Saving/Investing for Long-Term Care

[dougp29]

I'm retired, single, and plan to use my home as a vehicle for funding long-term care. I am looking to make monthly contributions to a Vanguard fund so that, should the time come when I need long-term care, I have cash available to at least begin paying for care. I'm asking for suggestions as to which fund(s) would be good for accumulating resources to be used for this initial care. Thank you for any suggestions you might have.

[barnaclebob]

What does your complete financial situation look like? Planning to use your house seems like a good idea but most people here would probably say to just use whatever money you have saved to pay for the start of your care vs creating a specific account/fund.

[dougp29]

Thanks for your insights. I have an excellent pension, have accumulated about $900k in IRAs at Vanguard, and have additional investments/savings in taxable accounts. In responding to your comment, I'm thinking that perhaps I am making this more complicated than it is.

[DarthSage]

Yeah, you may be over-thinking things. DH and I are thinking in our heads that we're saving for a "Million Dollar Disease". We don't have an account specifically marked "MDD"--it's more of a mindset that we won't go under $1M in our accounts, by spending or gifting of whatever. We'll have 5 pensions and 2 SS checks coming in, so we expect retirement to be fine if we don't go nuts with spending.

If we luck out and die peacefully, our children will inherit, but they're aware that the money is intended for our care first. Unlike a lot of people here, I don't worry about leaving to our kids--they've been given great head starts in life, they should plan on carrying the ball from adulthood on.

[cshell2]

I'm also single and figure the house would be liquidated and then move on to whatever investment accounts there are at the time, I don't want to have money set aside for just LTC because I intend all funds to be part of my spend down calculations. I don't care if the kids end up with nothing for an inheritance, so not trying to preserve funds there either. To me, LTC is more of a worry for married people that don't want to leave the spouse destitute.

[LilyFleur]

Single, and have earmarked my paid-for home to pay for long-term care. When that time comes, I/we will make a decision based on my heirs' situations---would they do better inheriting my home at a stepped-up cost basis, and then selling? Would one of them like to live in it as part of their half of the inheritance? (I'm already in capital-gains territory if I sold today.) It could make more sense to pay for it out of my 401k, as there would be very large medical deductions for long-term care, at least under current tax law.

Of course, none of us know the future, so it's good to have several options.

But I do know this: I will not remarry. I can take care of myself financially, and I'm pretty sure I don't want to physically, emotionally, and financially take care of someone I haven't had a long-term marriage with.

[TN_Boy]

Thanks for your insights. I have an excellent pension, have accumulated about $900k in IRAs at Vanguard, and have additional investments/savings in taxable accounts. In responding to your comment, I'm thinking that perhaps I am making this more complicated than it is.

I think you are overthinking this. You can look at what LTC costs are in your area, then figure out how many years of LTC selling the house would yield, which is probably a lot if you have an "excellent" pension (do you also have SS?) to help pay for the costs.

I don't see any reason at all to set aside money specifically for LTC. Your biggest concern should be who would manage the finances and sell the house if you wound up needing to move to a care facility before being able to take care of the house yourself. I.e. who is your POA?

[adamthesmythe]

Concur with most of the comments. As long as OP always has a few hundred thou or so left for the transition period I think he's set.

[smitcat]

Sounds like everyone is saying something like a few hundred thousand (adjusted for inflation) earmarked for LTC would be a reasonable plan - I agree.

[smitcat]

Single, and have earmarked my paid-for home to pay for long-term care. When that time comes, I/we will make a decision based on my heirs' situations---would they do better inheriting my home at a stepped-up cost basis, and then selling? Would one of them like to live in it as part of their half of the inheritance? (I'm already in capital-gains territory if I sold today.) It could make more sense to pay for it out of my 401k, as there would be very large medical deductions for long-term care, at least under current tax law.

Of course, none of us know the future, so it's good to have several options.

