This is a topic that does make me mad. Current tax law penalizes widows for being frugal and saving assets in their retirement accounts.
How so, you ask? Just look at the tax code! What’s the premium levels for Medicare Part B and D? Have they been indexed for inflation over the last 10 years? Nope.
Are they based on TAXABLE or MODIFIED INCOME? Modified.
Why is that a big deal? Because MAGI is before any deductions PLUS tax-exempt interest is included in the mix too.
So, a widow with any decent size IRA not only finds herself with more taxes to pay, much more by the way, but also a significant increase in Medicare Part B and D premiums!
Hey, I have a ‘progressive’ tax idea, why don’t we go after the most vulnerable in our society, widowed women who no longer have the ability to change their tax planning. Only makes sense, right???
Yeah, I am being sarcastic.
You want to make Medicare more solvent? Fine. Go after those who can still plan their finances accordingly. But don’t go hit taxpayers after the fact, when they are old, alone and can’t change their planning.
It’s not right.