Retirement

farce said:
In my case it is because my wife is 15 years younger than me. She is a teacher and has moved from state to state following my jobs, never staying in a single state long enough to get vested in their pension plan. She will get small payments from Ohio and California’s plans, but she teaches at a charter school in NC so she has a late start on a 401k. She will getting surviving spouse benefits from my social security and I wanted to make sure those payments are a large as possible when I’m gone. So it’s less about will I reach my breakeven point than what benefit will she receive.

I’ve only started taking withdrawals from my retirement account in the last two years. Fortunately, my earnings have exceeded my withdrawals and the balances in those accounts continue to increase. So I expect I will be leaving her in good shape, but I was trying to maximize her SS benefits so she can support her next husband!
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I'm 58 and pretty set because of 3 pensions. I have one from the MIlitary, one from current job, and my wife is a teacher. LIke Farce I will take SS at age 70 to maximize the check my wife will get after me. We plan to take 100% survivor on all pensions.
 
I plan to wait until 70 to get SS. Of course, that's 24 years away (ugh that was wild to think of it as only a couple of decades - life goes FAST yall). But I could always go earlier if I need the money, but the hope is that the savings beyond the 401k can sustain us.
 
farce said:
IRMAA goes away a few years after you retire (as I recall they average the last three years?) It's a temporary thing, but it bit me in the ass the first few years of my retirement.
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farce said:
You’ll have to look up the thresholds. Mine went away even though I still had a decent consulting income for 4 years after retirement. But I had a lot of income my last year working as I had equity in my employer and it was sold the year before my retirement.

ETA:
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As I understand it, IRMAA does not go away. It gets evaluated every year and is based on the most recently available tax return so it looks at the year prior to the year that is ending. 2025 would use 2023's tax return; 2026 would use 2024 and so on.

While it doesn't go away, if your taxable income goes below the threshold, you won't get a supplemental charge. The chart you had in that post is the total Medicare cost (ain't nothin free) but even if you are making below the IRMAA thresholds, you are still paying $175 a month. A bit clearer way to look at it is to look at the additional cost per level. The first threshold is $70/month or $840, the next three thresholds are each an extra $105/month or $1260 and that last threshold is $135/month or $1620. Going over the threshold is ok if it makes sense financially but you just don't want to go over by a small amount because it is a tax cliff and being over by $1 is the same cost as being over by $50k.

The year you turn 65, you won't go on Medicare until your birthday and thus won't have to pay IRMAA until then. So if you have a late birthday like I do (Oct), you would only have a few months of extra cost and it is less impactful if you have a lot of extra income when you were 63.

Notice that the IRMAA thresholds are close to income tax rate breaks but not the same. Also if you are doing Roth Conversions based on tax brackets, you will only have a guestimate where the IRMAA threshold will be 2 years later. However, it does seem like they move somewhat consistently and if you only fill up the 22/25% bracket, you are probably going to be below IRMAA, if you fill up the 24/28% bracket, you are going to trigger multiple IRMAA brackets, but you probably will be slightly below the 4th level. For example, the first 2024 IRMAA charge comes at $103k ($206k married) while the 2022 22% tax bracket goes up to $89k so there was plenty of room between the top of 22% and the first IRMAA charge. On the other hand, if you filled up your 24% bracket in 2022, you would be in the 3rd level IRMAA for 2024 and close to but safely under the 4th level ($182k income v $193k threshold).
 
These not well known supplemental cost thresholds are where having flexibility from Roth or Brokerage accounts is useful. You could use tax deferred money up to the first or second threshold and then Roth/Brokerage funds without triggering more IRMAA charges. But of course, you have to know about all of this stuff in advance and far enough in advance that you set up and invest in Roth/Brokerage accounts.
 
dcphx said:
As I understand it, IRMAA does not go away. It gets evaluated every year and is based on the most recently available tax return so it looks at the year prior to the year that is ending. 2025 would use 2023's tax return; 2026 would use 2024 and so on.

