Medicare Lesson: IRMAA

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Welcome to finishing well brought to you by Cardinal God� Certified financial planner belonged to Schild, best-selling author and financial planner helping families finish well for over 40 years on finishing well will examine both biblical and practical knowledge to assist families in finishing well, including discussions on managing Medicare IRA long-term care life insurance and investments and taxes.

Now let's get started. Finishing well welcome to finishing with a show discovering Medicare as well. Right you may want karate. What Bible verse is that well yeah we were we been praying and asking for God's influence where in the Bible doesn't say this is how you help wealthy people pay less in taxes that we consigned us to deliver versus non-so hot as we did. We did find something we think actually applicable and helpful in its own way that you know Jesus told the parable of soils and I love it terribly and I really think the ideas for me to prepare my heart to be as good a soil as possible for the seeds that the word of someone in my heart all those in and I understand that but I don't know if you've ever turned the parable back if you were actually a farmer you know. Then all of a sudden wow yeah I don't need to be someone my seeds in there with it weeds because if the IRS is a weed and they would love to feed on your on your money and and so you know there's some hard soil investments understand. I'm sure you've invested in some of I have where the seed was just like Stella and the birds came and got it before it is ever enough so what time at that little bit you know to say okay what will really where is wisdom applied in this situation.

So in order to use wisdom. We first got understand what were talking about. What is the wealth tax on Medicare okay so were were gets the acronym Irma the government comes up with these very interesting names for things that they sound really coming to his income. Irma sounds like a nice person to make success income related monthly adjustment amount of five words when it really means is if you make too much money in retirement when you're on Medicare to charge a whole bunch extra for your Medicare and I haven't met the client were anxious because after they hear the show today with.

I'm thinking that somebody's gonna call you and say you know what this I want to be your first client concert actually wants to plan firm yeah I mean we have people that we catch them before they go on Medicare and we tell them about Irma when they're sharing their income with this so we prepare people. I'm just talking about somebody that they get the Irma letter because they come out in January come out right now. It's one of the reasons were talking about this. The show could've been talking a lot client can potential clients are just people call us and Dave, I haven't met the person that was ready for this, that even knew what what is what is this is the question you just what is this worse is coming from.

I've never heard about this, so that's a bit of what were trying to do today is talk of you have some flesh on that for a list just take me for today is the perfect example. Since having been born in 1955 that means I turn 65 is here now eligible for Medicare in October so let's just say that I was wealthy, which I'm not, let's just say I made $200,000 year and because if you're married filing jointly in my right if you make over hundred and $70,000. This is this is you and if you are single it's 85,000 so say I made $200,000 in 2018. Because that's another hiccup will find out about a minute, but in 2019. I made $200,000 and in October, first I apply for Medicare and get it in life good and they did me a coupon book price are paying for my Medicare window I find out about Irma, just about a month or two in in there good looking to give you a bill for it back to the day Medicare started in units in grids you go to my website and see how all this works out soon I can get into a lot of details, but you can pay extra for your part B and extra for your part D and the extra amount can be almost $5000. If your incomes identify thousand year per person that's on top of the about 2000 to 2400 year that you can pay for part B and part D any so it's all glop together and it it really irritates people's anything to us when you have an expense that shows up out of nowhere and you didn't plan for.

So we now one of the things it really is confusing about this from my perspective it's just totally gray moves when it comes to malicious tell them what you told me as I ready for the show. They're going to take my 2018. Income why would they go back two years minutes 2020. There's nothing I can do about my 2018 income. What's up with that but I said okay so one of the take your 2019 tax return. This is what I asked you this so what it when others score the IRS and look at your 2019.

Because women live our 2019 yeah, and neither has anyone else in her so 2018 is the most recent year that's been filed so gotta use old data and see you could have somebody I got many examples of this sunlight at 63, two years ago they were making a high income but now there retired or retiring in their anticipating a much smaller income still enough to live on, but because they've left their job, or perhaps people sold stock during that year that there retiring or they had to malicious things that can really cause a spike two years before you retire and then this whole Irma thing my closes in on Which justice is very confusing and you think okay well if I'm working on my 2018 income.

