples with income greater than $750,000.

When you consider these taxpayer subsidies in light of the huge taxpayer subsidy of tax-free medical insurance premiums paid by both employers and employees, it's easy to see why our healthcare costs are so high. It's a for-profit industry subsidized heavily by taxpayers, in a way that is not transparent to citizens or patients.
Last edited by LilyFleur on Fri Apr 22, 2022 1:54 pm, edited 1 time in total.
Soon2BXProgrammer
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by Soon2BXProgrammer »

water2357 wrote: Wed Apr 20, 2022 12:40 am What is the method you rely on to keep your retirement income below IRMAA, NIIT, AMT and any other additional taxation that you perhaps did not need to worry about before retirement age?
Megabackdoor Roth to stuff my Roth IRA and keep my taxable account small.
Earned 40 (and counting) credit hours of financial planning related education from a regionally accredited university, but I am not your advisor.
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celia
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by celia »

We switched to Roth contributions when Roths were started, converted like crazy in our 60s and during the 2008 crash, then QCDed after reaching 70.5. No worries here because we didn’t over-save in tax-deferred.

I also used a large chunk of tax-deferred to buy extra years of “service credt”. That made my pension larger and we pay yearly taxes on that instead. It simplified our life too in not having to worry about where retirement money comes from.
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.
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Harry Livermore
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by Harry Livermore »

LilyFleur wrote: Fri Apr 22, 2022 1:46 pm
Tib wrote: Fri Apr 22, 2022 1:36 pm Harry Livermore: "I should look at these special charges [IRMAA] as a form of charity. I'll probably have a healthier outlook on life that way."
LilyFleur: "I like your attitude."

Well, that's generous of you. I think of charity as voluntary and prefer to pick my own beneficiaries. Some years ago, the annual Medicare book used to include information on what percentage of the actuarially expected expenses of their Medicare-provided care are borne by those in each of the five IRMAA brackets. For IRMAA1-IRMAA5, the percentages, as I recall, were 20%, 40%, 60%, 80%, 100%.
Darn. Harry was getting his zen on.
That is very interesting that only these retirement income brackets are actually paying their way: singles with income greater than $500,000 and married couples with income greater than $750,000.

When you consider these taxpayer subsidies in light of the huge taxpayer subsidy of tax-free medical insurance premiums paid by both employers and employees, it's easy to see why our healthcare costs are so high. It's a for-profit industry subsidized heavily by taxpayers, in a way that is not transparent to citizens or patients.
Agreed. And Tib, those are interesting stats as well. I will dig into that.
I also prefer to choose my charities, but I'm not opposed to some structured assistance to help those less fortunate (i.e. progressive taxes and special charges like IRMAA) Anyway, I think the middle road is best... and yes, I do try to zen my way through this stuff lol.
Cheers
lws
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by lws »

My employee retirement medical benefits cover Part B IRMAA.
They require that I sign up for Part B.
Drug coverage, Part D IRMAA, is my responsibility.
ModifiedDuration
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by ModifiedDuration »

Tib wrote: Fri Apr 22, 2022 1:36 pm Harry Livermore: "I should look at these special charges [IRMAA] as a form of charity. I'll probably have a healthier outlook on life that way."
LilyFleur: "I like your attitude."

Well, that's generous of you. I think of charity as voluntary and prefer to pick my own beneficiaries. Some years ago, the annual Medicare book used to include information on what percentage of the actuarially expected expenses of their Medicare-provided care are borne by those in each of the five IRMAA brackets. For IRMAA1-IRMAA5, the percentages, as I recall, were 20%, 40%, 60%, 80%, 100%.
Someone paying the standard Part B (physicians and outpatient services) premium of $170.10 a month is paying 25% of the cost of the Part B program.

With IRMAA payments the percentages are 35%, 50%, 65%, 80%, and 85%.
Last edited by ModifiedDuration on Fri Apr 22, 2022 4:29 pm, edited 1 time in total.
Tib
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by Tib »

Not to mention the part paid by employer and employee during decades of work.
ModifiedDuration
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by ModifiedDuration »

Tib wrote: Fri Apr 22, 2022 4:22 pm Not to mention the part paid by employer and employee during decades of work.
That just goes to fund Part A (hospitalizations).
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by Tib »

Where are these statistics found nowadays? I'd like to watch how the percentages evolve.
ModifiedDuration
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by ModifiedDuration »

Tib wrote: Fri Apr 22, 2022 4:32 pm Where are these statistics found nowadays? I'd like to watch how the percentages evolve.
I’m not sure of your question.

The Part B percentages related to IRMAA (the 25%, then 35%, 50%, 65%, 80%, and 85%) do not change from year-to-year.
Tib
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by Tib »

OK, I think they used to be what I originally posted.
ModifiedDuration
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by ModifiedDuration »

Tib wrote: Fri Apr 22, 2022 4:39 pm OK, I think they used to be what I originally posted.
When originally put in place in 2007, the IRMAA percentages were much lower (there were only 4 IRMAA brackets initially).

With the passage of the Affordable Care Act in 2010, the current percentages were put in place for 2011.

The 5th IRMAA bracket (85%) was put in place in 2019, as part of the Bi-Partisan Budget Act of 2018.

(Yeah, I know, more than you ever wanted to know about this stuff.)
Californiastate
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by Californiastate »

I'm now converting up to the limit but will eventually pay the piper once SSI and RMD's kick in. It's inevitable and really a drop in the bucket.
TravelforFun
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by TravelforFun »

Harry Livermore wrote: Thu Apr 21, 2022 7:10 am
prd1982 wrote: Thu Apr 21, 2022 6:22 am
I consider IRMAA, NIIT, etc. as giving to a non-profit that does a lot of good work. Plus, unlike most of my charitable giving, I get to benefit from their work. While I do try to minimize my taxes, I don’t agonize over them.
Great way to look at it... I suppose I do the same...
Cheers
My wife are paying an additional $500 per person per month for Part B and D and I'm okay with it. I feel fortunate to be in this situation.

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CletusCaddy
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Re: How are you investing to keep your retirement income below IRMAA, NIIT, AMT, etc.?

Post by CletusCaddy »

Good Listener wrote: Thu Apr 21, 2022 7:06 pm
CletusCaddy wrote: Wed Apr 20, 2022 7:53 pm
birdbard wrote: Wed Apr 20, 2022 4:53 pm
CletusCaddy wrote: Wed Apr 20, 2022 12:50 am I just did a Roth conversion, paying 44% tax rate on the balance.
That's a heavy hit. Can you elaborate on how you envision this working out as a better financial step long term?
It won’t work out.

I miscalculated, and can’t undo the mistake with recharacterization.

That being said, with my maturing I bonds, EE bonds, SS, and RMDs hitting all at once in my 70s, I wouldn’t be shocked if my traditional IRA withdraws are taxed at over 30% .
it works out in cases for people where it's a legacy issue and they just want to leave their as a tax-free part of their estate. That's why I'm doing it and I'm doing it up to 35% Federal and 7% New Jersey.
How much of a legacy are we talking about to make it worth paying 42% now?
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