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How bad the IRRMA will be, will depend on if and how you plan for the Medicare tax.
It's manageable if you plan. We will have extra spending power in 2024 when the IRRMA goes away.
YTMV
Are you breaking news here on CD? I thought the income adjusted Medicare premium is permanent. I can't tell if your smilie conveys happiness or that you meant it as a joke.
I don't see anything about IRMAA being temporary or sunsetting in 2024.
I would expect recent soaring inflation to raise the income limits, however.
Location: Was Midvalley Oregon; Now Eastside Seattle area
13,080 posts, read 7,537,409 times
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Quote:
Originally Posted by Igor Blevin
Are you breaking news here on CD? I thought the income adjusted Medicare premium is permanent. I can't tell if your smilie conveys happiness or that you meant it as a joke.
I don't see anything about IRMAA being temporary or sunsetting in 2024.
I would expect recent soaring inflation to raise the income limits, however.
As MJ said, IRRMA has a 2 years look back [Implied, yearly]
Our IRRMA happened because we sold a rental without doing a 1031. The rental was a net cash flow loss because of HOA fees. We made money in the appreciation being greater than the depreciation.
IRRMA can be temporary if you do your planning. See your tax advisor-spend the money to see the horse's front end.
IMO... aggressive pre-emptive "draining" is likely counterproductive for most people.
My plan is to pull only from taxable 401k, leaving Roth accounts untouched to grow. To the extent we're not being pushed into higher Medicare premiums we'll also do Roth conversions. If one or both of us lives long enough we'll get to the point where we only have Roth accounts, but that will take quite a few years.
The reasoning for leaving the Roth accounts alone are twofold. First is the case of the surviving spouse. When there's only one of us left, expenses will drop but not by half, so the survivor will be facing higher tax brackets and (likely) higher Medicare premiums. Having the Roth accounts will help in managing this. The other reason is to leave most of inheritance money in Roths (and taxable, where stepped-up basis hopefully still will apply).
Our IRRMA happened because we sold a rental without doing a 1031. The rental was a net cash flow loss because of HOA fees. We made money in the appreciation being greater than the depreciation.
IRRMA can be temporary if you do your planning. See your tax advisor-spend the money to see the horse's front end.
Oh, gotcha. You were citing your personal case, and reminding us that the premiums are not permanent one raised, but varies year to year with income.
I am already subject to IRMAA and am not protected by "hold harmless". Collecting SS willl bump me a tier in Medicare premiums, so that will be for life. It is what it is.
All of the considerations you and mathjak raised are good food for thought. There is a LOT to consider, which is why poor people don't need tax attorneys.
Draining 401ks and converting to Roth have similar taxation issues so how do you believe one is better than the other? It’s the post withdrawal/conversion that matters
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
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If you are not afraid of spending 24% tax + IRMMA, you must really want your Roth future benefits. (Which are substantial). Or... You want some accessible funds. In a cash flow crunch look to all options. I often borrow from myself or my LLCs to bridge needs like capital or home purchase. Interactive Brokers had the best margin rates, last I checked.
Most of us only do Roth conversions up to our tax thresholds (12% for me). Thus 3 more conversion years remain, and I'm still over 4 yrs to RMDs. That will allow ~$400k more to get into Roth. The remaining taxable will be at my effective rate (usually below 13%). Prefer 8% as effective rate
If you have charities in mind.... You can always fund a DAF during a year with high earnings. And bulk up a high deductible yr. (Losses, capital improvements to business history holdings, sect 179... accelerated depreciation) I run many tax scenarios starting in January each year, planning 1031, Roth conversions, buy and selling of appreciated assets, rebalancing assets, time sales (carrying paper) and especially tax implications.
If you are not afraid of spending 24% tax + IRMMA, you must really want your Roth future benefits. (Which are substantial). Or... You want some accessible funds. In a cash flow crunch look to all options. I often borrow from myself or my LLCs to bridge needs like capital or home purchase. Interactive Brokers had the best margin rates, last I checked.
