For pre-medicare health insurance, I think probably a good planning figure is $2k/month for a couple. (Then do more careful research as retirement gets closer).
When Cobra is an option, there could be lower costs the first 18 month of retirement.
Since busdriverâs question is answered, I was puzzled by no RMD this year under CARES act. Why is that? How does not taking RMD help with the hardship of the virus or 2009 melt down? Counter intuitive to me. If they exempt taxes on RMD, that will help. Most people would need RMD or more to live on. Is this yet another rule helping the better to do when the hardship is falling on have nots?
For insurance, weâll pay about $1k/month when weâre on COBRA, and about $3k/month (total) after that. Age and income mean high cost and no subsidies.
@itsgettingreal17, I would budget $30K per year including co-pays etc. We live in an expensive area for health care.
In an ideal world, you could create a business that employs you and that generates enough revenue to pay for your premiums and out-of-pocket expenses. Hence you would be paying them out of pre-tax rather than post-tax dollars. Then, in effect, you could budget $15K or so before tax rather than $30K, but this has to make sense to you from a life perspective, not just a financial perspective.
I pay $24k/year for a high deductible plan. Basically $30k/year (including deductible) before any coverage kicks in.
I think the deal with my company is that they will pay $9600 towards any plan (never adjusts, which is bad), so the $24K plan actually costs $33,600 overall. The cost for our high deductible is about 12K, which totals $21.6K overall cost.
It wouldnât alarm me so much if I knew what the cost would be going forward, but I donât. All I know is that it will surely go up. I canât imagine paying the cost of an individual plan, ours is still group coverage.
@Iglooo, no compelling social benefit that I have seen, but I found this on one website:
[Quote]
The waiver provides flexibility for those who can afford not to take retirement plan distributions. Retirees can avoid liquidating assets at low prices. They can also mitigate frightening drops in their account balances.
Thanks @busdriver11 and @shawbridge It still doesnât make sense to me. Donât people prepare enough cash in anticipation? If it benefits people who donât need RMD to live on, Iâd like to know what fraction of retirees belong to that group. Top 50%, 10%? I canât imagine it applies to many retirees.
It also applies to non-retired people who inherited an IRA. The RMD table for inherited accounts is steeper than for your own, so it was extra helpful to them.
All you have to do with an inherited IRA is to withdraw fully within 10 years. They donât have a schedule to follow as far as I know.
If you inherited it years ago you are grandfathered in on lifetime distributions. We are in this category.
Editing to clarify. My husband inherited an IRA about 10 years ago. He has to take an RMD every year based on his age. While âhaving to take moneyâ is about the best kind of problem to have, while he was still working it did affect out tax bracket. This year it will be about a wash because the account balance is back up to almost where it was in December.
@dragonmom â I believe the SECURE Actâs change to RMD schedule for inherited IRAs and Roths did not take effect until Jan 1, 2020, so anyone who inherited an IRA or Roth prior to Dec 31 of last year is subject to the same lifetime distribution schedule as your husband. (There is at least one subtle difference that I know aboutâŠsomething to do with the how RMDs are calculated if one of the other beneficiaries did not take the first RMD on a timely basis. I believe all beneficiaries are then subject to the RMD schedule of the oldest beneficiary. I should probably verify that before hitting post!)
As long as we are talking about inherited IRAs, I have to makes some decisions soon on IRA from my deceased mother. There was an 6K IRA annuity that I took as cash, for simplicity. There is also a bigger $18K IRA CD account (compilation of 4 IRA CDs at credit union in NY, non-Roth) that needs closing, and Iâm tempted to also cash it out⊠take the pain of the taxes now. But my husband is encouraging me to make it an IRA for myself somewhere. Thoughts?
Note - I do need to track this all carefully. My mother wisely assigned co-owners, beneficiaries or TOD on almost all of her assets (modest, but very diversified). Our agreement is that if there was an overage to me (the local kid, on more accounts) I would make âgiftâ to sister make things a fair 50/50 split .
