2 Years before Social Security and 4 Years before RMDs: Does starting Roth conversions at this point make sense?

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Retirement_Life
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2 Years before Social Security and 4 Years before RMDs: Does starting Roth conversions at this point make sense?

Post by Retirement_Life »

My wife and I will both be retiring from our jobs at the end of 2022. In 2023, I will be 68 and my wife will be 67. We are trying to figure out if Roth conversions are a practical strategy, given our financial assets and the relatively short time frame until we start social security and RMDs kick in.

Second marriages for both of us (married 4 years). We keep finances separate (except for a joint checking account). We file our taxes as married filing jointly (per CPA recommendation). We have no debt. Given the differences in our net worth (see below), I pay for the majority of our expenses.

I will wait until 70 to collect my maximum social security (SS) benefit (~$50,000/year); I am currently collecting a spousal survivor benefit ($20,400/year). My wife would like to start collecting SS in 2023 when she turns 67 ($42,000/year); when she starts, she will receive about $21,000 for the partial year 2023.

My wife receives a small pension (~$12,000/year) from a previous employer; I received a lump sum pension which has been rolled over into my 401k.

Wife’s assets are: $300k in after-tax accounts; $600k in IRA and 401k (combined total).
Husband’s assets are: $1.5M in after-tax accounts, 3.8M in IRA and 401k (combined total), and $156k in Roth IRA (established years ago with then after-tax 401k contributions).

Based on the above information, in 2023 we estimate about $100k of income from her from pension, her partial year SS, my survivor SS, as well as interest, dividends, capital gains, etc., from our taxable accounts. This estimate excludes considering how much to draw from my retirement accounts. In retirement, our annual gross income requirement will be about $100k.

Medicare Part B premiums will start in January 2023. Due to our 2021 MAGI (24%tx bracket), our IRMAA monthly Part B premium will be $428.60 for each of us. We plan to appeal the 2023 IRMAA premium because of our work stoppage at the end of 2022.

So, I am trying to determine how much to draw down yearly from the $3.8M in my combined retirement accounts in the next few years before RMDs start for both of us. In the interim, social security income will kick in (first for my wife, and then for me). Also trying to determine if I should do some Roth conversions (and if so, how much) in order to lower my retirement account balance and therefore future RMDs, all the while considering the impact on future IRMAA premiums.

Is there any value added in starting Roth conversions given our circumstances (assets and time frame)? It’s all a bit confusing as we try to factor in IRMAA and federal tax brackets for 2023 and beyond into our decision making.

Any feedback or suggestions would be appreciated.
RetiredCSProf
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Re: 2 Years before Social Security and 4 Years before RMDs: Does starting Roth conversions at this point make sense?

Post by RetiredCSProf »

From the info you gave, it sounds like starting Roth conversions would make sense for you. You will have more than enough in retirement to cover your expenses. The question is what are your plans for the excess?

- Are you charitably inclined? You can donate up to $100K annually in QCDs from the tIRA, starting at age 70.5. This will dampen the tax impact of taking RMDs.

- Do you plan to leave a legacy to heirs? You mentioned previous marriages for both of you -- but did not indicate whether either of you have children.

- Are you covered by LTCi or do you plan to "self-insure" using distributions from the tIRAs?
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Re: 2 Years before Social Security and 4 Years before RMDs: Does starting Roth conversions at this point make sense?

Post by Kevin M »

DW and I are in a similar situation, although a couple of years older. I started SS this year at 70, and DW will start in a couple of years at 70. I also was receiving SS survivor benefits until I started my retirement benefit.

The big kicker for us is IRMAA. We will be in an IRMAA tier when receiving RMDs and SS, but are in a higher IRMAA tier now and next year due to Roth conversion in 2021 and home sale in 2022. I don't want to do a Roth conversion in any year that will kick us into a higher IRMAA tier than I estimate we will be in when receiving RMDS and SS. That doesn't leave much room for a Roth conversion this year (last I estimated, maybe $30K, but probably less now due to higher interest rates in 2022 than in 2021), and I don't think we'll be able to make enough Roth conversions to reduce our IRMAA tier when we both are receiving SS and RMDs.