Most of us only do Roth conversions up to our tax thresholds (12% for me). Thus 3 more conversion years remain, and I'm still over 4 yrs to RMDs. That will allow ~$400k more to get into Roth. The remaining taxable will be at my effective rate (usually below 13%). Prefer 8% as effective rate
If you have charities in mind.... You can always fund a DAF during a year with high earnings. And bulk up a high deductible yr. (Losses, capital improvements to business history holdings, sect 179... accelerated depreciation) I run many tax scenarios starting in January each year, planning 1031, Roth conversions, buy and selling of appreciated assets, rebalancing assets, time sales (carrying paper) and especially tax implications.
Did I make a bad assumption that I had to convert my entire 401k to a Roth IRA? It sounds like you are saying I can convert just a portion of it, such as only $50,000?
Did I make a bad assumption that I had to convert my entire 401k to a Roth IRA? It sounds like you are saying I can convert just a portion of it, such as only $50,000?
Yes, you can do partial Roth conversions - I would think that is the most popular way that is handled to minimze tax impacts.
Yes, you can do partial Roth conversions - I would think that is the most popular way that is handled to minimze tax impacts.
Thank you. That is certainly more useful to convert a part of a 401k to a Roth. My aplogies to those who knew their stuff and were patient with my financial ignorance.
Location: Was Midvalley Oregon; Now Eastside Seattle area
13,080 posts, read 7,537,409 times
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Quote:
Originally Posted by leastprime
OP,
Your strategy is a reasonable course of action for taxation.
Investing behavior may change between a taxable acct vs qualified accts. And change between tIRA and Roth.
Early on, I suggested this strategy to DS, to think about limiting his qualified accounts contributions (tIRA, Roth since he was 16, now 38) and favor, taxable LT holdings.
YTMV
OP, You've had a QUACK (QUalified Account ACK) realization.
Quote:
Originally Posted by StealthRabbit
If you are not afraid of spending 24% tax + IRMMA, you must really want your Roth future benefits. (Which are substantial). Or... You want some accessible funds. In a cash flow crunch look to all options. I often borrow from myself or my LLCs to bridge needs like capital or home purchase. Interactive Brokers had the best margin rates, last I checked.
Most of us only do Roth conversions up to our tax thresholds (12% for me). Thus 3 more conversion years remain, and I'm still over 4 yrs to RMDs. That will allow ~$400k more to get into Roth. The remaining taxable will be at my effective rate (usually below 13%). Prefer 8% as effective rate
If you have charities in mind.... You can always fund a DAF during a year with high earnings. And bulk up a high deductible yr. (Losses, capital improvements to business history holdings, sect 179... accelerated depreciation) I run many tax scenarios starting in January each year, planning 1031, Roth conversions, buy and selling of appreciated assets, rebalancing assets, time sales (carrying paper) and especially tax implications.
There are scenarios where the most beneficial use of tIRA/401k/deferred comp distributions is to taxable NOT to Roth conversions ... the Elan Musk gambit.
If Elan Musk (imaginary) doesn't take a salary or have Earned or Unearned Income, How does EM get income?
Ever wonder why Investment Firms really push hard for personal loans?
Why Private Premium Premier Banking exists?
Why DT had/has so much debt?
The gambit: You have a lot of stock options (the better choice) or equity holdings. If you take a salary your marginal bracket would be 37%+state. If you don't take earned income your marginal tax could be 0% or something lower amount than 37%.
A young eager personal banker approaches you, Igor B., and says "If you can show you how to have more Income, pay less taxes but your fair share of taxes, maintain your wealth & assets, would you be interested?" WFA.
"And if I can do this in less than 5 minutes, actually in my experience you will recognize the strategy in 1 minute, would you be open to explore the possibilities that will benefit everyone?" WFA.
the gambit: Pledging assets against personal loans at example, 6mo Tbills + 12%. Mr Igor, all you need to do is sell only enough assets to keep the loan current. IOW, 18% interest on a $1,000,000 loan is far cheaper than 37% tax on that $1,000,000 gross earned income, Plus whatever other payroll taxes that may be imposed. Your only tax will be the capital gains in selling the asset to maintain the account with us.
YTMV
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