What stinks about IRMAA is you don’t know what the brackets for the applicable year until it’s too late so you have to guess what you want your income to be. Eg. Medicare premiums are based on income from 2 years prior. So 2026 premiums are based on this years income. The stink: you won’t find out out about those 2026 brackets until 2025. Part 2 of the stink: It impact isn’t marginal. You go one dollars into next bracket the impact is ~ 2400 in premiums.
Very good advice and similar to what I teach. Have three buckets, traditional, Roth, and brokerage. Design your taxable income. And consider Roth conversion ladders once your traditional bucket reaches a million. RMDs can balloon to over $300k in required withdrawals if you have too much money in traditional retirement accounts.
I am definitely going to pay at the 22%, because I didn't do the Roth for my IRA, and IRAAMA will kick in for my Med. Part B, as well, especially since I get a pension. I started taking SS right away because I was scared that the gov would do something to it, and it would not be available. I was not thinking about my impending RMDs, which after my recent calculations are going to be HUGE, and I mean HUGE. Thus, I paying the piper.
great presentation, Azul! thinking I'll add whatever is needed to my wife's pension income to cap out the 12% tax bracket and convert whatever we don't need to Roth each year. getting expenses down by then will be key.
I asked my accountant about this & how much could I convert each year without triggering either Irmaa or a higher tax bracket. She was happy to figure it out, and said nobody ever asked her that before.
Excellent content that really clearly demonstrates the need to plan what funds get pulled from the various buckets to arrive at an optimal tax plan when taking healthcare subsidies into account. I found this particularly helpful because it applies in my situation. Thank you for the clarification on this tricky part of the path - I am not as “lost” as I was before watching the video.
I might be missing something, but a strategy to execute on Roth Conversions should be done prior to retiring, if possible. Meaning, my taxable income and bracket would be much higher in the year I convert, yet I'm still on my company's health insurance. So I pay my taxes for the convert, and no impact to health care premiums. Assuming no additional Roth Conversions are necessary in the years when I start retirement, then I should be ok I believe.
@DrJillLearnMoreLiveBette-fd4vh well, there is always room, just depends on how much you want to pay the taxman. When I turned 45-ish, I started the process to convert. I have done 5 tranches over the past 5 years, with a few more to go. I've done this in tranches so as to keep myself in a 'no higher than...' tax bracket while also being able to afford the estimated tax bill required for the conversion. Definitely a balancing act.
Great ideas. 20 years ago I had no idea that I would have enough that my RMDs would push me into such a high tax bracket. On one hand, you have no money and you pay no taxes and life is not good. The other, you have a grand life and yet have to hand over a lot of money to the Feds and states.
Excellent Azul, I really love when you include the graphics it makes the presentation much easier to comprehend. It seems every video is better than the previous. Thank you for your time and efforts.
I completely agree with you! My first 100k took a long time and wasn't that special to be honest with you. Once I hit 300K that is the game changer in my opinion. At this point my money is basically making me a pretty good yearly salary. When I go to sleep at night I know my money is making decent money with the help of my FA
Nice. People often underestimate financial advisors' importance. Over 50 years of data reveal that those who work with advisors typically earn more than those who go it alone. I've been fortunate to work with one for 13 years, resulting in a $1 million portfolio, largely from early investments in AI and other growth stocks.
I sold a house in 2023 which we had lived in for 28 years, so there was hefty profit on it. I now find out that somehow that hefty profit counts towards the year's income, and it's thrown us in the 32% tax bracket. I guess the IRS doesn't care that much of that profit went to purchase two replacing properties to live. I'm dreading what substantially increased amount we'll have to pay for Medicare in the coming year.
"Discovering how the profit from selling our home impacts our tax bracket was eye-opening. It's frustrating that even though we reinvested in new properties, it still affects our income. Planning ahead for increased Medicare costs is now crucial. Thanks for shedding light on these financial nuances!"
The IRMAA calculation is based on 2 yr look back at AGI, so yes 2023 high income levels will affect 2025 premiums. There are ways to appeal IRMAA based on special or 1-time circumstances for IRMAA so I suggest you look into that.
@@judyjrasmussen339does this mean my Medicare premium will be higher since I’m working up until I turn 65 and will be applying for Medicare right away?
The minimum distribution can be put into a Roth if you’re 73 and over, since you have to pay taxes on that money anyway. But, converting a large chunk of cash may be difficult since you can’t touch that money for five years. Five years is a long time in your twilight years.