There's nothing I can do it. That's history. It's in the books that you know what with the planning you know if if we were supposed be planting seeds back there two years ago and what might that look like and will before we get that if there was a spike of income. So if you got where you were making a big income but now you're not in the two years back thing is getting a there's a there's an appeal for you and you can find it on Medicare's website or you can give me a call. We help people with us all the time where your incomes gone down substantially worth under Irma or it's much less because of the specific event, like retirement. We can appeal this and perhaps get rid of it. Okay, we can't do that is if you're still going to make a lot of money in retirement over the Irma thing that may we can get it reduced, but probably not so sure. And I have a large income in retirement. We gotta go to where your question was going before he has. We need to start looking at this from a 20 or 30 year perspective is that people that start with a large income in retirement usually finish with a large income determine as well is investing their money in. They are not spending all their money and so they've got large income and so were we talked a bit about planning your seeds in the good soil around the rocker in the weeds and in the parable, we only look at that.

We in my world. Are you planning your money where you can make the most money, but it's in a taxable account. So when you're 75 years old and you're making a big income is that income to becoming Summit as it can be taxed with tax. The first of all you can be paying a big tax rate on that and then second of all it's going be driving up Irma surcharges which could be much larger.

10 years. Whatever is this amount in 2020 30 is Rob would be a lot more then it also is good be causing you to pay taxes on your Social Security so taxes are a big deal in retirement and Medicare surtax for people with high incomes, you know, so with the answer to that is is we need to begin doing some planning to where your you're still getting income in retirement but is tax exempt income and there's a whole lot of ways we can do that but we we like to have several years to do that. There are some ways we can do that very quick corporate you don't have much taxes doing right now.

So what I'm thinking is this could be a goad right because what you told me about Irma is you. Obviously these people with substantial incomes. This taxes painful but is not really affect their life.

However, as a goad to do something about the situation, it could really help them plan their overall investment into retirement and in a lot better way for both the church enough that led to Q CDs and other things going talk about later on this Irma thing could really just be like a kick in the side to tell you you need to look at what you do. I've got all my IRA money moved over to Ross and I got a whole bunch of money stuffed in life insurance policies that I did back when I was making income that I can get at without having given a tax bill and so that raw thing I know a lot of our listeners always know exactly which talk about but I just can't help but see myself six months ago gone, whose Mr. Roth really just you know another show another day. But what were simply saying is if you have a big IRA, which a lot of people that have high income do and the words 401(k) is going to come in IRA and you can start making substantial withdrawals to live off of. In retirement, which a lot of people and those are taxable as a traditional IRA, you can have a big tax bill in retirement and you just say okay what I was in big Taxco. That's one thing but it's also going to be driving this Irma tax service.

This wealthy tax on Medicare animus can be driving tax on Social Security so what a Roth IRA is is you pay the taxes now, or we get a Roth conversion strategy over several years to spread this out because if you do a Roth conversion yet pay the taxes I had to pay the taxes to get all my money moved over into a Roth but that's forever tax free and I'm not can be painting stuff and I'm in heaven completely tax exempt income and muscle securities can be tax exempt because I'm not can be showing any other or any of substantial I'm still have some income in retirement when I'm up over 70, but it's it's not can be 170 above, thanks for your listing to finishing well, a certified financial planner Hans Schild today show is discovering Medicare's while tax called arm and as you might guess it's there@cardinal.com. The website there's seven worst habit we talked about always on the show and one of those would be Medicare in this document today so you can get the whole chapter on Medicare which I know having read the chapters on both of the book and workbook talk about Irma and how you know how that's done, and if it's got the latest draft that you show me that that's want to send them to get to that in the next part of the show, so stay tune a person always get that by just emailing Hans I normally go Amazon when we come back got a whole lot more on Hans and I would love to take our show on the road to your church and Sunday school Christian or civic group. Here's a chance for you to advance the kingdom through financial resources and leveraging Hans expertise and qualified charitable contributions veterans aid and attendance IRA Social Security care and long-term care. Just go to Cardinal guy.com and contact Tom to schedule a live recording of finishing well your church Christian or civic group. Contact Tom to Cardinal guy.com that's cardinal guide.com welcome back to finishing well with certified financial planner Hans Schild today show is discovering Medicare's wealth tax called Irma but sounds more think about it, since I go in her eyes got big thing is get hurt but that's a tendency for those people are at high incomes to just really fry the bacon really does mean even people that can have that story online payment taxes only pay my taxes and people that have that which are huge in number but there I have a number of clients alike and have no member clients that feel the duty to pay taxes and then I got another group, the just distaste every second of it and they think the government have no taxes or whatever, but all three of those groups when they get this Irma lettering is completely by surprise. They're not happy and I can get through that before I start explaining the system was worse even do to an angry person is to give them more informatics to try to talk about other Inc. so just try to picture my mind. This guy just blowing hot going down the really bad news about that is there based it on two years ago, your income will you and what I've learned to do is say what I can hear your you're very upset about this and understandably so those are my first 10 responses is not funny.

