Craig Wear explains how Roth conversions raise Medicare premiums temporarily but can save $80,000 to over $100,000 in lifetime premiums by avoiding future RMD-driven tax bills. For clients with $1 million or more in IRAs, converting early beats letting required distributions push income higher later.
2, 3, 4 years ago, one of the biggest excuses that people made for not doing Roth conversions more aggressively is that they were concerned that their Medicare premiums were going to go up. Make no mistake, your Medicare premiums will go up for a short period of time if you are Medicare eligible or become Medicare eligible. They're going to go up for a short period of time because Medicare Part B and Part D are income-based premiums. Meaning your income on your tax return is what has a significant impact on what those premiums are going to be. And so when you do Roth conversions, you willingly throw taxable income onto that tax return, which causes you to get to higher and higher thresholds. The reality though is that added amount of premium that you're going to pay for a few years pales in comparison to the tax benefits of getting that conversion done. And of course, that's, that's part of what we have to prove to clients and prove to ourselves, is that you're really much better off. And most of the time what we actually see is clients that do aggressive conversions, we're able to demonstrate at least $80,000, and a lot of times well over $100,000 of Medicare premium savings for them over their lifetime. And that's really the big issue here, is we're looking at Tax avoidance over your lifetime, tax Medicare premium savings over your lifetime, and what your net present value or your net worth is going to— how it can be impacted to the better by doing these Roth conversions. But if you have these large IRAs, what's going to happen is the growth in those IRAs over time is going to cause those required minimum distributions when you reach your magic age to get higher and higher and higher. And so At the end, at the end of the day, you're going to end up with higher Medicare premiums anyway if you don't do the conversion. Hey, if you've got $1 million or more in your IRAs, the IRS already has scheduled one of the biggest tax bills of your entire lifetime. It starts at 73 or 75 years old. The problem is most people just haven't seen the number yet. We have an RMD calculator that we've put together that'll give you an idea what the taxes are going to be over your lifetime, as well as maybe what's going to be left for your heirs. If you leave it all to them. We've taken it a step further and we've cross-referenced that to people just like you that have been clients of ours, of over 3,000 of our clients. And we want to be able to give you an idea of what's possible for you to save if you get Roth conversions done right. So click the link below. It'll take you about 2 minutes and it'll be pretty alarming. Take care.