Another advantage for not having to take RMDs this year is that someoneâs RMD might put them in a higher tax bracket, so not having to take it may save on taxes. Also, if you make more money then you could have to pay a surcharge on your Medicare premium in 2 years (thatâs how far back Medicare looks to determine your premium).
So not having to take the RMD could save seniors $.
Please be sure to understand how inherited IRAs work for non-spouse beneficiaries - I have an IRA from my mom that I rolled [direct rollover] into an inherited IRA with me as beneficiary. This account is grandfathered into the âmy life time distributionâ model. It is a bit larger than the total you are talking about, but itâs been nice to have the little bit of income (or not, this year) each month/year. As weâre early in our retirement - in the flavor weâre experiencing it - Iâve been able to plan and work with it.
There are calculators online that would allow you to see what distributions would look like over the 10(?) years you have to liquidate the account. Run one and see how you can fit that into your finances. [Edited to add this paragraph, as I realized that I donât know whether your momâs IRAs are grandfathered or not.]. I have found the calculators to be spot on. (Yes, I ran more than one.)
Watch deadlines - both from the institution, and IRS. The institution we worked with had a âruleâ that if we transferred out within 30 days of their notification to us, there would be no fee. (And their annual fee was out of line for the now split IRA.) Of course, we each received different answers, from different customer support staff - and compared notes to get to the most complete and beneficial answers. So donât be shy about talking to multiple reps to get a complete picture.
If youâre interested in simplicity, yes cashing the account out will be simpler, but perhaps more costly, tax wise. But I have not found doing the distributions to be overly onerous. Most financial institutions handle these routinely, and tracking (confirming) the RMDs has been a simple spreadsheet to update yearly.
OK, this is really getting down in the weeds, but here goes.
You can have your late Dec RMD paid directly to the IRS, and have that payment treated as though it had been paid evenly throughout the year. This will allow you to avoid the penalty assessed on underpayments. As @TdoesCollege commented above, taking the RMDs is not onerous, but it is your call if it is worth the hassle to remember.
If you donât need the money to live on, wait until December to take your RMD and ask the sponsor to withhold a big chunk for the IRS, enough to cover your estimated tax on the IRA payout and all of your other taxable income for the year.
Although estimated tax payments are considered made when you send in the checksâand must be paid as you receive your income during the yearâamounts withheld from IRA distributions are considered paid evenly throughout the year, even if made in a lump sum payment at year-end.
So if your RMD is large enough to cover your entire tax bill, you can keep your cash safely ensconced in the IRA most of the year, avoid withholding on other sources of retirement income, skip quarterly estimated payments . . . and still avoid the underpayment penalty.
https://www.kiplinger.com/article/retirement/T045-C000-S004-withhold-taxes-from-your-rmds.html
https://ttlc.intuit.com/community/taxes/discussion/rmds-and-estimated-taxes/00/155338
I donât know what âmake it an RA for myselfâ means here. You canât mix an inherited IRA with your own IRS. An inherited IRA has to be kept separate.
Of course, it does. I was asking which seniors? Needy seniors? Probably not. Unneedy seniors get to save money but needy seniors who has to withdraw RMD to live on do not benefit at all. Wouldnât you think if anyone needs help itâs the needy seniors? The system is tilted to uneven the playing field further.
Thanks for the good info!
I forgot to say that my mother had already taken her 2020 RMD. So I think (?) all I would need to do is transfer to my bank (where mom and I both banked) as inherited IRA ⊠but, interest rates quite low there . Other options include opening something new at our Schwab accounts or a new TD Ameritrade account (where husband knows the ropes).
@colorado_mom Please check about doing a direct transfer to wherever you might choose to have it end up. And make sure that the receiving institution creates it as an inherited IRA. When I created the new account, I needed to provide info about my mom - DOB, DOD, and I canât recall what else - SSN, perhaps?