You cannot convert your RMD to Roth. You would need to withdraw more than the RMD to convert, which is why the Roth advocates say to do it before RMDs kick in.
"Understanding how staying within 1-2 IRMAA brackets can significantly reduce increases compared to taxes on SSA and RMDS above 1.7M in pretax assets is crucial. This video provides valuable insights into optimizing retirement income strategies!"
"Roth conversions can be a game-changer for retirement planning. Video [#] explains the costly mistakes to avoid, shedding light on smart financial strategies. It's a must-watch for anyone planning their retirement wisely!"
As retired military who wants to retire at age 62 (less than 4 years away; take SS@67) and start Roth conversions in late 2025 (I use NewRetirement), am I correct in assuming that I do not need a marketplace healthcare plan for the 3 year gap until medicare kicks in as long as I'm okay with paying the 20% with Tricare Select, or changing to Tricare Prime (pay premiums) for those three years?
That’s my situation. I’m on Tricare select and will hit 65 in a few years at which point I’ll have Medicare. But as military retirees, we are required to buy part B when we take Medicare.
@@Mahan1914 My current intention is to just have A+B. Shouldn't need "D" and don't want it. I see what the supplemental plan does in limiting what services and support my 83 y/o mother deals with.
In these uncertain times, it's more important than ever to have a solid understanding of how to manage your finances, invest wisely and navigate economic downturns. But my primary concern is how to grow my reserve of $240k which has been sitting duck since forever with zero to no gains, sure I'm all in on the long term game, but with my savings are lying waste to inflation and my portfolio losing gains everyday, I need a remedy.
If you need advice, consider speaking with a financial advisor. Don't get me wrong, you can do it on your own, but financial advisors have a lot more knowledge and expertise in this area.
you are completely right, Advisors have information and paths that are not disclosed to the public.. I profited £560k in 2022 under the tutelage of my Fiduciary-counselor. Am I selling? Absolutely not.. I am going to sit back and observe how this all plays out.
Finding financial advisors like Melissa Terri Swayne who can assist you shape your portfolio would be a very creative option. There will be difficult times ahead, and prudent personal money management will be essential to navigating them.
It's by each year's earnings. If one year you bring in a lot more income than usual, you will get a lower subsidy than a year where you brought in less income.
Yep, I'm 63 and thinking about it. It may make sense to bite the bullet and pay the Irmaa surcharge. I don't need ACA . Another factor is converting right now at record highs is not too enticing.
@@bobb7918 thanks, that makes sense. I could sell an asset that has appreciated and keep it in a money market fund in my Roth until prices are more reasonable.
I am single and planning to retire in my early 50's. I will be spending from non-tax advantaged brokerage accounts until I am 59. Because of this, my income may at first be too low to qualify for the ACA. I don't think I could get Medicaid, as I have a large amount of savings (multi-millionaire). So, I may actually need to do some Roth Conversions just to hit the minimum income for the ACA eligibility and subsidy. Do Capital Gains and Qualified Dividends count as income for purposes of ACA eligibility? Is my strategy for qualifying for the ACA sound, or am I missing something?
It would only make sense if you converted in the year you signing up for Medicare. Why would y’all wait to convert once you retired? Should have did that years ago
IRMAA issue is overblown and should not enter into the decision. First of all IRMAA limits increase each year for inflation so a 60 year old today who will start RMDs in 15 years could have a $5m IRA without tripping an IRMAA surcharge if there only income is SS and RMDs. If they have a lot of other income then they could have an IRMAA issue later, but in that case converting today would put them in IRMAA surcharges during the conversion years so they can avoid them later, effectively eliminating the benefit.
@@comingshortly at ~300 dollars extra each month for the next two years IRMAA is not overblown to me. Keith, the timing of conversions is critical. These days I am careful to keep my key taxable income below the second IRMAA tier.
@@comingshortly if one had $5m in an IRA, they are likely going to pay IRMAA penalties already before getting to RMDs due to their taxable investments. The penalties start at a pretty low $103k for a single person, and penalties could be hundreds of dollars per month. But do what you want to do... i rather pay less than more.
This is my favorite channel. Despite the dip in crypto. I still thank you for the level headed financial advice I started crypto investment with $7,500 and since following you for few weeks now, l've got 25k In my portfolio. Thank you so much mrs Elizabeth Slone
Wow. I'm a bit perplexed seeing her been mentioned here also Didn't know she has been good to so many people too this is wonderful, i'm in my fifth trade with her and it has been super.