But I do know this: I will not remarry. I can take care of myself financially, and I'm pretty sure I don't want to physically, emotionally, and financially take care of someone I haven't had a long-term marriage with.

"It could make more sense to pay for it out of my 401k, as there would be very large medical deductions for long-term care, at least under current tax law."
What exactly are very large medical deductions?

[Mitchell777]

Single, and have earmarked my paid-for home to pay for long-term care. When that time comes, I/we will make a decision based on my heirs' situations---would they do better inheriting my home at a stepped-up cost basis, and then selling? Would one of them like to live in it as part of their half of the inheritance? (I'm already in capital-gains territory if I sold today.) It could make more sense to pay for it out of my 401k, as there would be very large medical deductions for long-term care, at least under current tax law.

Of course, none of us know the future, so it's good to have several options.

But I do know this: I will not remarry. I can take care of myself financially, and I'm pretty sure I don't want to physically, emotionally, and financially take care of someone I haven't had a long-term marriage with.

"It could make more sense to pay for it out of my 401k, as there would be very large medical deductions for long-term care, at least under current tax law."
What exactly are very large medical deductions?

If full blown nursing care were required the medical tax deductions could be well over $100K/year.

[TN_Boy]

Single, and have earmarked my paid-for home to pay for long-term care. When that time comes, I/we will make a decision based on my heirs' situations---would they do better inheriting my home at a stepped-up cost basis, and then selling? Would one of them like to live in it as part of their half of the inheritance? (I'm already in capital-gains territory if I sold today.) It could make more sense to pay for it out of my 401k, as there would be very large medical deductions for long-term care, at least under current tax law.

Of course, none of us know the future, so it's good to have several options.

But I do know this: I will not remarry. I can take care of myself financially, and I'm pretty sure I don't want to physically, emotionally, and financially take care of someone I haven't had a long-term marriage with.

"It could make more sense to pay for it out of my 401k, as there would be very large medical deductions for long-term care, at least under current tax law."
What exactly are very large medical deductions?

If full blown nursing care were required the medical tax deductions could be well over $100K/year.

Inability to perform two or more ADLs or dementia requiring constant supervision. If you meet those medical criteria you can deduct the care expenses, and if in a facility, you can can deduct room and board. IRS publication 502. And you can also be deducting prescription drug expenses, any co-pays, any unreimbursed dental expenses, vision expenses etc.

Big deduction if you are in assisted living or higher levels of care. So you pull from the IRA or 401k and offset the regular income with the big deduction.

[smitcat]

Single, and have earmarked my paid-for home to pay for long-term care. When that time comes, I/we will make a decision based on my heirs' situations---would they do better inheriting my home at a stepped-up cost basis, and then selling? Would one of them like to live in it as part of their half of the inheritance? (I'm already in capital-gains territory if I sold today.) It could make more sense to pay for it out of my 401k, as there would be very large medical deductions for long-term care, at least under current tax law.

Of course, none of us know the future, so it's good to have several options.

But I do know this: I will not remarry. I can take care of myself financially, and I'm pretty sure I don't want to physically, emotionally, and financially take care of someone I haven't had a long-term marriage with.

"It could make more sense to pay for it out of my 401k, as there would be very large medical deductions for long-term care, at least under current tax law."
What exactly are very large medical deductions?

If full blown nursing care were required the medical tax deductions could be well over $100K/year.

What is that advantage in dollars?

[smitcat]

Single, and have earmarked my paid-for home to pay for long-term care. When that time comes, I/we will make a decision based on my heirs' situations---would they do better inheriting my home at a stepped-up cost basis, and then selling? Would one of them like to live in it as part of their half of the inheritance? (I'm already in capital-gains territory if I sold today.) It could make more sense to pay for it out of my 401k, as there would be very large medical deductions for long-term care, at least under current tax law.

Of course, none of us know the future, so it's good to have several options.