I may not do a Roth conversion at all this year, due to the complexity of estimating our 2022 taxable income, and the consequences of going over the next IRMAA tier limit by $1.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
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Stinky
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Re: 2 Years before Social Security and 4 Years before RMDs: Does starting Roth conversions at this point make sense?

Post by Stinky »

Retirement_Life wrote: Tue Nov 29, 2022 1:50 pm
Based on the above information, in 2023 we estimate about $100k of income from her from pension, her partial year SS, my survivor SS, as well as interest, dividends, capital gains, etc., from our taxable accounts......

In retirement, our annual gross income requirement will be about $100k......

So, I am trying to determine how much to draw down yearly from the $3.8M in my combined retirement accounts in the next few years before RMDs start for both of us. In the interim, social security income will kick in (first for my wife, and then for me).
If I understand correctly, your income is $100k. And your expenses are $100k. Is that correct?

If so, you don't have any need to withdraw from retirement accounts now. But you may want to withdraw some to do Roth conversions.

With almost $4.5 million in combined IRA/401k accounts, your and your spouse's RMDs will be approaching $200k per year once you both need to start taking them. So, for the next few years while your income is relatively "low", you could make Roth conversions. From your income, you might be in the 12% tax bracket for 2023, or maybe the bottom of the 22% tax bracket. I consider both 22% and 24% to be relatively low tax rates for the income level that you're at. The tax rates are currently scheduled to go up in 2026. I would do Roth conversions up to the top of the 24% tax bracket.

FWIW - I'm pre-RMD age also, and feel comfortable doing Roth conversions up to the top of the 24% tax bracket.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
ClassOf2021
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Re: 2 Years before Social Security and 4 Years before RMDs: Does starting Roth conversions at this point make sense?

Post by ClassOf2021 »

Stinky wrote: Tue Nov 29, 2022 8:05 pm
Retirement_Life wrote: Tue Nov 29, 2022 1:50 pm
Based on the above information, in 2023 we estimate about $100k of income from her from pension, her partial year SS, my survivor SS, as well as interest, dividends, capital gains, etc., from our taxable accounts......

In retirement, our annual gross income requirement will be about $100k......

So, I am trying to determine how much to draw down yearly from the $3.8M in my combined retirement accounts in the next few years before RMDs start for both of us. In the interim, social security income will kick in (first for my wife, and then for me).
If I understand correctly, your income is $100k. And your expenses are $100k. Is that correct?

If so, you don't have any need to withdraw from retirement accounts now. But you may want to withdraw some to do Roth conversions.

With almost $4.5 million in combined IRA/401k accounts, your and your spouse's RMDs will be approaching $200k per year once you both need to start taking them. So, for the next few years while your income is relatively "low", you could make Roth conversions. From your income, you might be in the 12% tax bracket for 2023, or maybe the bottom of the 22% tax bracket. I consider both 22% and 24% to be relatively low tax rates for the income level that you're at. The tax rates are currently scheduled to go up in 2026. I would do Roth conversions up to the top of the 24% tax bracket.

FWIW - I'm pre-RMD age also, and feel comfortable doing Roth conversions up to the top of the 24% tax bracket.
+1

2023-2025 could be a good window for you to do Roth conversions. How far to go in 2023?

1. 24% marginal federal tax which could pass beyond the IRMAA 366k magi limit due to ltcg and qualified dividends
2. Stay below the 366k limit
3. Convert to the next lower IRMAA limit of 306 k magi

It may be that if you appeal 2023 IRMAA and chose option 3, you might get 2 years of lower IRMAA for the both of you but I am not sure of this.

I am in a similar situation and I chose option 1 (for 2022) and it looks like I may already above the 366k limit and so will likely pay both 2023 and 2024 at the greater than 366k IRMAA (but my spouse will not start Medicare til 2026).

If you did option 2, then I am not sure if any appeal is useful/needed.
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Retirement_Life
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Re: 2 Years before Social Security and 4 Years before RMDs: Does starting Roth conversions at this point make sense?

Post by Retirement_Life »

Thank you all for the feedback and suggestions received thus far; I appreciate it.

