Thx Intercst. Remember when I said if it sounds too good to be true? Well, more on that later when I find out more, but scam here is the right word as thought I would log on to Aetna website(after receiving their letter approving coverage without mentioning a word of co-pay and see an invoice for $6600.00 for one month’s worth!!! After being told by some Company called InfucareRX that there was absolutely nothing to pay…Yes, you have explained it clearly.
Regardless, the drug is supposed to be delivered at 11 am today and a nurse coming at 2pm to administer…No way now is this going to happen and have a few calls to make, so more on that later…
Regardless, must go by areas as paying only $1.60 a month is dirt cheap, but you always somehow manage to find the best deal…look forward to hearing where you might be shopping around come next month…
I have noticed a difference in how Medicare Parts A & B work vs Part D. Perhaps the problems with Part D related to Insurance companies involvement. Or maybe that Part D was crafted/written by one political party and Parts A & B by the other political party.
Update. Supposedly the Pharmacy that produces and sending me the drug(InfucareRX) and who told me that I would have nothing to pay originally, when I asked them to put this in writing, gave me the number of “The Assistance Fund” (never heard of this) who had agreed to pay 100% of my co-pay costs though an assistance fund programme and I just spoke with someone there who agreed this was indeed the case, but stated Aetna would bill me first and then reimburse me later?
Hmmm…
Get this. On my financial summary from Aetna.
Total RX costs for a 28 day supply. $66,036.11
My plan(paid) $59,417.82.
My cost(and after that it said “ONLY”…$6620.21!!
You couldn’t make this stuff up. :-))) 
My wife receives a very expensive drug that was initially handled the same way - massive copay bill for $12,000, followed by 100% assistance.
Needless to say we were marginally panicked at first blush.
An issue with a Roth conversion is its cost that can increase significantly after the RMD Begin Date. Were I to do a Roth conversion of $100K prior to the end of 2023, the income taxes on that $100K would be approximately $44K. Is it worth it to pay the taxes to do the conversion?
After retiring in 2013, I was hit by the aspect of the “Sequence of Return Risk” that none of the retirement articles discuss: the upside of the risk. My traditional IRA increased in value every year since starting RMD in 2015 until 2022 when it decreased in value by $763K. That decrease resulted in a 19.8% decline in my RMD for 2023 from 2022 but still over $100K per year.
Discontinuing Medicare Part B as suggested by intercst is the best approach to eliminating the IRMAA premium as I would need to move $1MM to a Roth IRA for any meaningful reduction in my RMD.
Just make sure that the VA will cover you for emergency care outside of a VA facility before you cancel Medicare Part B. If you show up in a private hospital without Medicare Part B, they may not have to give you the Medicare rate – unlimited price gouging would apply.
intercst
That’s a 44% tax rate. Quite high for most cases. What do you estimate your tax rate will be on that $100k if it were withdrawn in 2025/26/27/28/etc? Remember, if you withdraw an additional $100k in 2023, it will [evidently] all be taxed at your marginal rate of 44%. But if withdrawn in 2027, perhaps part of it would be taxed at a lower rate, and the remainder of it taxed at your [then] higher marginal tax rate?
I would point out that, under current law for Federal rates, in 2026, the current 32% bracket will increase to 33% and the current 37% bracket will increase to 39.6% However, the 35% bracket will remain the same. It’s not clear to me which Federal bracket @MCCrockett is in, but I seem to remember that he lives in CA, so he’s probably in the 35% Federal bracket and the 9.3% CA bracket.
A better option for @MCCrockett might be to move out of California to a state with no income taxes, or at least, no taxes on pension income. That should knock 9% - 10% off of the marginal rate for Roth conversions.
AJ
Were I to do a $100K Roth conversion this year, the conversion amount would be taxed in the 9.3% marginal tax bracket for California income axes. For Federal income taxes a portion of the conversion amount would be taxed in the 24%, 32%, and 35% marginal tax brackets. I think that I will be able to avoid the Federal 3.8% Net Investment Income Tax but I’m not confident about that as I’m not sure if the Roth conversion amount would be treated as a qualified withdrawal from my traditional IRA.