The first step to successful investing is figuring out your goals and risk tolerance either on your own or with the help of a financial professional but is very advisable you make use of a professional.
Excellent content that really clearly demonstrates the need to plan what funds get pulled from the various buckets to arrive at an optimal tax plan when taking healthcare subsidies into account. I found this particularly helpful because it applies in my situation. Thank you for the clarification on this tricky part of the path - I am not as “lost” as I was before watching the video.
What stinks about IRMAA is you don’t know what the brackets for the applicable year until it’s too late so you have to guess what you want your income to be. Eg. Medicare premiums are based on income from 2 years prior. So 2026 premiums are based on this years income. The stink: you won’t find out out about those 2026 brackets until 2025. Part 2 of the stink: It impact isn’t marginal. You go one dollars into next bracket the impact is ~ 2400 in premiums.
Very good advice and similar to what I teach. Have three buckets, traditional, Roth, and brokerage. Design your taxable income. And consider Roth conversion ladders once your traditional bucket reaches a million. RMDs can balloon to over $300k in required withdrawals if you have too much money in traditional retirement accounts.
I like that you get the point quickly.
I am definitely going to pay at the 22%, because I didn't do the Roth for my IRA, and IRAAMA will kick in for my Med. Part B, as well, especially since I get a pension. I started taking SS right away because I was scared that the gov would do something to it, and it would not be available. I was not thinking about my impending RMDs, which after my recent calculations are going to be HUGE, and I mean HUGE. Thus, I paying the piper.
great presentation, Azul!
thinking I'll add whatever is needed to my wife's pension income to cap out the 12% tax bracket and convert whatever we don't need to Roth each year. getting expenses down by then will be key.
I asked my accountant about this & how much could I convert each year without triggering either Irmaa or a higher tax bracket. She was happy to figure it out, and said nobody ever asked her that before.
Sounds like a good accountant. I'm glad she was able to help you figure it out. Azul
Excellent content that really clearly demonstrates the need to plan what funds get pulled from the various buckets to arrive at an optimal tax plan when taking healthcare subsidies into account. I found this particularly helpful because it applies in my situation. Thank you for the clarification on this tricky part of the path - I am not as “lost” as I was before watching the video.
I'm glad the video was helpful Casey. Thanks for watching and for being a part of the community here. 🙏 Azul
I might be missing something, but a strategy to execute on Roth Conversions should be done prior to retiring, if possible. Meaning, my taxable income and bracket would be much higher in the year I convert, yet I'm still on my company's health insurance. So I pay my taxes for the convert, and no impact to health care premiums. Assuming no additional Roth Conversions are necessary in the years when I start retirement, then I should be ok I believe.
@DrJillLearnMoreLiveBette-fd4vh well, there is always room, just depends on how much you want to pay the taxman. When I turned 45-ish, I started the process to convert. I have done 5 tranches over the past 5 years, with a few more to go. I've done this in tranches so as to keep myself in a 'no higher than...' tax bracket while also being able to afford the estimated tax bill required for the conversion. Definitely a balancing act.
Great ideas. 20 years ago I had no idea that I would have enough that my RMDs would push me into such a high tax bracket. On one hand, you have no money and you pay no taxes and life is not good. The other, you have a grand life and yet have to hand over a lot of money to the Feds and states.
Donate the money.
Excellent video again! Learned a lot as usual. Thanks so much Azul!
Excellent Azul, I really love when you include the graphics it makes the presentation much easier to comprehend. It seems every video is better than the previous. Thank you for your time and efforts.
Great video, The first $100,000 invested was amazing. But when you hit $300,000 it’s like smashing the glass ceiling! I cried.
I completely agree with you! My first 100k took a long time and wasn't that special to be honest with you. Once I hit 300K that is the game changer in my opinion. At this point my money is basically making me a pretty good yearly salary. When I go to sleep at night I know my money is making decent money with the help of my FA
Nice. People often underestimate financial advisors' importance. Over 50 years of data reveal that those who work with advisors typically earn more than those who go it alone. I've been fortunate to work with one for 13 years, resulting in a $1 million portfolio, largely from early investments in AI and other growth stocks.
I've been considering but haven't been proactive. Can you recommend your advisor? Could really use some assistance.
"Nicole Anastasia Plumlee" is the licensed advisor I use. Just research the name. You’d find necessary details to work with to set up an appointment.