To provide a little more information: Although my wife’s taxable and retirement accounts are certainly part of our overall income and tax profile, I am helping my wife financially by paying the majority of our expenses and therefore only including my finances when considering Roth conversion. In my original post, I roughly estimated $100k of combined income, excluding any withdrawals from savings or retirement accounts. About half of the $100k income is from my wife’s interest on savings, small pension, and partial social security for 2023, most of which I would like her to continue saving for herself. Of the $1.5M in my after-tax accounts, I have set aside $500k in accounts for my wife (as my beneficiary); and part of the remaining balance is in equities, leaving about $600k in liquid assets (which I would to tap into to pay taxes on Roth conversions).

I’m thinking that in 2023 I will need to make a distribution from my 401k (with federal and state taxes withheld) of $75k to realize ~$50+k after tax. This would put us at ~$175k gross income for 2023. At this income level, we are in the 22% tax bracket and no IRMAA Part B surcharges. On top of this $175k gross income, I could perform an approximately $75k Roth conversion resulting in IRMAA surcharge of $230.80/month each (IRMAA cliff ≤$246k); or approximately $125k Roth conversion resulting in IRMAA surcharge of $329.70/month each (IRMAA cliff ≤$306k); or approximately $175k Roth conversion resulting in IRMAA surcharge of $428.60/month each (IRMAA cliff ≤$366k); and so on. Is my understanding correct? It all seems complicated and I am still learning.

As indicated above, I would pay taxes on the Roth conversions from my personal after-tax $600k liquid assets (not my wife’s savings) and these taxes will add up over the next few years of Roth conversions. I like the comfort of having a few 100k of liquid savings in retirement for unexpected and discretionary expenses (emergencies, home improvements, vacations, new car, etc.). Assuming $175k Roth conversions yearly for the next 3 tax years (before tax rates go up), that would total a $525k reduction in my current retirement account balance of $3.8M (tIRA and 401k). Given the relatively small reduction in the retirement account balance, and the amount of tax owed on the Roth conversions, I’m not yet convinced it’s worth performing Roth conversions. Diverting $525k from my tIRA/401k to a Roth IRA will reduce my initial RMD only by about $21k.

Upon further reflection, my main goal for performing Roth conversions is to reduce my tIRA/401k balance in order to reduce future RMDs. Building up a tax-free Roth IRA balance or leaving a Roth IRA legacy is of lower priority. Because of this, I could just pay the Roth conversion taxes directly out of the conversion. Even though this results in less money going into the Roth, so be it. And then there is IRMAA to consider.

I wouldn’t be surprised if I am way off base on this, so please feel free to enlighten me. I do appreciate everyone’s feedback.
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Re: 2 Years before Social Security and 4 Years before RMDs: Does starting Roth conversions at this point make sense?

Post by Stinky »

Retirement_Life wrote: Thu Dec 01, 2022 10:15 am Thank you all for the feedback and suggestions received thus far; I appreciate it.

To provide a little more information: Although my wife’s taxable and retirement accounts are certainly part of our overall income and tax profile, I am helping my wife financially by paying the majority of our expenses and therefore only including my finances when considering Roth conversion. In my original post, I roughly estimated $100k of combined income, excluding any withdrawals from savings or retirement accounts. About half of the $100k income is from my wife’s interest on savings, small pension, and partial social security for 2023, most of which I would like her to continue saving for herself. Of the $1.5M in my after-tax accounts, I have set aside $500k in accounts for my wife (as my beneficiary); and part of the remaining balance is in equities, leaving about $600k in liquid assets (which I would to tap into to pay taxes on Roth conversions).

I’m thinking that in 2023 I will need to make a distribution from my 401k (with federal and state taxes withheld) of $75k to realize ~$50+k after tax. This would put us at ~$175k gross income for 2023. At this income level, we are in the 22% tax bracket and no IRMAA Part B surcharges. On top of this $175k gross income, I could perform an approximately $75k Roth conversion resulting in IRMAA surcharge of $230.80/month each (IRMAA cliff ≤$246k); or approximately $125k Roth conversion resulting in IRMAA surcharge of $329.70/month each (IRMAA cliff ≤$306k); or approximately $175k Roth conversion resulting in IRMAA surcharge of $428.60/month each (IRMAA cliff ≤$366k); and so on. Is my understanding correct? It all seems complicated and I am still learning.