I'm sure for those people who are subjected to that so okay so like this guy is a brand-new client lives in my neighborhood met him through next door next door absolutely was asking who somebody good with Medicare and then you know somebody wrote on their you. I don't know in next door to my wife dies and an silly road on their cell and so-and-so else wrote so-and-so and then one of my neighbors is read my book said oh you know Hans Schild knows so much about Medicare you wrote a book about it and then Ron is telling me this, and then she says going there and tell him some about yourself and I said you know I extraordinarily like you do that so I went in and I just pasted my contact information.

That's all I sent right underneath my neighbors comments anyhow.

Frank called me up and changed his name but he's a vet veterinarian and he was just moved to the area just opened up a brand-new veterinary hospital. It's beautiful to bring my dog there and he's turning 65 in January 2020. Born in 1955 and he needed to find all about Medicare soaps, you know I learned in his history. Is he had come from California settled in Cary research and then really have any connections here and in California. He was working for one of the big pet stores and they were working in like 60 to 80 hours a week.

This 64-year-old vet. He didn't want that. He made 1/4 of $1 million in 2018, but he quit just he said man I gotta get out of this I can get out to California to kill me moved to North Carolina 2019.

He didn't make much in money because he moved and he beheld set up this business. He made some money and eagerly anticipate making a lot in 2020, and then you can build from there book work this business that is on pace and she gets his Irma letter and he got it the beginning of the month.

Maybe this send the turn 65 people early and he was just live just like what's this I don't make this much money and I made you know because it says right on there which you made in 2018. You know, and so I you know the good news for him is there's an appeal form is all we gotta do is explain this to Medicare and my guess is we can guarantee this with everybody there, they're going to get rid of the Irma forming the bases income on what he earned in 2019 or is gas of 2020 or something so so there is a solution for people that have had a spike in income due to a retirement or sometimes this is with death of me.

I've had situations where somebody dies like us know were dealing with the spouse turning 65. The they died to the husband died two years ago and he had a high income and then at his death he sold all the stock in the company thing a bunch of things that do with retirement so she showed this huge income and now she's after that and she's living you know we planned out a reasonable income that's below Irma and this is not that hard to appeal.

Okay, but I have allowed people to hear that boy coming give me an appeal. I don't want to pay this well if your income is just your taxable income is consistently high and going to be consistently high, then you disconnect me, it's just that simple and you know we got in the lowest price with the company. He was comfortable with what he was really doing is major and in the minors because this Irma thing and then really just like the taxes he pays on his business cash flows, and help them with all that and really can't live a low tax retirement or semi retirement or whatever disease planning, but to have over be overly focused on the Medicare supplement is a little misappropriated energy yeah so it's it's there's lots to think about it and and and structure and in there's life insurance to that would be of there's there's lots of things we can do to get income off of the tax return guy or in other words to create income or cash flow that you're not can have pay taxes on your noggin have to show your income statement and hope Roth IRAs life insurance cash values and then taking loans against them into the future anything unless you arty have the money accumulated in the last to be done over several years.