I looked up her name online and found her page. I emailed and made an appointment to talk with her. Thanks for the tip
I sold a house in 2023 which we had lived in for 28 years, so there was hefty profit on it. I now find out that somehow that hefty profit counts towards the year's income, and it's thrown us in the 32% tax bracket. I guess the IRS doesn't care that much of that profit went to purchase two replacing properties to live. I'm dreading what substantially increased amount we'll have to pay for Medicare in the coming year.
Was the profit higher than the capital gains threshold?
"Discovering how the profit from selling our home impacts our tax bracket was eye-opening. It's frustrating that even though we reinvested in new properties, it still affects our income. Planning ahead for increased Medicare costs is now crucial. Thanks for shedding light on these financial nuances!"
@@gregkloe yes, a lot more than the $500,000 allowed deduction for a married couple
The IRMAA calculation is based on 2 yr look back at AGI, so yes 2023 high income levels will affect 2025 premiums. There are ways to appeal IRMAA based on special or 1-time circumstances for IRMAA so I suggest you look into that.
@@judyjrasmussen339does this mean my Medicare premium will be higher since I’m working up until I turn 65 and will be applying for Medicare right away?
How is the Affordable Care Act actually affordable? Doesn’t seem affordable for people who are retired for sure.
The minimum distribution can be put into a Roth if you’re 73 and over, since you have to pay taxes on that money anyway. But, converting a large chunk of cash may be difficult since you can’t touch that money for five years. Five years is a long time in your twilight years.
You cannot convert your RMD to Roth. You would need to withdraw more than the RMD to convert, which is why the Roth advocates say to do it before RMDs kick in.
thanks Azul really helpful.. i am retiring in October and i am 58, the KFF calculator is really helpful
Congrats on your upcoming retirement ... 58, well done! Azul
Great information. Thank you Azul.
thansk i am trying to figure out the aca stuff right now to deside if i want to retire or not
Poor on paper is the goal...
Thank you, Azul! You have given me some food for thought and now I can look ahead for planning!
1-2 IRMAA BRACKETS up result in much lower increases than taxes on SSA plus RMDS on pretax assets above 1.7M.
"Understanding how staying within 1-2 IRMAA brackets can significantly reduce increases compared to taxes on SSA and RMDS above 1.7M in pretax assets is crucial. This video provides valuable insights into optimizing retirement income strategies!"
"Roth conversions can be a game-changer for retirement planning. Video [#] explains the costly mistakes to avoid, shedding light on smart financial strategies. It's a must-watch for anyone planning their retirement wisely!"
As retired military who wants to retire at age 62 (less than 4 years away; take SS@67) and start Roth conversions in late 2025 (I use NewRetirement), am I correct in assuming that I do not need a marketplace healthcare plan for the 3 year gap until medicare kicks in as long as I'm okay with paying the 20% with Tricare Select, or changing to Tricare Prime (pay premiums) for those three years?
That’s my situation. I’m on Tricare select and will hit 65 in a few years at which point I’ll have Medicare. But as military retirees, we are required to buy part B when we take Medicare.
@@Mahan1914 My current intention is to just have A+B. Shouldn't need "D" and don't want it. I see what the supplemental plan does in limiting what services and support my 83 y/o mother deals with.
@@macgeek2112correct, you won’t need part D as that’s basically covered by your military plan.
You also have to worry about the tax bracket "cliff".
I had cobbled this info together over the years, but you presented it in a very clear manner.
Thanks for the compliment ... 😊 Azul
Excellent video / information to prepare for and consider. Thank you.
I'm sure it's nothing but whenever Azul points with his whole hand it reminds me of an unfortunate historical situation
oooh ... I never thought of that. Thanks for the observation. 😳 Azul
Very helpful and new information for me to consider. Thanks Azul.
Thanks!!
Great info, thanks Azul.
In these uncertain times, it's more important than ever to have a solid understanding of how to manage your finances, invest wisely and navigate economic downturns. But my primary concern is how to grow my reserve of $240k which has been sitting duck since forever with zero to no gains, sure I'm all in on the long term game, but with my savings are lying waste to inflation and my portfolio losing gains everyday, I need a remedy.
If you need advice, consider speaking with a financial advisor. Don't get me wrong, you can do it on your own, but financial advisors have a lot more knowledge and expertise in this area.
you are completely right, Advisors have information and paths that are not disclosed to the public.. I profited £560k in 2022 under the tutelage of my Fiduciary-counselor. Am I selling? Absolutely not.. I am going to sit back and observe how this all plays out.