As indicated above, I would pay taxes on the Roth conversions from my personal after-tax $600k liquid assets (not my wife’s savings) and these taxes will add up over the next few years of Roth conversions. I like the comfort of having a few 100k of liquid savings in retirement for unexpected and discretionary expenses (emergencies, home improvements, vacations, new car, etc.). Assuming $175k Roth conversions yearly for the next 3 tax years (before tax rates go up), that would total a $525k reduction in my current retirement account balance of $3.8M (tIRA and 401k). Given the relatively small reduction in the retirement account balance, and the amount of tax owed on the Roth conversions, I’m not yet convinced it’s worth performing Roth conversions. Diverting $525k from my tIRA/401k to a Roth IRA will reduce my initial RMD only by about $21k.

Upon further reflection, my main goal for performing Roth conversions is to reduce my tIRA/401k balance in order to reduce future RMDs. Building up a tax-free Roth IRA balance or leaving a Roth IRA legacy is of lower priority. Because of this, I could just pay the Roth conversion taxes directly out of the conversion. Even though this results in less money going into the Roth, so be it. And then there is IRMAA to consider.

I wouldn’t be surprised if I am way off base on this, so please feel free to enlighten me. I do appreciate everyone’s feedback.
I think that your plan sounds just fine. You've clearly been thoughtful about it. There's no single right answer to a situation like yours, and you're looking at things from a variety of angles.

A couple of minor comments -

--- If you do get into IRMAA territory, be aware that there is also a surcharge on Part D prescription coverage if you have it. The lowest tier is $12.20 per person per month, and it goes up as the tiers go up. Mr Google can give you a complete listing of charges.
--- At your ages in your middle-to-late 60s, both you and your wife may very well have at least 10-15 more years of life, if not more. But be aware that when one of you dies, the other will start filing taxes as "single" in the year after death, and tax (and IRMAA) brackets will change. I doubt that you want to factor this into your financial planning over the next 2-4 years, but it's something to be aware of.

You're doing a good job in thinking this through. Best to you.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
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Re: 2 Years before Social Security and 4 Years before RMDs: Does starting Roth conversions at this point make sense?

Post by twh »

In my experience, the first IRMAA cliff is hard to avoid and just puts too many roadblocks in the way of getting Roth conversions done and whatever else you want to do. I stopped worrying about it. That said, I do try to avoid the next IRMAA levels.
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Re: 2 Years before Social Security and 4 Years before RMDs: Does starting Roth conversions at this point make sense?

Post by delamer »

Is your current wife the heir to your retirement accounts or is someone else?

One of the reasons to do Roth conversions is to avoid the bump up in tax rates on RMDs after the first spouse dies. But uf your current wife isn’t goimg to inherit your accounts, that calculation changes.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Retirement_Life
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Re: 2 Years before Social Security and 4 Years before RMDs: Does starting Roth conversions at this point make sense?

Post by Retirement_Life »

Thanks again everyone for the feedback. My wife is not the heir to my retirement accounts, nor most other accounts. I have set aside some after-tax bank accounts ($500k) naming her as the beneficiary; she is also on the deed to our house ($500k). All other finances are separate per a prenup agreement. She is the heir to assets from others in her family, so she will be OK.

I may consider a $100k Roth conversion in 2023, having federal and state taxes withheld from the conversion and the balance going into the Roth IRA. Plus taking a distribution of $100k from retirement accounts (with taxes withheld), and other income of about $100k would put our MAGI at about $300k. Medicare IRMAA Part B+D would be $361/year ($329.70+$31.50). This is $4332/year per person. The base Medicare premium is $164.90 ($1979/year per person). For my wife, if the base premium is subtracted from the $361 premium the overage is $2353/year (which I would cover for her).

