Latest news with #IRMAA
Miami Herald
16-07-2025
- Business
- Miami Herald
Millions of Medicare beneficiaries could see major price shock
If you think Medicare is a set-it-and-forget-it program, think again - especially if you've saved well for retirement. A growing number of retirees will soon face sharply higher Medicare Part B premiums, with some paying more than $1,100 per month, $13,200 per individual per year, or $26,400 per couple per year by 2034. The culprit? A combination of rising health care costs and the slow creep of income thresholds that trigger something called IRMAA - the Income-Related Monthly Adjustment Amount. Don't miss the move: SIGN UP for TheStreet's FREE daily newsletter Currently, 5.1 million Medicare beneficiaries pay more than the standard Part B premium today, but that number is expected to balloon to over 8.6 million people in the next decade. For those caught unaware, the financial hit can be surprising and steep. Medicare Part B covers outpatient medical services, including doctor visits, preventive care, durable medical equipment, and more. In 2025, the standard monthly premium is $184.90 - a modest $10.30 increase from 2024. But for higher-income retirees, that's just the starting point. Thanks to a law passed back in 2007 and expanded by the Bipartisan Budget Act of 2018, individuals with modified adjusted gross incomes (MAGI) above certain thresholds must pay an IRMAA surcharge. These thresholds begin at $106,000 for single filers and $212,000 for joint filers in 2025. Related: Retired workers to see frustrating change to Medicare in 2026 Depending on how high your income climbs, you'll pay a larger share of the program's cost - up to 85% of the total, compared to the 25% share paid by those at the standard level. Currently, about 8% of Medicare beneficiaries pay IRMAA, according to the Medicare Trustees Report. But due to unindexed income thresholds, a surge in Required Minimum Distributions (RMDs), and record-setting intergenerational wealth transfers, the number of IRMAA payers is expected to rise dramatically - to 8.6 million by 2034. Some of those retirees will pay as much as $1,181.50 per person per month - an 88% increase over today's top-tier rate. And don't count on inflation-adjusted relief anytime soon. While standard premiums rise with health care cost projections, the income brackets that determine IRMAA tiers are increasing at a snail's pace - essentially at the general rate of inflation, and in some cases, not at all until 2028. Why does this matter? Because many affluent retirees - especially those waiting until age 73 or older to take RMDs - will find themselves suddenly hit with four- or even five-figure annual Medicare surcharges. And for those who assumed that their careful savings strategy would provide peace of mind in retirement, IRMAA can come as a rude awakening. As Mantell Retirement Consulting President Marcia Mantell put it: "There's no way there is any balance between all the numbers. More and more retirees are going to fall into the IRMAA tiers. When they make the transition, it is a total shock. And they are unhappy - to say the least." Mantell points out the core imbalance: While Part B premiums are projected to jump by 11% or more per year, the IRMAA thresholds will only inch up modestly. This will drag more retirees into higher payment tiers, even if their real purchasing power hasn't changed. Related: Big Beautiful Bill Act makes Roth IRA conversions more complicated Katy Votava, founder of agrees - with a caveat. "This forecast may be reasonable based on demographic growth in the Medicare population," she said. "But a lot hinges on continued economic growth." She points to the 2008-2009 recession as a cautionary tale, when the number of high-income Medicare beneficiaries dropped by 14–17% and didn't recover for four years. In other words, IRMAA isn't just about income - it's about timing, tax strategy, and market cycles. If you're not planning for it now, you could be facing hundreds or even thousands of dollars in surprise Medicare premiums later - and smaller Social Security checks to boot. The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
Yahoo
14-07-2025
- Business
- Yahoo
Ask an Advisor: I Had to Pay Extra for Medicare Last Year. How Do I Avoid This Happening Again After a Roth Conversion?
