Since 2020, the IRMAA income thresholds are now indexed for inflation, but with a rising stock market and rising wealth, more and more retirees are still facing the potential to exceed the thresholds (especially once Required Minimum Distributions begin at age 72). So what can one do to plan around the IRMAA brackets?
Her are a few actions you could take:
1. Beware the 'traditional' strategy of spending down non-qualified accounts first and allowing pre-tax retirement accounts to just keep compounding, or the concentrated withdrawals in the later years can blast retirees into the IRMAA brackets with no way to come back down. Instead, consider drawing more evenly across pre-tax, taxable, and tax-free Roth buckets;
2. Consider partial Roth conversions to winnow down the size of IRAs before RMDs begin;
3. Use RMDs for charitable contributions (via the Qualified Charitable Distribution or QCD rules) so the income never hits the tax return in the first place (and thus can't boost income for IRMAA purposes);
4. Consider tapping home equity via a reverse mortgage to manage/minimize the taxable liquidation of accounts (as dollars drawn out from a reverse mortgage are received as a loan and not taxable income);
5. Tap any permanent life insurance you may have purchased in the past, which can also be borrowed against without a taxable event to generate retirement cash flows without crossing IRMAA thresholds (just be cautious not to over-borrow against the policy and trigger a taxable lapse in the future!).