Personal Finance (Not Investing) • Taking massive distributions in retirement year yet avoiding a big IRMAA bill?

Hi, all. In a few old posts I've found mention of the idea of focusing one's discretionary income in one's retirement year, but not much elaboration on why it can be advantageous, so I'm exploring the topic a bit.

I think the way this can work, using my situation as a case study:

• 2024: retire mid-year and start Medicare, paying IRMAA (3rd tier) based on 2022 income. Instead of filing for reconsideration now I can take a bunch of optional income (for me, iIRA distributions) to run my income up to the top of the 24% bracket, which would normally be a big IRMAA bill in 2026.
• 2025: File for reconsideration based on 2024 qualifying event (2024 retirement) and non-IRMAA 2025 income.
• 2026: File for reconsideration again, still based on 2024 event and continued non-IRMAA income, avoiding what would otherwise be tier 4 or hgher based on my outsized 2024 income.

My understanding of IRMAA is that this is all completely legit and aligned with how things work. For me, the basic tradeoff is that I could be sacrificing $628.80 in possible 2024 IRMAA savings (which I could get by getting reconsidered from $454.20/month down to $349.40/month over six months of 2024) for the chance to draw down an Inherited IRA at 24% that I would likely otherwise be paying 25% on. In the more general case (thinking of some of my colleagues who were laid off with truly astounding severance packages and commensurately huge 2024 incomes), being able to opt out of 2024 ever being used for IRMAA calculations is even better.

Any thoughts, alternatives, or pitfalls I'm missing? In my case I'm not sure it's worth it because tax brackets could very well change to my advantage, but making some headway on drawing down the iIRA is appealing. (I need to have it empty by 2031, which should be comfortably doable even with SS income starting in 2029.)

Statistics: Posted by glitchy — Tue Jul 23, 2024 10:47 am — Replies 0 — Views 51

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