One problem with calculating the cost of Roth conversions in future years is that we don’t know the impact of inflation on the income ranges for each tax bracket. If the Tax Cuts and Jobs Act sunsets at the end of 2025, how will the IRS adjust the marginal tax income ranges for 2026? Will it use the inflation data from 2018 through 2025 to adjust the 2017 marginal tax rate income ranges for 2026?
I have considered moving to Reno, NV where there is a VA Medical Center and no income taxes. That will have to wait until my mother’s estate is settled hopefully by the end of 2023. While California doesn’t tax Social Security, it does take 9.3% of the rest of my income. That savings would defray some of the cost of living in a retirement community.
If you’re not strongly tied to CA, and it sounds like you aren’t, then moving would be quite a decent plan. Let’s say average $200k taxable income, then with the first 100k taxed at 4% and the next 100k taxed at 9%, that’s about $13k going to CA each year, or more than $1k a month. That could be close to 1/3 of the total cost of a nice retirement community in a low-income-tax place!
IIRC, you are filing Single, so your NIIT limit is $200k. If you are MFJ, the NIIT limit would be $250k. The NIIT limit is not indexed to inflation.
Roth conversions are not considered investment income and are not subject to NIIT. However, if you have any investment income, the Roth conversion money would count toward the $200k limit, so the investment income that’s over that limit would be subjected to NIIT. So by doing a $100k Roth conversion, you could effectively be pushing your investment income into being charged NIIT tax. Therefore, if you do have investment income, you should try to limit your Roth conversions to keep you under the NIIT limit.
The brackets from 2017 will be indexed for inflation. Here is one estimate: Preparing for the 2025 Tax Sunset (creativeplanning.com)
AJ
I would also point out that even you had the full 32% bracket amount of $49,150 of the $100k taxed at 32% and the other $50,850 taxed at 35% (in other words nothing taxed at 24%), your Federal tax would be $33,526. Add in $9300 for CA taxes, and you are at $42,826, not $44k. For every $100 used to fill out your 24% bracket, you would take $11 off of the tax bill.
No, it’s not a lot below $44k, but it’s closer to $43k than $44k.
AJ
The $44K was a “swag”, a term used in my former occupation as a software engineer when we needed to provide an estimate to complete a project. Unfortunately, I used my 2022 cheat sheet for estimated taxes instead of the 2023 version in my “swag”.
When I used the correct cheat sheet, it appeared that a portion of the $100K might be taxed at the 24% marginal tax rate; however, my dividend and interest income is greater than I predicted in March 2023 and may fill up the 24% bracket.
Thanks for your calculations. There is still the question of how much is too much to pay for a Roth conversion?
Apparently, doesn’t permit me to define what “swag” means. You’ll need to figure it out for yourself.
Personally, I wouldn’t pay 44% (or even 40%-43% blended). That’s despite my belief that tax rates will eventually have to go way higher based on rampant government spending at all levels. If you can plan to leave CA during '24, then beginning '25 it would likely be worth “eating up” all the 24/32% brackets with Roth conversion, and maybe some of the 35% bracket if you’ve already subjected investment income to NIIT. Even in '26 and beyond, it would likely be worth “eating up” the lower rates with Roth conversion.
Since the 24% bracket tops out at $182,100, adding $100k onto it would result in taxable income of $282,100 That means that up to $82,100 in investment income (i.e. dividends and interest) would be subject to NIIT.
Depending on how much investment income you have, it looks like you’d effectively be paying as much as 47%, including CA state taxes. That seems high. Even 43%, if you only convert enough to stay just below the NIIT limit, seems high. At this point, I probably would wait until I could get out of CA to do any Roth conversions, if I were you.
I R an engen-ear, 2. I am very aware of SWAGs.
AJ