The sale of property makes one's Medicare premium go up?

[Tell It Right]

By disclaiming my mom’s IRAs so that they pass to us children (thereby removing her RMDs), and reducing interest income by funding 529 accounts for the great-grandchildren his Medicare will drop a bit to 405.80, and tax savings will be about $20k this year and next combined.

That sounds like a good strategy. Of course, I believe doing that with your mother's IRA will make it have to abide by non-spousal inherited IRA rules. That has a pretty steep type of RMD by forcing you to empty it within 10 years. I have an extended family member who inherited her parents' IRA's. We withdraw (she withdraws but I help her with the math) the 1/10th each year from her inherited IRA and uses that money to contribute to her SEP IRA (gig worker) and her husbands traditional IRA and 401K (normal W-2 worker). Because she and her husband are working they can contribute to retirement investment accounts anyway. The inherited IRA withdrawals simply give them the budget to max those contributions. And since she and her husband make great money (read: in a high tax bracket) they'd rather keep that money in tax-deferred investments than in vest in Roth accounts.

The overall process results in a net zero increase in tax liability. The withdrawals from the inherited IRA are taxable income. Yet by contributing those exact amounts into hers and her husband's tax deferred accounts, their taxable income is reduced by the same exact amount. Some time in the future whenever they have a low income year (perhaps not until they retire) we'll look at converting chunks of their tax-deferred accounts into Roth IRA accounts. The Roth conversions are taxable events, but you can make them small enough each year to not put you into a high tax bracket.

My wife retired 5 years ago and all of the tax deferred investments in her name have been converted into her Roth IRA. All in small enough chunks per year to keep us in the 12% tax bracket while I'm quasi-retired and making an income. We'll do the same with my tax-deferred money too (almost half of the investment money in my name is already in Roth IRA and Roth 401K). Currently, the new Age 65 bonus standard deduction is set to expire before my wife and I are old enough to use it. With that in mind, plus 85% of our SS being taxable (when we start collecting it at age 62), plus tax on regular withdrawal from tax-deferred investments to live on, we'll be within the current 12% tax bracket and have some wiggle room to convert some chunks to Roth IRA each year and eventually be all Roth IRA, without going into the higher 22% tax bracket. (Assuming no law changes to tax brackets and deductions.)

[Bob Wills is still the king]

There is a phaseout of support after a certain level of income. I can’t remember the cutoff, but cashed in some stocks to buy property and had to pay increased Medicare premiums for several years after.

[Bob Wills is still the king]

“If you have more money, you should not need as much government assistance. Isn’t that what being a conservative is all about?”

____________________________________________________________

Exactly, and a good reminder.

[Bob Wills is still the king]

“”You will have to pay tax on the RMD””

That’s for IRAs not Medicare....
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Your RMD is income. If it pushes your income beyond the limits, you’ll also pay the additional charges for Medicare.

[volare737]

I don’t want anything from the government, other than part of what they confiscated from me. That’s my definition of conservative.

[volare737]

….or minimizing what they confiscate.

[Tell It Right]

I don’t want anything from the government, other than part of what they confiscated from me. That’s my definition of conservative.

Almost, but not quite for me. I wish Medicare didn't exist and distort both the finances and availability of health care. That's my definition of conservative.

And yes, I'm not old enough yet to collect SS but I want back at least what I and my employers put into it. IMHO a reasonable solution is to give people the option to opt out of it. (i.e. If you want you can receive a lump sum on the agreement you don't get future payments. And if you're working you can choose to not contribute to SS but on the agreement that you won't later get SS payments.) That would be a yuge up front govt expense with most people probably opting to keep money in their pockets now, not later. (Perhaps not as much as other yuge spending sprees by govt like the Inflation Raising Act.) But it's a temporary cost to yield a long term solution of not having the ginormous Ponzi scheme getting ever larger and larger. (Except of course for the people who choose to keep SS going for them as is.)

And the people who care enough about their finances to do a little research can invest that amount of money into simple investments like mutual funds (even if it's as simple as a S&P 500 index fund) and have better retirement money anyway. (The SS fund on average gives more to each person in SS checks than it took in from them while working, which is why it's going broke. Yet, the SS fund managers by law can invest the fund money into only one asset class: U.S. treasuries. So it doesn't grow well.)

[vivenne]

It does.

[Sequoyah101]

I share all of your frustration and howl at the moon for all the good it does.

I have said for years there is a 100% chance of failure without trying but....our situation appears more hopeless than hopeful.

[Georgia Girl 2]

Rental property.

[The Truth Will Make You Free]

Sounds like you have good plans for staying in 0% (Roth) and lower tax brackets.

My dad is 94, so we’d be surprised if the lifetime spousal inheritance is more than the 10-years of non-spousal inheritance. His IRAs are double my mom’s, so this will give us sons more than 10 years (hopefully) to move funds out of the both IRAs. At least in my case, since I only have a half year of social security this year, I’ve got some 0% space to move out more than the RMD tax-free, whereas my dad is at a combined 24% this year and 30% next year (loss of spousal deductions). None of us sons are working, so we can’t do Roth conversions. )I’ve thought of working a but just so I could do Roth conversions.) Disclaiming an IRA has to be done within 9-months of a person’s decease.

As for 529 accounts, our state only allows a $10,000 per adult deduction from state income, so my dad will gift funds to the grandkids for deposit into the accounts, so at least they can get the tax deduction. As grandparents my wife and I will open and own the accounts. That way the income will not show up on college financial aid forms. After 15 years if the beneficiaries don’t go to college or have other allowable educational expenses, the 529 accounts can be converted to Roth accounts, subject to annual Roth allowances and other stipulations. I found out in Colorado the state will gift $118 into a 529 account the parent opens for kids born after 1/1/20 and will match $500 contributions for the following 5 years.

Another aspect to reduce taxes from the IRA RMDs is to give donations directly from the IRA to charitable organizations. That will be next year…

Blessings!

[Thank You Rush]

True but I was merely pointing out that RMD’s pertain to IRA’s and not Medicare....