That's impressive! I could really use the expertise of this manager for my dwindling portfolio. Who’s the professional guiding you?
Finding financial advisors like Melissa Terri Swayne who can assist you shape your portfolio would be a very creative option. There will be difficult times ahead, and prudent personal money management will be essential to navigating them.
I checked Melissa up out of curiosity and i must say i am impressed by her Credentials. i emailed her already, waiting on her response.
How is the ACA subsidy calculated if your income year to year from your investments fluctuates
It's by each year's earnings. If one year you bring in a lot more income than usual, you will get a lower subsidy than a year where you brought in less income.
Excellent video. Lots of content out there about roth conversions but nothing about the impacts you're mentioning. 👍🏻
If you take or use Roth money for your income, does that count toward this AGI that affordable care act is based off
Roth money is taxed when it goes into the Roth account but are not taxed when withdrawn. It does not count as taxable income.
At 63 and 64 it can affect both ACA and Irmma!!!!!!
Yep, I'm 63 and thinking about it. It may make sense to bite the bullet and pay the Irmaa surcharge. I don't need ACA . Another factor is converting right now at record highs is not too enticing.
@ I would not wish for my nest egg to go down in value. You don’t have to transfer in kind. You can sell and covert to Roth what you want.
@@bobb7918 thanks, that makes sense. I could sell an asset that has appreciated and keep it in a money market fund in my Roth until prices are more reasonable.
Is dividend income taxed differently?
The IRMAA bit me for tax years 2022 and 2023. I will be free of the extra charge once my 2024 income is part of the medicare formula.
I am single and planning to retire in my early 50's. I will be spending from non-tax advantaged brokerage accounts until I am 59. Because of this, my income may at first be too low to qualify for the ACA. I don't think I could get Medicaid, as I have a large amount of savings (multi-millionaire). So, I may actually need to do some Roth Conversions just to hit the minimum income for the ACA eligibility and subsidy. Do Capital Gains and Qualified Dividends count as income for purposes of ACA eligibility? Is my strategy for qualifying for the ACA sound, or am I missing something?
It would only make sense if you converted in the year you signing up for Medicare. Why would y’all wait to convert once you retired? Should have did that years ago
Great info! Please go back to doing some of your walking videos - your fans go crazy for those 😊
Income vs Obamacare and IRMAA. Nothing new here. If you convert most of your money to Roth, your Roth investment gains (withdrawals) are tax free.
IRMAA issue is overblown and should not enter into the decision. First of all IRMAA limits increase each year for inflation so a 60 year old today who will start RMDs in 15 years could have a $5m IRA without tripping an IRMAA surcharge if there only income is SS and RMDs. If they have a lot of other income then they could have an IRMAA issue later, but in that case converting today would put them in IRMAA surcharges during the conversion years so they can avoid them later, effectively eliminating the benefit.
@@comingshortly at ~300 dollars extra each month for the next two years IRMAA is not overblown to me. Keith, the timing of conversions is critical. These days I am careful to keep my key taxable income below the second IRMAA tier.
@@comingshortly if one had $5m in an IRA, they are likely going to pay IRMAA penalties already before getting to RMDs due to their taxable investments. The penalties start at a pretty low $103k for a single person, and penalties could be hundreds of dollars per month. But do what you want to do... i rather pay less than more.
This is my favorite channel. Despite the dip in crypto. I still thank you for the level headed financial advice I started crypto investment with $7,500 and since following you for few weeks now, l've got 25k In my portfolio. Thank you so much mrs Elizabeth Slone
Wow. I'm a bit perplexed seeing her been mentioned here also Didn't know she has been good to so many people too this is wonderful, i'm in my fifth trade with her and it has been super.
The first step to successful investing is figuring out your goals and risk tolerance either on your own or with the help of a financial professional but is very advisable you make use of a professional.
Isn't that the same Mrs Elizabeth Slone that my neighbours are talking about, she has to be a perfect expert for people to talk about her so well
I'm new at this, please how can I reach her?
she's mostly on Telegrams, using the user name
The only costly mistake people make is hiring a financial advisor. They steal your money. All are crooks.
Thanks!
Excellent content that really clearly demonstrates the need to plan what funds get pulled from the various buckets to arrive at an optimal tax plan when taking healthcare subsidies into account. I found this particularly helpful because it applies in my situation. Thank you for the clarification on this tricky part of the path - I am not as “lost” as I was before watching the video.