While it doesn't go away, if your taxable income goes below the threshold, you won't get a supplemental charge. The chart you had in that post is the total Medicare cost (ain't nothin free) but even if you are making below the IRMAA thresholds, you are still paying $175 a month. A bit clearer way to look at it is to look at the additional cost per level. The first threshold is $70/month or $840, the next three thresholds are each an extra $105/month or $1260 and that last threshold is $135/month or $1620. Going over the threshold is ok if it makes sense financially but you just don't want to go over by a small amount because it is a tax cliff and being over by $1 is the same cost as being over by $50k.

The year you turn 65, you won't go on Medicare until your birthday and thus won't have to pay IRMAA until then. So if you have a late birthday like I do (Oct), you would only have a few months of extra cost and it is less impactful if you have a lot of extra income when you were 63.

Notice that the IRMAA thresholds are close to income tax rate breaks but not the same. Also if you are doing Roth Conversions based on tax brackets, you will only have a guestimate where the IRMAA threshold will be 2 years later. However, it does seem like they move somewhat consistently and if you only fill up the 22/25% bracket, you are probably going to be below IRMAA, if you fill up the 24/28% bracket, you are going to trigger multiple IRMAA brackets, but you probably will be slightly below the 4th level. For example, the first 2024 IRMAA charge comes at $103k ($206k married) while the 2022 22% tax bracket goes up to $89k so there was plenty of room between the top of 22% and the first IRMAA charge. On the other hand, if you filled up your 24% bracket in 2022, you would be in the 3rd level IRMAA for 2024 and close to but safely under the 4th level ($182k income v $193k threshold).
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Yes, $174.70 is the base cost for Medicare Part B. If you are on Medicare but have not started taking Social Security, you will get a bill every month for that amount plus any income-based supplemental charge. If you are receiving SS benefits, that amount is deducted from your monthly SS benefit.

But only part A (which is no charge) is universal, Part B is optional. Many veterans decline Part B if they are eligible for veterans benefits. Many poor people decline Part B because their benefits are so small they can’t afford it, so they go to the emergency room for routine health care. Those on Medicare Advantage plans are a whole other story which deserves its own thread.

But for most people whose income is above the base threshold, the monthly surcharge based on an income related monthly adjustment amount (IRMAA) goes away as their income is recalculated based on the 2 year lag time and eventually falls below the threshold. IRMAA always exists and will kick in if your income increases over the threshold, but most retirees don’t see big increases in their incomes once they’ve passed the initial lag time limit.
 
farce said:
Yes, $174.70 is the base cost for Medicare Part B. If you are on Medicare but have not started taking Social Security, you will get a bill every month for that amount plus any income-based supplemental charge. If you are receiving SS benefits, that amount is deducted from your monthly SS benefit.

But only part A (which is no charge) is universal, Part B is optional. Many veterans decline Part B if they are eligible for veterans benefits. Many poor people decline Part B because their benefits are so small they can’t afford it, so they go to the emergency room for routine health care. Those on Medicare Advantage plans are a whole other story which deserves its own thread.

But for most people whose income is above the base threshold, the monthly surcharge based on an income related monthly adjustment amount (IRMAA) goes away as their income is recalculated based on the 2 year lag time and eventually falls below the threshold. IRMAA always exists and will kick in if your income increases over the threshold, but most retirees don’t see big increases in their incomes once they’ve passed the initial lag time limit.
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Very helpful breakdown, thanks. I’m helping my folks prepare for retirement and a lot of this is new to me, since personally I’m still in the “accumulation/save as much as possible” phase in my 30s.
 
The key questions as you get close to retirement is not only how much you have in aggregate but where those funds lie and how they are invested. For the the most part your home, while it adds to your net worth and potential estate has no real impact on your earnings unless you sell and downsize.

My current plan is for the first 3-4 years live off cash and brokerage account moneys which will not be counted as income for tax purposes aside from capital gains which of course is taxed at a lower bracket. So despite having what would be considered a high spending flow I should have minimal tax concerns while my IRA and other pretax portfolios continue to hopefully appreciate in value or in bad market conditions have the ability to recover before I would need them.