Question: We will be enrolled in my company retiree medical plan starting in January 2023 (UHC Medicare Advantage with included Rx coverage). So, does Part D IRMAA apply in our situation?
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Re: 2 Years before Social Security and 4 Years before RMDs: Does starting Roth conversions at this point make sense?

Post by curmudgeon »

My general plan is to project IRMAA and tax brackets each year, and see where our income is likely to fall within them. If we have significant space in the current bracket, I'll do Roth conversions to push us up near the top of the bracket. If we have RMDs, and are likely to be just over an IRMAA bracket, I may do some QCD to help get us under.

I figure if I keep nibbling away at the tax-deferred in this way, I can slowly move more into tax-free and reduce the impact of the growing RMD percentages as we age (as well as the eventual filing single stage). Prior to RMDs, I'm willing to move some distance into IRMAA with Roth conversions and/or withdrawals from tax-deferred. I use "what would our income look like if we were age 73 and taking RMDs?" as a rough starting point for where I should be pushing our income in the current year, and then adjust for other circumstances if there are more optimal situations around ACA, IRMAA, tax brackets, etc.
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Re: 2 Years before Social Security and 4 Years before RMDs: Does starting Roth conversions at this point make sense?

Post by ModifiedDuration »

Retirement_Life wrote: Thu Dec 01, 2022 3:26 pm Question: We will be enrolled in my company retiree medical plan starting in January 2023 (UHC Medicare Advantage with included Rx coverage). So, does Part D IRMAA apply in our situation?
Yes.
twh
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Re: 2 Years before Social Security and 4 Years before RMDs: Does starting Roth conversions at this point make sense?

Post by twh »

Retirement_Life wrote: Thu Dec 01, 2022 3:26 pm Thanks again everyone for the feedback. My wife is not the heir to my retirement accounts, nor most other accounts. I have set aside some after-tax bank accounts ($500k) naming her as the beneficiary; she is also on the deed to our house ($500k). All other finances are separate per a prenup agreement. She is the heir to assets from others in her family, so she will be OK.

I may consider a $100k Roth conversion in 2023, having federal and state taxes withheld from the conversion and the balance going into the Roth IRA. Plus taking a distribution of $100k from retirement accounts (with taxes withheld), and other income of about $100k would put our MAGI at about $300k. Medicare IRMAA Part B+D would be $361/year ($329.70+$31.50). This is $4332/year per person. The base Medicare premium is $164.90 ($1979/year per person). For my wife, if the base premium is subtracted from the $361 premium the overage is $2353/year (which I would cover for her).

Question: We will be enrolled in my company retiree medical plan starting in January 2023 (UHC Medicare Advantage with included Rx coverage). So, does Part D IRMAA apply in our situation?
My mother also has a retiree UHC Medicare Advantage plan and I only see SSA have taken money for Part B and not also Part D.

One other pre-retirement thing you should do is get a HELOC on the house. You should be able to shop around and find one that has no fees -- usually you'll need some account aggregation amount minimum or something to avoid the closing costs on the HELOC. Just leave the balance at zero, but it's easier to get while you have W2 income.
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Re: 2 Years before Social Security and 4 Years before RMDs: Does starting Roth conversions at this point make sense?

Post by Lee_WSP »

Based upon a 5% ROR, it looks like if you're able to reduce your balance by 1 million dollars, you can save ~100k per year during the peak RMD years.

https://www.schwab.com/ira/ira-calculators/rmd

If this drops you down from the 32 to 24, it's a worthwhile endeavor to try and really maximize this and push through the IRMAA tier.

If not, then it doesn't make sense to blow through the tier and you should instead stay well enough below it so as to not accidentally break the ceiling.

I say you should convert up to that tier because you're probably not going to be any worse off if you do that and quite possibly better off. I am assuming that the tier is in the same bracket you're in now or the same bracket as the most optimistic RMD scenario puts you in. If either of those two assumptions are wrong, I retract the statement. Please keep in mind that I haven't done a deep dive in your finances, I just did a quick bird's eye view of it.
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Re: 2 Years before Social Security and 4 Years before RMDs: Does starting Roth conversions at this point make sense?