We have several clients that start those at 65 just shifting money into that they've already got the money in the IRAs and so were moving those to Roth conversions and then what they have in cash within the perhaps moving to annuities if the knock and spend it right away were working to have a return and then that return is going to be tax-deferred suitability appoint the future were there and have to pay the tax and tax-deferred. But it's not can show up on their income statement right now and then you have just nonqualified money or money that is not in an IRA is just your savings or brokerage accounts or real estate or some type of investment that you can sell or get out of your neck and have to pay taxes and you know it's just like you spending your own money.

That's not a taxable event so we can structure your income in such a way that we get it down under these thresholds and you know the well structured mine as I know, I intend to pay very little taxes and retirement.

That's another story of the Irma that that comes to your mind what you think it and allow I wish I'd known about this for five years before.

Oh yeah, well I mean I got this CPA is one of many CPAs condos for his own planning his own tax planning really came to us over Medicare and now I start to send us a lot of referrals and he was here he got very scientific about Irma once he understood he knew nothing about this.

He is not an individual practice. Senior Clancy work for a corporation over in Raleigh, but he he now knows all about Irma and he sending us referrals we have this guy come in. Who is he and his wife were in their late 60s is income its Chinese on the back.

His business card so they've invented some technology or whatever that thing company of about 20 employees, but he was advised by his group insurance broker to sign up on Medicare because they were paying so much of the company for group insurance so I signed up for Medicare send his wife up for Medicare but the most expensive supplement to the didn't even look at it in the same company Medicare supplement and then he signed up for Social Security to which he kinda thought he needed to do to get Medicare because it was all there. He was going through as quickly and then he starts getting his Social Security checks in their taken about 47% of it out in income taxes because he has such a high income and then added to that he gets his Irma letter and then he sis asserts and knows up. He starts talking to our client about his client, send them over to the end moral send on this guy make so much money that to do all is planning around Irma really doesn't make sense is like the tail wagging the dog in the week so we had to get income down about that. He still didn't want pay, and over the long term organist set things up in tax-exempt basis, but he still has this high income and so were really going to help him with that is to structure things within his business and how he receives income how his wife receives income in where they stuff away once they receive so is it possible I understand about Social Security within a year you can go back and say whoops I goofed. I don't want to apply for muscle security concept is that something makes sense for him yeah I think he might be over a year as I know, might associate body looked into that. He's got a checklist that but might that would be one thing. The second thing is, he probably could go back on his group insurance the beginning he could have the beginning of this year. The only problem is he really effectively had to tell a fib to Medicare that he was losing his group insurance when he owns the company. So now if he went back on the group insurance and per his wife was also an employee of the company would have to undo the fit so is this, their close enough to 70s.

It would were just going to sit down with what is just try to make it better and nobody's got a feeling sorry for these people take up a collection form, Casey felt right, but it still, it's a matter of through the use of two CDs right qualified charitable distributions.

They can sell this money and good soil) really would definitely build a harvest for the kingdom. You know this guy once he turned 70 1/2. His wife turned 70 half the each out of their big traditional IRAs that they still have can give $100,000 to the church or omissions and have no taxable effect on stuff we've been talking about. That's awesome. It is awesome and that's leverage for the kingdom of things that that God you know gives us an obviously a very talented man that he's been able to steward his wealth into that in a situation and so would be be cool to see what happens. Again, we thank you so much for listening to finishing well today, it would today show was Medicare discovering the wealth tax Irma and it's at the seven ways to have their a cardinal guy.

Dot-coms go to cardinal guy.com and look for Medicare and you can get the PDF of the book of the workbook complete cardinal guide to planning for and living in retirement that my very own pond shop that hangs on. We hope you enjoyed finishing well brought you by Cardinal guy.com visit cardinal.com for free downloads of the show previous shows on topics such as Social Security, Medicare, IRAs, long-term care and life insurance, investments and taxes as well as constant best-selling book, the complete cardinal guide to planning for and living in retirement and the workbook once again for dozens of free resources past shows what you get Hahn's book go to cardinal.com if you have a question, comment or suggestion for future shows. Click on the finishing well radio show on the website and send us a word. Once again, that's cardinal guy.com cardinal guy.com