But I do know this: I will not remarry. I can take care of myself financially, and I'm pretty sure I don't want to physically, emotionally, and financially take care of someone I haven't had a long-term marriage with.

"It could make more sense to pay for it out of my 401k, as there would be very large medical deductions for long-term care, at least under current tax law."
What exactly are very large medical deductions?

If full blown nursing care were required the medical tax deductions could be well over $100K/year.

Inability to perform two or more ADLs or dementia requiring constant supervision. If you meet those medical criteria you can deduct the care expenses, and if in a facility, you can can deduct room and board. IRS publication 502. And you can also be deducting prescription drug expenses, any co-pays, any unreimbursed dental expenses, vision expenses etc.

Big deduction if you are in assisted living or higher levels of care. So you pull from the IRA or 401k and offset the regular income with the big deduction.

Please an example --- someone has how much in their tax deferred at say 85? I don't know what to guess here - $300K?
What would their normal RMD be? What would the deduction be worth?

[TN_Boy]

Single, and have earmarked my paid-for home to pay for long-term care. When that time comes, I/we will make a decision based on my heirs' situations---would they do better inheriting my home at a stepped-up cost basis, and then selling? Would one of them like to live in it as part of their half of the inheritance? (I'm already in capital-gains territory if I sold today.) It could make more sense to pay for it out of my 401k, as there would be very large medical deductions for long-term care, at least under current tax law.

Of course, none of us know the future, so it's good to have several options.

But I do know this: I will not remarry. I can take care of myself financially, and I'm pretty sure I don't want to physically, emotionally, and financially take care of someone I haven't had a long-term marriage with.

"It could make more sense to pay for it out of my 401k, as there would be very large medical deductions for long-term care, at least under current tax law."
What exactly are very large medical deductions?

If full blown nursing care were required the medical tax deductions could be well over $100K/year.

Inability to perform two or more ADLs or dementia requiring constant supervision. If you meet those medical criteria you can deduct the care expenses, and if in a facility, you can can deduct room and board. IRS publication 502. And you can also be deducting prescription drug expenses, any co-pays, any unreimbursed dental expenses, vision expenses etc.

Big deduction if you are in assisted living or higher levels of care. So you pull from the IRA or 401k and offset the regular income with the big deduction.

Please an example --- someone has how much in their tax deferred at say 85? I don't know what to guess here - $300K?
What would their normal RMD be? What would the deduction be worth?

Is your general concern/question that at an advanced age a person might not have enough in their tax-deferred account to withdraw to pay for the LTC? They can certainly pull MORE than the RMD if needed to cover LTC costs, and if they had a choice between greater than RMD withdrawals or pulling from a brokerage account, the medical deduction might tip the decision towards the IRA withdrawal, if a choice had to be made (which is better for the heirs also of course).

I'd have to look up the RMD tables, just like you would, to answer your specific question. The median age of entering LTC is something like 79 or 80. So a typical person with some SS (or in the OPs case, a pension) income would be paying LTC costs out of SS/pension plus pulling from IRA/401k or brokerage account. The SS/pension/tax-deferred withdrawals are all regular income and can be offset by the medical deductions.

I'm not totally sure what else you are asking. I have zeroed a relative's income who was paying large amounts for LTC using the medical deduction. I could come up with some sample numbers, but I'm not sure exactly what you are looking for.

[smitcat]

"It could make more sense to pay for it out of my 401k, as there would be very large medical deductions for long-term care, at least under current tax law."
What exactly are very large medical deductions?

If full blown nursing care were required the medical tax deductions could be well over $100K/year.

Inability to perform two or more ADLs or dementia requiring constant supervision. If you meet those medical criteria you can deduct the care expenses, and if in a facility, you can can deduct room and board. IRS publication 502. And you can also be deducting prescription drug expenses, any co-pays, any unreimbursed dental expenses, vision expenses etc.

Big deduction if you are in assisted living or higher levels of care. So you pull from the IRA or 401k and offset the regular income with the big deduction.

