How RMDs Can Triple Your Medicare Premiums

In part two of our 5 part series of why you need a Roth, Jane and Bob Youtube have now reached 60 and 70 years old. Their accounts have grown nicely.

At 60 years of age, they both have around $500k in their 401k plans.

Impossible you say? Well, no, not at all. Remember when they were 50 they started with $150k each in their 401ks. They added a 10k deferral and their company matched 8% of their salary.

So each year $14k was going into the account and it was growing at 7% a year. None of these scenarios are far-fetched

But at 60 let’s say they receive an inheritance or something and decide to quit their crappy old jobs.

They no longer add to their investment accounts but they aren’t taking money out either.

By the time they reach 70 their accounts have grown to around $1,000,000 each! Now they have reached the age for required mandatory distributions. RMDs on $2,000,000 is around $75,000 in the first year!

Wait to see what happens in following years, it’s going to get a LOT worse.

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Medicare premiums are MEANS-TESTED! Let me state that again…Medicare premiums are MEANS-Tested!

What does that mean? Well, simple. You pay higher premiums the more income you have.

“Oh, that’s only for rich people!” You might be thinking. Uh huh. Think again.

In this video I show you how a single taxpayer, let’s say a widow, can have her Medicare Part B and D premiums increase by 100% with only a 20% increase in income.

Think it can’t happen to you?

Well, your Medicare premiums are based on your Modified Adjusted Gross Income (MAGI).

MAGI is ALL the income you receive PLUS your tax-exempt interest.

MAGI is before you use your Standard Deductions or itemized deductions you may claim.

Remember, there is a huge difference between TAXABLE income and Gross Income.

And there is another difference between Gross Income and Modified Adjusted Gross Income too.

If you are ignorant of how this works, you can easily be paying Medicare Premiums well above what you anticipated when you first went into retirement.

Don’t let this be you. Plan accordingly. In fact, start planning in your 50s so you can avoid leaving your surviving spouse a huge tax bill. Because by then it’s too late to change tactics.

At that point, it’s just pay the tax man and hope he or she will be okay.


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