SmartAsset and Yahoo Finance LLC may earn commission or revenue through links in the content below. I'll reach my RMD distribution age in 2026, and I'm trying to figure out how much I can transfer from my traditional TSP account into an external Roth IRA in 2025 without exceeding the IRMAA threshold for Medicare Part B premiums. I had to pay a significant premium last year because I exceeded the threshold. I understand that the amount of the rollover to the Roth counts as taxable income, but which other specific line items on Form 1040 are also included in my taxable income? It has been very difficult to fully understand this and get a clear-cut answer. – Thomas I'm sorry you've had so much trouble with this topic-many retirees run into similar questions when planning Roth conversions around Medicare premium thresholds. Fortunately, the answer is pretty straightforward: the income figure that determines your IRMAA bracket is your modified adjusted gross income (MAGI), which consists of your adjusted gross income (AGI) plus any tax-exempt interest you receive. A can help you create a retirement income strategy that accounts for RMDs, Medicare premiums and other tax considerations. . The income-related monthly adjustment amount (IRMAA) is a surcharge added to your Medicare Part B and Part D premiums if your income exceeds specific thresholds set by the federal government. Individuals with income below the lowest threshold pay only the standard premium ($185 per month in 2025), with no additional IRMAA charge. For 2025, the IRMAA brackets and the associated premiums are: Income Part B premium Part D premium Single: $106,000 and belowMarried: $212,000 and below $185 Plan premium Single: Over $106,000 up to $133,000Married: Over $212,000 up to $266,000 $259 $13.70 + plan premium Single: Over $133,000 up to $167,000Married: Over $266,000 up to $334,000 $370 $35.30 + plan premium Single: Over $167,000 up to $200,000Married: Over $334,000 up to $400,000 $480.90 $57 + plan premium Single: Over $200,000 up to $500,000Married: Over $400,000 up to $750,000 $591.90 $78.60 + plan premium Single: $500,000 and aboveMarried: $750,000 and above $628.90 $85.80 + plan premium (Consider working with a financial advisor to plan your income in a way that helps minimize IRMAA surcharges and supports long-term tax efficiency.) IRMAA might sound straightforward, but the way the Social Security Administration calculates the income used to determine it can be surprisingly complex. The calculation is based on a measure called modified adjusted gross income (MAGI). There are a few key details that often trip people up and may be contributing to your frustration: IRMAA uses your income from two years prior. That means your 2025 Medicare premiums are based on the income reported on your 2023 tax return. MAGI isn't shown as a line item on your tax return. Unlike gross income, adjusted gross income (AGI) or taxable income, you have to calculate MAGI manually. MAGI varies depending on context. Different programs use different formulas, so it's essential to apply the version used specifically for Medicare IRMAA. MAGI always starts with your adjusted gross income (AGI), which appears on line 11 of Form 1040. From there, it's adjusted depending on the context-for IRMAA, the calculation is relatively simple. For IRMAA purposes, MAGI equals your AGI plus any tax-exempt interest, which is reported on line 2a of Form 1040. To estimate your IRMAA-related income for 2025, just add line 11 and line 2a from your 2023 tax return. The result determines which IRMAA bracket you fall into. For example, if your AGI in 2023 was $95,000 and you earned $2,000 in tax-exempt interest from municipal bond funds, your MAGI for IRMAA purposes would be $97,000. (And if you need additional help calculating your MAGI or planning for IRMAA, speak with a financial advisor.) The MAGI calculation is most useful when used proactively, as you're doing. If you complete a Roth conversion in 2025, that amount will be included in your AGI for that year-and it will affect your IRMAA bracket two years later, in 2027. The challenge is that the IRMAA brackets for 2027 won't be published until late 2026. By then, your 2025 MAGI will already be locked in, leaving no opportunity to adjust your income retroactively. To plan effectively, you'll need to estimate future IRMAA thresholds. The simplest approach is to use the current year's brackets. A slightly more nuanced method is to project them using a modest inflation adjustment, such as 2% or 3%. (Then again, you could also work with a financial advisor who offers retirement