Please an example --- someone has how much in their tax deferred at say 85? I don't know what to guess here - $300K?
What would their normal RMD be? What would the deduction be worth?

Is your general concern/question that at an advanced age a person might not have enough in their tax-deferred account to withdraw to pay for the LTC? They can certainly pull MORE than the RMD if needed to cover LTC costs, and if they had a choice between greater than RMD withdrawals or pulling from a brokerage account, the medical deduction might tip the decision towards the IRA withdrawal, if a choice had to be made (which is better for the heirs also of course).

I'd have to look up the RMD tables, just like you would, to answer your specific question. The median age of entering LTC is something like 79 or 80. So a typical person with some SS (or in the OPs case, a pension) income would be paying LTC costs out of SS/pension plus pulling from IRA/401k or brokerage account. The SS/pension/tax-deferred withdrawals are all regular income and can be offset by the medical deductions.

I'm not totally sure what else you are asking. I have zeroed a relative's income who was paying large amounts for LTC using the medical deduction. I could come up with some sample numbers, but I'm not sure exactly what you are looking for.

Good questions really - I am struggling to figure out if/when leaving larger amounts in the tax deferred for LTC makes sense. In many cases it does make sense to convert tax deferred to Roth early on, and in other cases the tax deferred accounts will not be that large when needed.
Maybe 80 is a great age to try and figure the pros and cons. How much benefit that would be for someone with reasonable tax deferred accounts at 70 and whether that strategy makes sense is more elusive.
A few other items I am not sure of in light of recent changes...
- do after tax accounts also get a deduction when paying for LTC by a person or spouse?
- are payments for LTC also deductible when/if paid by a recipient's child/other individual?

[TN_Boy]

If full blown nursing care were required the medical tax deductions could be well over $100K/year.

Inability to perform two or more ADLs or dementia requiring constant supervision. If you meet those medical criteria you can deduct the care expenses, and if in a facility, you can can deduct room and board. IRS publication 502. And you can also be deducting prescription drug expenses, any co-pays, any unreimbursed dental expenses, vision expenses etc.

Big deduction if you are in assisted living or higher levels of care. So you pull from the IRA or 401k and offset the regular income with the big deduction.

Please an example --- someone has how much in their tax deferred at say 85? I don't know what to guess here - $300K?
What would their normal RMD be? What would the deduction be worth?

Is your general concern/question that at an advanced age a person might not have enough in their tax-deferred account to withdraw to pay for the LTC? They can certainly pull MORE than the RMD if needed to cover LTC costs, and if they had a choice between greater than RMD withdrawals or pulling from a brokerage account, the medical deduction might tip the decision towards the IRA withdrawal, if a choice had to be made (which is better for the heirs also of course).

I'd have to look up the RMD tables, just like you would, to answer your specific question. The median age of entering LTC is something like 79 or 80. So a typical person with some SS (or in the OPs case, a pension) income would be paying LTC costs out of SS/pension plus pulling from IRA/401k or brokerage account. The SS/pension/tax-deferred withdrawals are all regular income and can be offset by the medical deductions.

I'm not totally sure what else you are asking. I have zeroed a relative's income who was paying large amounts for LTC using the medical deduction. I could come up with some sample numbers, but I'm not sure exactly what you are looking for.

Good questions really - I am struggling to figure out if/when leaving larger amounts in the tax deferred for LTC makes sense. In many cases it does make sense to convert tax deferred to Roth early on, and in other cases the tax deferred accounts will not be that large when needed.
Maybe 80 is a great age to try and figure the pros and cons. How much benefit that would be for someone with reasonable tax deferred accounts at 70 and whether that strategy makes sense is more elusive.
A few other items I am not sure of in light of recent changes...
- do after tax accounts also get a deduction when paying for LTC by a person or spouse?
- are payments for LTC also deductible when/if paid by a recipient's child/other individual?

