RMD and IRMAA Tax Strategy for Bismarck Retirees

How Can a Bismarck Retirees Use a Roth Conversion to Avoid the NIIT and IRMAA Medicare surcharges when taking RMDs?

The short answer is Energized Retirement Planners as your Bismarck, ND financial advisor will partner with you to determine your spending goals first. Don't let the tax tail wag the spending dog - you have worked hard to save up those account balances so you should enjoy them. Maybe you have heard "fly first class or your kids will."

Once your spending goals are set, then your advisor can project out investment balances. Your pre-tax IRA balances will determine your RMDs at 73. If it appears that the RMDs will place you into a higher tax bracket than you are currently, it might make sense for a Roth conversion.

Anything else I should take into account for a Roth conversion?

Many things! There are many levers in tax planning. Moving one may impact another. For example, a Roth conversion before age 65 might impact a healthcare subsidy if your insurance is through the healthcare.gov exchange. Also, a Roth conversion will add income that could impact your senior homestead property tax credit. A Roth conversion could make more of your Social Security subject to tax. And of course too high of income could trigger the Net Investment Income Tax (NIIT) and IRMAA Medicare surcharges.

Any huge variables?

If you are married, you have an advantageous filing status of "married filing joint." Upon first death, the survivor will move into the single tax brackets - creating a potential drastic increase in taxes. Roth conversions could negate a lot of this impact if you receive tax advice early on in retirement.

So I should convert every year?

Not necessarily. There are many scenarios where it might not make sense in a given year. Creating a lifetime tax plan is crucial but then you still have to evaluate each tax year as they come to take into account all of the levers mentioned earlier.