Why all of the IRMAA angst? [IRMAA: Resistance is futile] - Web page 7

Who will probably be topic to IRMAA #1, #2, #3 …?

Assume a pair age 72 in 2025, with RMDs starting in 2026. Aim is to estimate the tax-deferred quantities that may put them one greenback over an IRMAA boundary when RMDs start.

1. Our illustrative couple have been within the managerial/skilled class whereas working. Their 2026 revenue from age-70 deferred social safety, and/or pensions, is $100K.

2. Their projected taxable brokerage stability, all in VTI, pretty much as good Bogleheads, is $500K. Projected dividend revenue is thus $6,250.

3. The revealed 2024 IRMAA threshold is $206K; the projected IRMAA #1 threshold for 2026, at inflation of three%, is $218K and alter.

4. 218K minus 6.25K minus 100K = $111.75K. That’s the quantity of dread RMD, plus $1.00, that may put them into IRMAA #1.

5. The RMD divisor for age 73 is 26.5

6. Subsequently, our illustrative couple should have 111.751 X 26.5 = $2,961,402 of their tax-deferred accounts topic to RMDs earlier than they’ll incur IRMAA #1.

Doesn’t everyone right here on the discussion board have $3M in tax-deferred accounts? No??? Hmmm … how a lot of a fear is IRMAA, then?

Oh wait. The 2026 IRMAA thresholds will probably be decided in 2028. It is going to be $218,000 * 1.03 * 1.03 = $231,000 on the baseline assumption for inflation. It’s really a TDA stability of $3.305 million that’s required to set off IRMAA #1 in 2026.

Large, massive drawback right here on the discussion board, I think about. S-o-o-o many individuals right here with TDA balances over $3M. [actually, not hard to achieve if both were working, each contributed the 401(k) max for 30 years, with everything invested in a low cost Vanguard Target Date fund.]

IRMAA #2

Now let’s take a look at the TDA balances required to owe IRMAA #2, #3, and many others.

I’ll hold it easy. If IRMAA #1 will probably be $231,000 for 2026, then IRMAA #2 is about $290K. Multiply the distinction, $59K, by 26.5. Add to the $3.3M TDA stability; and we see that in the event you anticipate a TDA stability of $4.87 million, you’ll have to pay IRMAA #2 in 2026. Sorry.

IRMAA #3, #4

It is going to be $362K for IRMAA#3 and $434K for #4 in 2026, including $72K every time.

With a TDA stability of $6.78 million, you’re in danger for IRMAA#3; at $8.69M, you’re susceptible to IRMAA #4.

[IRMAA #5 charge, above $750K, is 1/3 the amount of #2, #3, #4, and is ignored]

If you wish to Roth convert your means out of IRMAA …

Let’s say you’re 62 or much less and your eleven-year projection reveals you susceptible to IRMAA #2, i.e., a TDA stability projected to be $4.87 million in 2026.

You must make the projection eleven years upfront as a result of if you’re over 62, your Roth conversion might itself set off IRMAA, and that gained’t fly, per my paper: https://papers.ssrn.com/sol3/papers.cfm … id=4700784

Subsequently, again in 2015, or surrounding years, you would need to convert funds with a future worth of $1.57M to be able to drop out of IRMAA altogether, as a result of solely such a big Roth conversion can be adequate to get your future TDA stability underneath $3.3M…

Good luck changing $1.57M within the 22% bracket

As I stated … resistance is futile.