I don't think of using a large medical deduction as a strategy, really. You probably won't know whether or not that you'll need a lot of money for LTC until around the time it happens. So we personally would not avoid Roth conversions because of that.

It's merely that if you wind up needing to fund LTC and you have both tax-deferred and taxable accounts, you can make choices about where to pull the funds from and the deduction might make some choices better than they would have been.

I think the answer to your first question is yes, the medical deduction, merely part of your itemized deductions, reduces your taxable income regardless of the source. I haven't looked into the second question.

[HereToLearn]

Inability to perform two or more ADLs or dementia requiring constant supervision. If you meet those medical criteria you can deduct the care expenses, and if in a facility, you can can deduct room and board. IRS publication 502. And you can also be deducting prescription drug expenses, any co-pays, any unreimbursed dental expenses, vision expenses etc.

Big deduction if you are in assisted living or higher levels of care. So you pull from the IRA or 401k and offset the regular income with the big deduction.

Please an example --- someone has how much in their tax deferred at say 85? I don't know what to guess here - $300K?
What would their normal RMD be? What would the deduction be worth?

Is your general concern/question that at an advanced age a person might not have enough in their tax-deferred account to withdraw to pay for the LTC? They can certainly pull MORE than the RMD if needed to cover LTC costs, and if they had a choice between greater than RMD withdrawals or pulling from a brokerage account, the medical deduction might tip the decision towards the IRA withdrawal, if a choice had to be made (which is better for the heirs also of course).

I'd have to look up the RMD tables, just like you would, to answer your specific question. The median age of entering LTC is something like 79 or 80. So a typical person with some SS (or in the OPs case, a pension) income would be paying LTC costs out of SS/pension plus pulling from IRA/401k or brokerage account. The SS/pension/tax-deferred withdrawals are all regular income and can be offset by the medical deductions.

I'm not totally sure what else you are asking. I have zeroed a relative's income who was paying large amounts for LTC using the medical deduction. I could come up with some sample numbers, but I'm not sure exactly what you are looking for.

Good questions really - I am struggling to figure out if/when leaving larger amounts in the tax deferred for LTC makes sense. In many cases it does make sense to convert tax deferred to Roth early on, and in other cases the tax deferred accounts will not be that large when needed.
Maybe 80 is a great age to try and figure the pros and cons. How much benefit that would be for someone with reasonable tax deferred accounts at 70 and whether that strategy makes sense is more elusive.
A few other items I am not sure of in light of recent changes...
- do after tax accounts also get a deduction when paying for LTC by a person or spouse?
- are payments for LTC also deductible when/if paid by a recipient's child/other individual?

I don't think of using a large medical deduction as a strategy, really. You probably won't know whether or not that you'll need a lot of money for LTC until around the time it happens. So we personally would not avoid Roth conversions because of that.

It's merely that if you wind up needing to fund LTC and you have both tax-deferred and taxable accounts, you can make choices about where to pull the funds from and the deduction might make some choices better than they would have been.

I think the answer to your first question is yes, the medical deduction, merely part of your itemized deductions, reduces your taxable income regardless of the source. I haven't looked into the second question.

Thanks for your clear explanations above.

Do you know if the (current) 7.5% of AGI threshold applies to IRA RMDs in the way that it applies to income? By that I mean is there some first dollar treatment of IRA distributions used for eligible medical expenses?

[smitcat]

Inability to perform two or more ADLs or dementia requiring constant supervision. If you meet those medical criteria you can deduct the care expenses, and if in a facility, you can can deduct room and board. IRS publication 502. And you can also be deducting prescription drug expenses, any co-pays, any unreimbursed dental expenses, vision expenses etc.

Big deduction if you are in assisted living or higher levels of care. So you pull from the IRA or 401k and offset the regular income with the big deduction.

Please an example --- someone has how much in their tax deferred at say 85? I don't know what to guess here - $300K?
What would their normal RMD be? What would the deduction be worth?

