The Easy Way to Avoid Doubling, Even Tripling, Your Medicare Premiums

With a Roth there are NO required minimum distributions (RMDs). This means you can allow your Roth to grow for as long as you are breathing without ever having to take any money out.  A traditional IRA, 401k, 403B or TSP all require at age 70½ you begin taking a percentage out of the account in order to pay tax on it.  What if you don’t need the money? Doesn’t matter. The IRS needs it more and they will get it starting when you turn 70 ½.   Let’s say you are 70 years old and have $100,000 in your traditional IRA.  Your RMD will be $3,649.63.  How did I get that? Just take your account balance from the end of the previous year, find your age at the end of this year on the IRS table below and divide that corresponding number into your account balance.  Now, I can hear some saying “Josh, paying tax on $3,649.63 is no big deal. I’m in the 12% bracket so it will only cost me around $400 in taxes.” I agree. The first few years of RMDs are so small you probably won’t even notice the tax hit.  In fact, your account will probably grow more than your required distributions. How about when you get older though?  At 82, say you  still have $100,000 in your account, your RMD will have increased 60% to $5,847.95.  These RMDs begin to add up when it comes to the taxes you pay on your Social Security as well and, unbeknownst to most, your Medicare Part B and D premiums too! How Medicare Premiums Double...or Worse! Medicare premiums are means-tested which means the higher your income the more your premiums will be. We aren’t talking chump change here either, folks. A single taxpayer with a Modified Adjusted Gross Income (MAGI) of less than $85,000, pays $134 in monthly Medicare Part B premiums and $34 in Part D premiums  But once that taxpayer goes above $107,000 in MAGI, her monthly premiums double from $168 to $335! MAGI = All Income Before Deductions (excluding Roth) The higher the MAGI, the larger the premium. The maximum premium for Medicare is $504.80 per beneficiary, which is an increase of nearly 400% from the lowest premium! Higher RMDs = higher taxable income = much higher Medicare premiums.