and income planning services.) Planning around Medicare premiums means working with imperfect information, since key figures like future IRMAA thresholds are only released after the fact. Still, by understanding how MAGI is calculated and how it influences what you'll pay, you can make more informed decisions about moves like Roth conversions and income timing. Even modest steps-such as tracking tax-exempt interest or projecting future brackets-can help clarify how current choices may ripple into future costs. A financial advisor can help you navigate the complexities of retirement planning. Finding a financial advisor doesn't have to be hard. SmartAsset's free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you're ready to find an advisor who can help you achieve your financial goals, get started now. Consider planning around the taxability of your Social Security benefits. Up to 85% of benefits can be taxed depending on your income. Coordinating withdrawals from taxable, tax-deferred and tax-free accounts can help manage how much of your benefit is included in your taxable income. Photo credit: Courtesy of Brandon Renfro, © Dodonov, © The post Ask an Advisor: I Had to Pay Extra for Medicare Last Year. How Do I Avoid This Happening Again After a Roth Conversion? appeared first on SmartReads by SmartAsset. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Forbes
20-05-2025
- Business
- Forbes
Understanding Your RMD Options Before Turning 73
Do I have to take an RMD? As I turn 73 later this year, I've reached a significant, if dubious, milestone. I'm now subject to Required Minimum Distributions (RMDs). It's worth taking a moment to celebrate reaching this point. Having to take RMDs suggests that I've accumulated enough assets to require such withdrawals. I'd rather be in this position than having nothing to distribute. But now, like many other individuals turning age 73, I have to make some decisions. My RMDs will be subject to ordinary income tax, and that's a concern. I'm still working and don't need the income. Nonetheless, I have to start taking my RMDs soon, and this means more income taxes and an increase in my Medicare premiums because of the dreaded IRMAA penalty. Fortunately, I have some options. And if you're in a similar situation, so do you. Preplanning as an option The basic formula for RMDs is straightforward. You take the sum of your qualifying accounts (traditional IRAs, 401(k)s, etc.) and divide that number by an IRS life expectancy factor. The resulting number is the amount you must take in the year you turn 73 - or suffer a 25% penalty. However, with preplanning you have several options for determining what that sum of accounts will equal when you turn 73. That number can be lowered. In my case, several years ago I took two steps to significantly improve my RMD situation by initiating a Roth conversion and purchasing a Qualified Longevity Annuity Contract (QLAC). The Roth conversion lowered my balances that are subject to lifetime RMDs. And, the QLAC I purchased delays when I must start taking RMDs on those funds. My QLAC will not be subject to RMDs for years down the road. Another planning opportunity exists if you're still working. Employment allows you delay some of your RMDs. For example, if you are still employed this year, you typically don't have to take RMDs on your workplace 401(k) account until you retire. The point is you're not necessarily stuck with high RMDs at age 73. You can do some preplanning to lower and/or delay taxable withdrawals. Now what? If you are turning 73 anytime this year, first ask yourself if you need the money, or is this just more income being imposed on you that'll increase your taxes? If you need the money, RMDs are not really an issue. Take the money, pay the tax, and enjoy retirement. If, however, these distributions are unwanted current income, consider your options going forward: Take this year's RMD when you reach age 73 Since your RMD is based on your account's value for end-of-year 2024, there's no market timing involved. You know your account balance and your age. Your RMD is set, and you can take the distribution now. For example, assume your accounts that are subject to RMDs totaled $1 million at the end of 2024. Your age 73 factor is 26.5, so you'll need to take at least $37,736 this year to satisfy your RMD. This is true irrespective of whether your account values have since slid down or increased. Wait to take this year's RMD until the end of the year This approach might help you better assess your overall tax situation, as you'll likely have a clearer picture of your