The biggest risk to anyone early in retirement is a drastic downturn either just prior to retiring or in the first decade. Obviously most of that is the luck of the draw but it can be mitigated by having sufficient monies in cash, CDs, and bonds. That's the basis for the 60/40 stock/bond recommendation and the 4% withdrawal rule. I think the 60/40 can be skewed higher if you have a larger overall portfolio, I'm probably planning around 70/30 or even 75/25 and invest the stock portion in diversified low cost mutual funds. I don't have the risk tolerance for crypto or other fad things like that. I know I might miss out on some crazy returns but it also won't go to zero which is what I really think it is actually worth.

You really want 5-6 years of cash and cash equivalents at any time to survive the downturn. We've had several pretty big downturns in the last 20 years but the market has fully recovered every time in 3 years or so and of course we are at all time highs now. It is conceivable to postulate a true depression or social upheaval event which really wipes everyone out but you cant plan around that. Everyone will be in the same boat in that circumstance.

At the end of the day, it's really all about your expenses. Going from being a very aggressive saver to a spender of those savings is going to be a challenge of a mindset change. Until I really got serious the last couple of years into diving into all this deeply (there are excellent YouTube videos all over the place and other references) I kind of assumed I needed to replace my actual current salary not realizing I no longer needed to save, taxes will be far lower, and expenses can be lower with the same lifestyle. As I said on earlier thread my plan is 3 years from now. Hopefully I can avoid the big downturn before then. With the fed seemingly pulling off what would have seemed a miracle 2 years ago I am feeling good about it. I have strong feelings about the election of course and the risk of a certain candidate but this is not a political thread lol.
 
UNCatTech said:
Glad things worked out for you.

In the last two layoffs at my company, they let several people go who had already planned to retire in the next 6 months. I spoke with one of the guys about a month after the layoff. He was ecstatic. He told me that he was planning on retiring in 2 months and would have had no pay, they let him go 2 months before retirement and paid him for a year. I hope that when I'm ready to go they offer me a year's pay to leave. :)
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That happened to my best friend from UNC who worked at SAS. Got a year's pay plus help paying for his COBRA for a year. He said he got the email and sprinted to HR to sign up,
 
Folks need to remember if they do not select part b at 65 there is a penalty if you try to add it later
 
douglas said:
Folks need to remember if they do not select part b at 65 there is a penalty if you try to add it later
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True. And if you choose to go with a Medicare Advantage plan it is costly to later convert to traditional Medicare.
 
farce said:
True. And if you choose to go with a Medicare Advantage plan it is costly to later convert to traditional Medicare.
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I’m 58 and could really use a primer on all of the decisions I need to make regarding SS and Medicare over the next 7 years. Like, when to enroll, what are the best choices, etc.
 
douglas said:
Folks need to remember if they do not select part b at 65 there is a penalty if you try to add it later
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But there’s no penalty if the reason you didn’t sign up is because you have coverage through work or your spouse’s work.
 
As a 66 y/o that has decided to hold off on SS but take the Medicare Advantage I'm telling you uncmba you will definitely be going back to school! I went to the senior center before my 65th and got the advantage plan for @$250-275 a month. I owed some back taxes so I sold a lot and hit the mess Farce mentioned. A 1 time profit was not a life event? This year I am paying @$690 a month. I'm praying the the calculations go back down for 2025.
 
SmilingJack said:
As a 66 y/o that has decided to hold off on SS but take the Medicare Advantage I'm telling you uncmba you will definitely be going back to school! I went to the senior center before my 65th and got the advantage plan for @$250-275 a month. I owed some back taxes so I sold a lot and hit the mess Farce mentioned. A 1 time profit was not a life event? This year I am paying @$690 a month. I'm praying the the calculations go back down for 2025.
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$690 a month for one person?

Is that normal or average?
 
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