• 0 Vote(s) - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5

RMD, SS, and Medicare

#1
Do both our social security annual amount and our RMD annual amount count towards the calculation of what we pay for medicare?
 
My SS is $32k and my RMD will be $60k. That puts me over the $85k base for the lowest payment for Medicare.
 
Any one have any experience with this???
 
Seems very unfair that the older I get, the bigger my RMD will be, and the higher my Medical premiums will be.
  Reply
#2
Believe you need to figure your modified Adjusted Gross Income (MAGI).

MAGI = your Adjusted Gross Income (AGI) including TAXABLE social security + any Tax Exempt Income (e.g., muni bonds)

Taxable social security may be up to 85% of your gross social security. But it may be less. See: Taxation of Social Security Benefits

If I understand your situation, probably 85% is taxable, and 85% of 36 = 30.6k

I believe the 85k you quote is for single filers. For MFJ, it would be 170k.

MAGI = 60 + 30.6 = 90.6 plus any tax-exempt income

If you are filing single, you may be over the 85k limit, so that would be an extra $53.50 per month in 2018.

However, note that it is your tax return from two years prior that is determining. So, the 2016 tax return determines 2018. And 2017 determines 2019. And 2018 determines 2020.
  Reply
#3
So my MAGI for my tax return filed for 2018 (when I turn 63) will determine my Medicare premium for the year 2020 (when I turn 65)?
  Reply
#4
Yes, ALL income is considered (except ROTH withdrawals) when calculating your Medicare premiums. That is both Part B & D will be calculated from your return 2 years before your turn 65.
 
There are exceptions like divorce and a couple other one time income bumps but something like a big bonus for that year is not considered an exception or deferred compensation. But if you can juggle your income like, defer SS a few years or balance out capital gains with capital losses the income level drops and so does your premiums. But hey, Medicare premiums are deductible on Schedule A even with the new tax law so it may still work for some people.
  Reply
#5
Premiums are medical expenses that are deductbile to the extent they exceed 7.5% of AGI. Given the $10k limit on state and local taxes plus the increased standard deduction for 65 and over it might to hard for most people benifit from that itemizing the Medicare premium, especially for couples and high earners. As an example a couple with AGI of $300k can deduct medical expense in excess of $22500.

Their part B and D premiums and a expensive Medigap F might be about $12k-$15k per year. That leaves $7-10K more just to get any amount to itemize. If the couple only has property and state taxes that get to the $10k limit they would need $22-25K in medical above their premiums to beat their $26500 standard deduction. They would be better off having a part time business where they could deduct the premiums and if qualifed get the 20% pass though deduction.
  Reply
#6
If you can, start converting any IRA accounts to ROTH. This is a taxable event ( conversion ) but depending on the size of your taxable retirement account might be ok for you.
  Reply
#7
(11-21-2018, 11:44 PM)Nate_R Wrote: If you can, start converting any IRA accounts to ROTH.  This is a taxable event ( conversion ) but depending on the size of your taxable retirement account might be ok for you.

I concur with your advice on t-IRA to Roth conversions. However, please consider the Medicare AGI limits ($85k and $170k) in order to avoid paying additional premiums.
 
Good luck & great profits!
  Reply
#8
(11-21-2018, 11:44 PM)Nate_R Wrote: If you can, start converting any IRA accounts to ROTH.  This is a taxable event ( conversion ) but depending on the size of your taxable retirement account might be ok for you.

Also if one spouse is younger convert IRA's to Roth before BOTH spouses are on Medicare and you have to pay TWO higher premiums instead of just one.....
  Reply
#9
That is why it is so very important to get as much of your retirement savings into a ROTH. It is almost always better to make after tax contributions to a ROTH rather than pre-tax to an IRA. The exception would only be the top tax brackets. Once you have a T-IRA, you should develop a plan to do ROTH rollovers before MRDs kick in.
  Reply
#10
Depending on how much you give to church/charity, you may want to give directly from your IRA - that also does not count within your MAGI. Gift can be up to 100K. Most churches and needy charities know how to receive the gift (I started when my church was not ready.).
  Reply


Forum Jump:


Users browsing this thread: 2 Guest(s)