final taxable income for the year. For example, you may unexpectedly decide to retire this year – causing your income tax bracket to be lower next year. Having this information may help you decide whether to take your RMD this year or consider using the next option. Defer this year's RMD until next year In your first year of RMDs there is a tempting opportunity to procrastinate. The law grants a one-time option to defer taking your first RMD payment until the following year, as long as you take it by April 1 of that year. This option is appealing because it allows more time to implement tax-efficient strategies. However, a significant downside is that this would require you to take two RMDs in the same tax year. Next year you would have to double up your RMDs. While this strategy might save taxes in 2025, it could significantly increase your taxes – and other costs – in 2026. For example, if you have a high income this year and expect it to continue into next year, delaying your RMD may inflict costs beyond additional ordinary income taxes. The extra RMD you take next year could cause you to be in a higher capital gains bracket, put you in a higher threshold for IRMAA's Medicare premiums, or subject you to the Net Investment Income (NII) tax. Piling taxable income into one year often generates increased expenses. Which is the best option? what's the solution? When turning age 73, tax modeling is crucial. First, identify all your accounts that are subject to RMDs. Then, assess their availability and liquidity. Although you'll be able to calculate your RMDs early in the year, you have some flexibility as to whether and when to take them. The key next step is to decide from which accounts you want to withdraw your RMDs. RMDs must be calculated separately for each account, but the total amount of your RMDs can sometimes be withdrawn from any one or a combination of your accounts. For example, you can aggregate an IRA and SEP IRA account and take your combined RMDs out of only one account. Be careful though. Aggregation of RMDs is not permitted in some cases, for example if you have a 401(k) and an IRA. Also, be sure to have the liquidity available to take the distribution in cash. If your accounts are heavily concentrated in equities, consider transferring your liquid funds into the accounts that will be used to satisfy your RMDs. Finally, if you truly don't need the additional income, and have a charitable bent, consider directing your RMDs (maximum of $108,000 in 2025) to a qualified charitable distribution (QCD). As early as age 70 ½ you can use a QCD to directly transfer money from your IRA to a qualified charity. As long as certain rules are met QCDs can be counted toward satisfying your RMDs for the year. Rather than having to deduct your charitable contribution from your tax return, you directly offset your RMD obligation, a far better tax result. Planning for Future RMDs Choosing when, where and how to take RMDs in the first two years is just one part of the strategy. You should also plan for subsequent years. Continued Roth conversions, additional QLAC purchases, and utilizing QCDs can further shield your assets from the tax sting of future RMDs. Roth conversions remain a compelling option even when you're subject to RMDs. Roth accounts do not have lifetime RMDs, providing tax-free growth for later distributions. However, you cannot use Roth conversions as a way to avoid current RMDs on accounts you have; plus, converting will increase your taxable income, potentially compounding your current tax headaches. Still, depending on your future tax situation, Roth conversions may work well in the long run. Another plan for the future is to create or increase QLACs. In 2025, the total limit for QLACs is $210,000. This financial instrument reduces the IRA balance subject to RMDs by allowing an annuity purchase to defer income well into the future. For example, if you purchase a QLAC at age 73 and the annuity payments in your QLAC are scheduled to begin at age 80, you have deferred RMDs – and saved taxes - for seven years. Once you begin, however, your payments are subject to income taxation. Accordingly, much like Roth conversions, this approach demands careful tax management. A hassle or an opportunity? Selecting the best RMD strategy involves weighing your current financial needs against long-term objectives. A holistic approach ensures that you meet immediate cash flow requirements while managing tax liabilities and maintaining flexibility in retirement. Don't just put off RMDs; figure out how to best manage your retirement income and taxes.