Is your general concern/question that at an advanced age a person might not have enough in their tax-deferred account to withdraw to pay for the LTC? They can certainly pull MORE than the RMD if needed to cover LTC costs, and if they had a choice between greater than RMD withdrawals or pulling from a brokerage account, the medical deduction might tip the decision towards the IRA withdrawal, if a choice had to be made (which is better for the heirs also of course).

I'd have to look up the RMD tables, just like you would, to answer your specific question. The median age of entering LTC is something like 79 or 80. So a typical person with some SS (or in the OPs case, a pension) income would be paying LTC costs out of SS/pension plus pulling from IRA/401k or brokerage account. The SS/pension/tax-deferred withdrawals are all regular income and can be offset by the medical deductions.

I'm not totally sure what else you are asking. I have zeroed a relative's income who was paying large amounts for LTC using the medical deduction. I could come up with some sample numbers, but I'm not sure exactly what you are looking for.

Good questions really - I am struggling to figure out if/when leaving larger amounts in the tax deferred for LTC makes sense. In many cases it does make sense to convert tax deferred to Roth early on, and in other cases the tax deferred accounts will not be that large when needed.
Maybe 80 is a great age to try and figure the pros and cons. How much benefit that would be for someone with reasonable tax deferred accounts at 70 and whether that strategy makes sense is more elusive.
A few other items I am not sure of in light of recent changes...
- do after tax accounts also get a deduction when paying for LTC by a person or spouse?
- are payments for LTC also deductible when/if paid by a recipient's child/other individual?

I don't think of using a large medical deduction as a strategy, really. You probably won't know whether or not that you'll need a lot of money for LTC until around the time it happens. So we personally would not avoid Roth conversions because of that.

It's merely that if you wind up needing to fund LTC and you have both tax-deferred and taxable accounts, you can make choices about where to pull the funds from and the deduction might make some choices better than they would have been.

I think the answer to your first question is yes, the medical deduction, merely part of your itemized deductions, reduces your taxable income regardless of the source. I haven't looked into the second question.

"So we personally would not avoid Roth conversions because of that."
We agree so far, I have been trying to find a contrarian opinion based on math but have been unsuccessful.
Started looking into this for a friend for almost a year now.

"I think the answer to your first question is yes, the medical deduction, merely part of your itemized deductions, reduces your taxable income regardless of the source. I haven't looked into the second question."
Thank you - they were both a 'yes' a number of years back, but I am not up on it now.

[TN_Boy]

stuff deleted...

Thanks for your clear explanations above.

Do you know if the (current) 7.5% of AGI threshold applies to IRA RMDs in the way that it applies to income? By that I mean is there some first dollar treatment of IRA distributions used for eligible medical expenses?

I don't think I understand your question, so if my answer makes no sense, my apologies. IRA distributions used to pay medical expenses (or other expenses) are fully taxable; I don't understand the bit about 7.5% of AGI as it applies to RMDs (versus 7.5% in the context of itemized medical deductions).

Again, this may not address your question ...

[HereToLearn]

stuff deleted...

Thanks for your clear explanations above.

Do you know if the (current) 7.5% of AGI threshold applies to IRA RMDs in the way that it applies to income? By that I mean is there some first dollar treatment of IRA distributions used for eligible medical expenses?

I don't think I understand your question, so if my answer makes no sense, my apologies. IRA distributions used to pay medical expenses (or other expenses) are fully taxable; I don't understand the bit about 7.5% of AGI as it applies to RMDs (versus 7.5% in the context of itemized medical deductions).

Again, this may not address your question ...

MY apologies, as my wording is the source of confusion.

As I understand things, medical expenses in excess of 7.5% of AGI can be itemized if one chooses to forego the standard deduction when filing taxes.

I was wondering if RMDs were treated differently than all other income, as in, if the 7.5% deductibility threshold did not apply, and medical expenses can be offset against RMDs from the first dollar.