Post by Artsdoctor »

Vanguard has a reasonable analysis of Roth conversions, and there are a couple of white papers which go into the pros and cons. You can find much of the information here:

https://investor.vanguard.com/investor- ... conversion

One of the biggest reasons to convert assets for investors approaching 70 and beyond centers around legacy planning. You said that this would not apply to you.

One issue you might consider is the 5-year rule surrounding Roth conversions. You have your Roth but your wife does not. Although she'd be allowed to withdraw converted amounts from her (new) Roth, she wouldn't be able to withdraw the dividends and gains for 5 years. You might consider opening up a Roth account for her now in order to start the clock.

It's not just the marginal tax rates and IRMAA surcharges that create challenges for conversions. You might want to invest in a tax software program to see how conversions affect tax amounts since tax laws are complicated enough that you can easily overlook things.
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Re: 2 Years before Social Security and 4 Years before RMDs: Does starting Roth conversions at this point make sense?

Post by delamer »

ModifiedDuration wrote: Thu Dec 01, 2022 3:53 pm
Retirement_Life wrote: Thu Dec 01, 2022 3:26 pm Question: We will be enrolled in my company retiree medical plan starting in January 2023 (UHC Medicare Advantage with included Rx coverage). So, does Part D IRMAA apply in our situation?
Yes.
If the retiree coverage includes prescriptions,why would they need Part D?
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Re: 2 Years before Social Security and 4 Years before RMDs: Does starting Roth conversions at this point make sense?

Post by delamer »

Your wife is not heir to your retirement accounts and you don’t need the income from those accounts.

So have you considered reducing the balances by making distributions now to those people/organizations who will inherit the accounts whrn you are gone?
Last edited by delamer on Thu Dec 01, 2022 6:00 pm, edited 1 time in total.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Re: 2 Years before Social Security and 4 Years before RMDs: Does starting Roth conversions at this point make sense?

Post by Lee_WSP »

delamer wrote: Thu Dec 01, 2022 5:51 pm

So have you considered reducing the balances by making distributions now to those people/organizations who will inherit the accounts whrn you are gone.
If only they are transferable during life’ it’d open up so many possibilities. There’s even a limit on how much you can donate and deduct.
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Re: 2 Years before Social Security and 4 Years before RMDs: Does starting Roth conversions at this point make sense?

Post by delamer »

Lee_WSP wrote: Thu Dec 01, 2022 5:53 pm
delamer wrote: Thu Dec 01, 2022 5:51 pm

So have you considered reducing the balances by making distributions now to those people/organizations who will inherit the accounts whrn you are gone.
If only they are transferable during life’ it’d open up so many possibilities. There’s even a limit on how much you can donate and deduct.
My general point was that money that is gifted now from tax-deferred accounts reduces future RMDs, just as Roth conversions do. The tax consequences would be no worse than Roth conversions.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Re: 2 Years before Social Security and 4 Years before RMDs: Does starting Roth conversions at this point make sense?

Post by Youku »

delamer wrote: Thu Dec 01, 2022 5:48 pm
ModifiedDuration wrote: Thu Dec 01, 2022 3:53 pm
Retirement_Life wrote: Thu Dec 01, 2022 3:26 pm Question: We will be enrolled in my company retiree medical plan starting in January 2023 (UHC Medicare Advantage with included Rx coverage). So, does Part D IRMAA apply in our situation?
Yes.
If the retiree coverage includes prescriptions,why would they need Part D?
If you have an Advantage plan with Rx included, you will not need to buy a Part D plan, however, IRMAA for Part D surcharges are still assessed.
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Re: 2 Years before Social Security and 4 Years before RMDs: Does starting Roth conversions at this point make sense?

Post by Eagle33 »

twh wrote: Thu Dec 01, 2022 3:59 pm My mother also has a retiree UHC Medicare Advantage plan and I only see SSA have taken money for Part B and not also Part D.
Was the Part B taken just the standard premium without any additional IRMAA? Then there would be no Part D IRMAA taken out of her SS.
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Re: 2 Years before Social Security and 4 Years before RMDs: Does starting Roth conversions at this point make sense?