Associated Press
30-04-2025
- Business
- Associated Press
Retirement Tax Consultants Says Before Converting to Roth, Get a Roth Analysis First
Compare the Cost of Converting vs Cost of Not Converting 'We are the bridge between your Accountant and Financial Advisor: We do what they don't'— David Hyden MCKINNEY, TX, UNITED STATES, April 30, 2025 / / -- For individuals contemplating whether to convert their traditional IRAs, 401(k)s, and other tax-qualified retirement plans to a Roth IRA, Retirement Tax Consultants is now offering a comprehensive Roth Conversion Analysis. Making the right decision about Roth conversion can save retirees hundreds of thousands of dollars over time—but only if it's based on accurate, personalized analysis. While some local advisors may be equipped to perform these calculations, the reality is that Roth analysis requires deep expertise in tax strategy, mathematics, and retirement income planning. Retirement Tax Consultants fills this gap by offering clients a professional-grade report set designed to evaluate all aspects of Roth conversion. These reports answer the most critical questions a retirement account owner must ask: ________________________________________ Our Roth Conversion Report includes a side-by-side analysis comparing the long-term costs of converting versus not converting: 1. THE COST OF CONVERSION • Tax cost of a conventional single-year conversion • Tax cost of a structured (multi-year) conversion • Tax cost of a strategically optimized single-year conversion using proprietary tax strategies • Fees and risks associated with an optimized conversion • D1RV (Day-One Roth Value) for each approach • Enhancement options available, with analysis of appropriateness and cost 2. THE COST OF NOT CONVERTING • Lifetime income taxes (voluntary and RMDs) • Increased Medicare premiums • IRMAA surcharges (Income-Related Monthly Adjustment Amount) • Investment fees and commissions on the embedded tax liability ________________________________________ 'With our tools, expertise, and software, we can show clients the true cost and benefit of a Roth conversion and help them decide if the Roth conversion makes sense financially. This is not just a financial guess—it's a fact-based analysis that empowers clients to make the best decision for their retirement future,' said David Hyden, Founder of Retirement Tax Consultants. 'For those clients that decide to convert to Roth we can also show them how to reduce the taxes by a minimum of 35% using strategies that are legal yet largely unknown by most advisers.' ASK ABOUT OUR LIMITED TIME PROMOTION: 40% OFF ________________________________________ To schedule your Roth Analysis, contact Retirement Tax Consultants today: 📞 Call: 469-342-8889 📩 Email: [email protected] 🌐 Visit: David B. Hyden Retirement Tax Consultants +1 469-342-8889 email us here Visit us on social media: LinkedIn Facebook Legal Disclaimer: EIN Presswire provides this news content 'as is' without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the author above.
Associated Press
26-04-2025
- Business
- Associated Press
GUIDE TO ROTH CONVERSIONS
GET A ROTH ANALYSIS FIRST 'We are the bridge between your Accountant and Financial Advisor: We do what they don't'— David Hyden MCKINNEY, TX, UNITED STATES, April 26, 2025 / / -- For individuals contemplating whether to convert their traditional IRAs, 401(k)s, and other tax-qualified retirement plans to a Roth IRA, Retirement Tax Consultants is now offering a comprehensive Roth Conversion Analysis. Making the right decision about Roth conversion can save retirees hundreds of thousands of dollars over time—but only if it's based on accurate, personalized analysis. While some local advisors may be equipped to perform these calculations, the reality is that Roth analysis requires deep expertise in tax strategy, mathematics, and retirement income planning. Retirement Tax Consultants fills this gap by offering clients a professional-grade report set designed to evaluate all aspects of Roth conversion. These reports answer the most critical questions a retirement account owner must ask: ________________________________________ Our Roth Conversion Report includes a side-by-side analysis comparing the long-term costs of converting versus not converting: 1. THE COST OF CONVERSION • Tax cost of a conventional single-year conversion • Tax cost of a structured (multi-year) conversion • Tax cost of a strategically optimized single-year conversion using proprietary tax strategies • Fees and risks associated with an optimized conversion • D1RV (Day-One Roth Value) for each approach • Enhancement options available, with analysis of appropriateness and cost 2. THE COST OF NOT CONVERTING • Lifetime income taxes (voluntary and RMDs) • Increased Medicare premiums • IRMAA surcharges (Income-Related Monthly Adjustment Amount) • Investment fees and commissions on the embedded tax liability ________________________________________ 'With our tools, expertise, and software, we can show clients the true cost and benefit of a Roth conversion and help them decide if the Roth conversion makes sense financially. This is not just a financial guess—it's a fact-based analysis that empowers clients to make the best decision for their retirement future,' said David Hyden, Founder of Retirement Tax Consultants. 'For those clients that decide to convert to Roth we can also show them how to reduce the taxes by a minimum of 35% using various strategies that are legal yet largely unknown by most advisers.' ________________________________________ To schedule your Roth Analysis, contact Retirement Tax Consultants today: 📞 Call: 469-342-8889 📩 Email: [email protected] 🌐 Visit: David B. Hyden Retirement Tax Consultants email us here Visit us on social media: LinkedIn Facebook Legal Disclaimer: EIN Presswire provides this news content 'as is' without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the author above.
