10 ways to avoid paying higher Medicare premiums

[MULTIZ321]

10 ways to avoid paying higher Medicare premiums.


https://www.usatoday.com/story/mone...ing-too-much-heres-few-ways-avoid/2665862001/


Richard

 

[bogey21]

I'm subject to the IRMMA and rather than look for ways to dodge it I'm happy to pay it. Why? Simply because it means I am fortunate enough to have fewer money worries than many others...

George

 

[GetawaysRus]

Thanks for posting this. It's yet another advantage of Roth conversions.

Roth conversions are tricky. If you start too early, then you may be in your peak earning years, so you can get stuck paying more tax. But if you start late, you can get screwed with increased Medicare premiums. It looks to me like the government is similar to "the house" in a casino. The house always wins.

 

[VacationForever]

Nothing new to me. There is a statement in the article which said when Roth conversion should be done. It really should be written to have Roth conversion happen way earlier than 63 because Medicare looks at income 2 years prior which makes 63 too late.

Here is the statement from the article.
"Floyd recommends planning ahead by doing Roth IRA conversions early — preferably by age 63 (or two years before starting Medicare if you’re staying on an employer plan after 65)."

 

[WinniWoman]

Nothing new to me. There is a statement in the article which said when Roth conversion should be done. It really should be written to have Roth conversion happen way earlier than 63 because Medicare looks at income 2 years prior which makes 63 too late.

Here is the statement from the article.
"Floyd recommends planning ahead by doing Roth IRA conversions early — preferably by age 63 (or two years before starting Medicare if you’re staying on an employer plan after 65)."

Wow. I wonder what we should do now. Hubby just went on Medicare and he is 65. I am thinking maybe I should do my Roth accounts instead of his since I am 63.

Thanks for this article, Richard. I have to ask our FA about this.

 

[VacationForever]

Wow. I wonder what we should do now. Hubby just went on Medicare and he is 65. I am thinking maybe I should do my Roth accounts instead of his since I am 63.

Thanks for this article, Richard. I have to ask our FA about this.

As long as after conversion, your income does not hit $174K for both of you for the year it is fine.

 

[sue1947]

This doesn't apply just to Medicare, but also the Affordable Care Act insurance, or any that are income based. Doing a Roth conversion is always a balancing act. Do as much as you can without going into a too-high tax bracket. I run 'what if' scenarios through the a tax filing program to see what the impact will be. That usually flushes out the unintended consequences.

Also, this is one of the reasons that should be considered when deciding when to take social security. It is also the one that most who advocated taking it early ignore.

Sue

 

[GetawaysRus]

A related article: https://www.forbes.com/sites/leonla...e-appealing-here-are-five-ways-to-use-a-roth/

Here's an important point to remember (quoting from the article): The Tax Cuts and Jobs Act (TCJA) individual tax cuts are scheduled to expire 12/31/25. Unless they are made permanent (which seems unlikely), almost everyone will be in a higher bracket, including the beneficiaries.

Also, from https://taxfoundation.org/look-ahead-expiring-tax-provisions/: December 31st, 2025, will be a significant day for most taxpayers. Twenty-three provisions from the Tax Cuts and Jobs Act directly relating to individual income taxes will expire, meaning most taxpayers will see a tax hike unless some or all provisions are extended. Some of the most impactful provisions scheduled to expire include the TCJA’s reduction of individual income rates, increased child tax credit, the increased AMT exemption and phaseout threshold, and the increased standard deduction. The individual income tax code is effectively scheduled to return to what it was before the TCJA, meaning personal exemptions, the overall limitation on itemized deductions, uncapped state and local tax deductions, and many other miscellaneous itemized deductions will return.

Take a look at your current tax bracket, then try to forecast your future tax bracket based upon your best estimate of future income under the assumption that the TCJA expires and tax brackets might rise. To do such a forecast, you have to find the old tax tables. (I think this means you have to search for the 2017 Federal tax tables.)

So I think there is a balancing act here. Yes, if you are in your early to mid-60s, doing a Roth conversion now is likely to increase your Medicare premium in subsequent years. However, you pay income tax on the conversion at current tax rates. You could end up saving a substantial sum in taxes compared to if those same funds were withdrawn later in life (from a traditional IRA) if you should end up in a higher future tax bracket (due to expiration of the TCJA) than your current tax bracket.

It's a gamble, since no one knows what the government will do with tax rates in the future. But possibly the bird in the hand (doing Roth conversions now) will pay off later?

Who says the government makes it easy for us....

 

[WinniWoman]

As long as after conversion, your income does not hit $174K for both of you for the year it is fine.

OHHHH..... we will have no where near that at all! Good!

 

[kckaren21]

likely to increase your Medicare premium in subsequent years

I believe a Medicare premium increase would be for one year, and they calculate it each year. The increase would not be permanent if it is a one year increase in income due to a Roth conversion.