I have seen many mentions of medical expenses offsetting RMDs and wondered why RMDs are listed specifically and not all sources of income at that age. Perhaps because RMDs are a large income source for many?

Thanks!

[TN_Boy]

stuff deleted...

Thanks for your clear explanations above.

Do you know if the (current) 7.5% of AGI threshold applies to IRA RMDs in the way that it applies to income? By that I mean is there some first dollar treatment of IRA distributions used for eligible medical expenses?

I don't think I understand your question, so if my answer makes no sense, my apologies. IRA distributions used to pay medical expenses (or other expenses) are fully taxable; I don't understand the bit about 7.5% of AGI as it applies to RMDs (versus 7.5% in the context of itemized medical deductions).

Again, this may not address your question ...

MY apologies, as my wording is the source of confusion.

As I understand things, medical expenses in excess of 7.5% of AGI can be itemized if one chooses to forego the standard deduction when filing taxes.

I was wondering if RMDs were treated differently than all other income, as in, if the 7.5% deductibility threshold did not apply, and medical expenses can be offset against RMDs from the first dollar.

I have seen many mentions of medical expenses offsetting RMDs and wondered why RMDs are listed specifically and not all sources of income at that age. Perhaps because RMDs are a large income source for many?

Thanks!

Okay, no I don't think there is any way to treat RMDs differently for medical expenses. I believe the RMD is fully taxable if used for any expense.

I *think* the reason RMDs are usually mentioned is simply because (as you say) most people don't have large taxable accounts to work with (well, also the RMDs are not avoidable). Most people starting retirement now or in recent years are living off SS, maybe a pension, a 401k/IRA etc.

Certainly the medical deduction wouldn't help me as much with income pulled from my taxable account since due to tax loss harvesting, my capital gains hit is not that big when I sell things.

It's a luxury that many BHers have the "problem" of deciding how best to manage their retirement tax situation via a combination of tax-deferred accounts, taxable accounts, Roth accounts .... common on this board, less so in general.

[HereToLearn]

stuff deleted...

Thanks for your clear explanations above.

Do you know if the (current) 7.5% of AGI threshold applies to IRA RMDs in the way that it applies to income? By that I mean is there some first dollar treatment of IRA distributions used for eligible medical expenses?

I don't think I understand your question, so if my answer makes no sense, my apologies. IRA distributions used to pay medical expenses (or other expenses) are fully taxable; I don't understand the bit about 7.5% of AGI as it applies to RMDs (versus 7.5% in the context of itemized medical deductions).

Again, this may not address your question ...

MY apologies, as my wording is the source of confusion.

As I understand things, medical expenses in excess of 7.5% of AGI can be itemized if one chooses to forego the standard deduction when filing taxes.

I was wondering if RMDs were treated differently than all other income, as in, if the 7.5% deductibility threshold did not apply, and medical expenses can be offset against RMDs from the first dollar.

I have seen many mentions of medical expenses offsetting RMDs and wondered why RMDs are listed specifically and not all sources of income at that age. Perhaps because RMDs are a large income source for many?

Thanks!

Okay, no I don't think there is any way to treat RMDs differently for medical expenses. I believe the RMD is fully taxable if used for any expense.

I *think* the reason RMDs are usually mentioned is simply because (as you say) most people don't have large taxable accounts to work with (well, also the RMDs are not avoidable). Most people starting retirement now or in recent years are living off SS, maybe a pension, a 401k/IRA etc.

Certainly the medical deduction wouldn't help me as much with income pulled from my taxable account since due to tax loss harvesting, my capital gains hit is not that big when I sell things.

It's a luxury that many BHers have the "problem" of deciding how best to manage their retirement tax situation via a combination of tax-deferred accounts, taxable accounts, Roth accounts .... common on this board, less so in general.

Thanks so much for the detailed response. Appreciate it.