Post by twh »

Eagle33 wrote: Fri Dec 02, 2022 3:09 pm
twh wrote: Thu Dec 01, 2022 3:59 pm My mother also has a retiree UHC Medicare Advantage plan and I only see SSA have taken money for Part B and not also Part D.
Was the Part B taken just the standard premium without any additional IRMAA? Then there would be no Part D IRMAA taken out of her SS.
She's never been in IRMAA territory, so I can't say about the Part D IRMAA surcharge. But, I had a look at her last year 1099-SSA and her current SS deductions and there are no separate line items for Part D, but there are for Part B and she's on a retiree UHC Advantage plan that includes drug coverage. Honestly, her plan is stellar, but the retiree pool for her plan is very large, so that helps I'm sure.
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Re: 2 Years before Social Security and 4 Years before RMDs: Does starting Roth conversions at this point make sense?

Post by Stinky »

twh wrote: Fri Dec 02, 2022 5:01 pm
Eagle33 wrote: Fri Dec 02, 2022 3:09 pm
twh wrote: Thu Dec 01, 2022 3:59 pm My mother also has a retiree UHC Medicare Advantage plan and I only see SSA have taken money for Part B and not also Part D.
Was the Part B taken just the standard premium without any additional IRMAA? Then there would be no Part D IRMAA taken out of her SS.
She's never been in IRMAA territory, so I can't say about the Part D IRMAA surcharge. But, I had a look at her last year 1099-SSA and her current SS deductions and there are no separate line items for Part D, but there are for Part B and she's on a retiree UHC Advantage plan that includes drug coverage. Honestly, her plan is stellar, but the retiree pool for her plan is very large, so that helps I'm sure.
If she’s in IRMAA territory, then she’ll have surcharges for Part B and Part D (if she has it).

If she’s not in IRMAA territory, she won’t have any IRMAA surcharges at all.
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WoodSpinner
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Re: 2 Years before Social Security and 4 Years before RMDs: Does starting Roth conversions at this point make sense?

Post by WoodSpinner »

OP,

Kudos, for thinking through this issue and starting with a set of Roth Conversion goals. You might add some consideration to the beneficiaries of your IRA and the tax impacts to their finances (If any).

The best way to figure this out is to build a forward looking Tax Projection across Retirement. If you are savvy you can do it yourself. Otherwise some of the Retirement calculators, Pralana Gold, NewRetirement can help you model this. Alternatively you might engage a flat fee financial advisor skilled in this area to develop a plan.

Given your assets, it’s likely going to be a worthwhile investment….

Best of luck

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tibbitts
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Re: 2 Years before Social Security and 4 Years before RMDs: Does starting Roth conversions at this point make sense?

Post by tibbitts »

An important considerations about Roth conversions is that with every year the odds of filing single vs. the MFJ you do now increase, so you have to consider what will happen to taxes in that case. If you have a spouse who won't inherit any of your assets then that might not be a factor for you, but it is for many people.
LiveFor30
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Re: 2 Years before Social Security and 4 Years before RMDs: Does starting Roth conversions at this point make sense?

Post by LiveFor30 »

twh wrote: Fri Dec 02, 2022 5:01 pm
Eagle33 wrote: Fri Dec 02, 2022 3:09 pm
twh wrote: Thu Dec 01, 2022 3:59 pm My mother also has a retiree UHC Medicare Advantage plan and I only see SSA have taken money for Part B and not also Part D.
Was the Part B taken just the standard premium without any additional IRMAA? Then there would be no Part D IRMAA taken out of her SS.
She's never been in IRMAA territory, so I can't say about the Part D IRMAA surcharge. But, I had a look at her last year 1099-SSA and her current SS deductions and there are no separate line items for Part D, but there are for Part B and she's on a retiree UHC Advantage plan that includes drug coverage. Honestly, her plan is stellar, but the retiree pool for her plan is very large, so that helps I'm sure.
I have a MedAdvantage plan and I have to pay IRMAA charges for part B and part D. You can not escape that unless you are able to stay on a company plan as an employee and not start Medicare B & D until a later date. Just an option and every situation is different.
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