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A bit of ROTH Conversion Info

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  • DonW
    I asked a question of the IRS on their website - Some might be interested in the answer Dear Taxpayer, Thank you for your inquiry, I apologize for the delayed
    Message 1 of 7 , Mar 1, 2010
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      I asked a question of the IRS on their website - Some might be interested in the answer

      Dear Taxpayer, Thank you for your inquiry, I apologize for the delayed response

      The information you are inquiring about for the 2010 tax year has not been published therefore we are unable to quote the tax laws and rollover requirements for converting from a Traditional IRA to a Roth IRA in 2010. The publication 590 for the 2010 tax year will not be available until early in 2011, however in the publication 590 for the 2009 tax year that publication does have a " What's New for 2010 Section". The only information currently available is quoted in what's new section and it is quoted as follows: Conversions to Roth IRAs.
      Beginning in 2010, the modified AGI and filing status requirements for converting a traditional IRA to a Roth IRA are eliminated.
      Also, for any 2010 rollover from an IRA other than a Roth IRA to a Roth IRA, any amounts that would be included as income will be included in income in equal amounts in 2011 and 2012. You can choose to include the entire amount in income in 2010.
      You may also consider seeking the assistance of a financial planner for guidance.
      You may access the publication 590 (Individual Retirement Arrangements (IRAs) directly from our web site at www.irs.gov as stated only the tax year 2009 is currently available.
    • DonW
      For those of you near 65 or older, and who may be considering converting most or all of your IRA-401K funds to roth be aware of a not so subtle gotcha
      Message 2 of 7 , Mar 3, 2010
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        For those of you near 65 or older, and who may be considering converting most or all of your IRA-401K funds to roth be aware of a not so subtle gotcha

        http://www.ssa.gov/pubs/10161.pdf

        The thumjbnail of the above two pages is that if your Modified adjusted gross income (MAGI) is over 170,000 for a couple, then you get to pay MORE for your medicare B coverage

        If it is over 214,000, your premiums will double !

        Plan ahead - your gubbermint is about ready to help you !

        By the way, they will not pay for a virtual colonscopy if you are on medicare

        (see today WSJ wed 3 march on opinion page regarding Obamas checkup )

        is there a connection ? :-PPP







        --- In ibmpension@yahoogroups.com, "DonW" <donwshuper@...> wrote:
        >
        > I asked a question of the IRS on their website - Some might be interested in the answer
        >
        > Dear Taxpayer, Thank you for your inquiry, I apologize for the delayed response
        >
        > The information you are inquiring about for the 2010 tax year has not been published therefore we are unable to quote the tax laws and rollover requirements for converting from a Traditional IRA to a Roth IRA in 2010. The publication 590 for the 2010 tax year will not be available until early in 2011, however in the publication 590 for the 2009 tax year that publication does have a " What's New for 2010 Section". The only information currently available is quoted in what's new section and it is quoted as follows: Conversions to Roth IRAs.
        > Beginning in 2010, the modified AGI and filing status requirements for converting a traditional IRA to a Roth IRA are eliminated.
        > Also, for any 2010 rollover from an IRA other than a Roth IRA to a Roth IRA, any amounts that would be included as income will be included in income in equal amounts in 2011 and 2012. You can choose to include the entire amount in income in 2010.
        > You may also consider seeking the assistance of a financial planner for guidance.
        > You may access the publication 590 (Individual Retirement Arrangements (IRAs) directly from our web site at www.irs.gov as stated only the tax year 2009 is currently available.
        >
      • lwbonne
        Please be aware that the medicare B premiums are adjusted annually so in the case of the IRA-401K conversion, you will pay a higher premium the year following
        Message 3 of 7 , Mar 3, 2010
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          Please be aware that the medicare B premiums are adjusted annually so in the case of the IRA-401K conversion, you will pay a higher premium the year following the conversion year, but the premium will be readjusted in the succeeding year based on the previous year's income.

          Leon

          --- In ibmpension@yahoogroups.com, "DonW" <donwshuper@...> wrote:
          >
          >
          >
          > For those of you near 65 or older, and who may be considering converting most or all of your IRA-401K funds to roth be aware of a not so subtle gotcha
          >
          > http://www.ssa.gov/pubs/10161.pdf
          >
          > The thumjbnail of the above two pages is that if your Modified adjusted gross income (MAGI) is over 170,000 for a couple, then you get to pay MORE for your medicare B coverage
          >
          > If it is over 214,000, your premiums will double !
          >
          > Plan ahead - your gubbermint is about ready to help you !
          >
        • DonW
          While the CURRENT rules claim a readjustment would happen if needed every year, the current shell game in congress, wherein premiums MAY be increased almost
          Message 4 of 7 , Mar 3, 2010
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            While the CURRENT rules claim a readjustment would happen if needed every year, the current shell game in congress, wherein premiums MAY be increased almost immediately, there seems to be NO assurance that once increased, they WILL be readjusted downwards, depending on the new rates . . .

            That is unless you fully understand and have found ALL the gotchas in the 2000 plus page bill that MAY be stuffed up . . .

            Be VERY cautious- and remember you can ( at least for now ) re-characterize any roth conversion.

            Document don




            --- In ibmpension@yahoogroups.com, lwbonne <no_reply@...> wrote:
            >
            > Please be aware that the medicare B premiums are adjusted annually so in the case of the IRA-401K conversion, you will pay a higher premium the year following the conversion year, but the premium will be readjusted in the succeeding year based on the previous year's income.
            >
            > Leon
            >
            > --- In ibmpension@yahoogroups.com, "DonW" <donwshuper@> wrote:
            > >
            > >
            > >
            > > For those of you near 65 or older, and who may be considering converting most or all of your IRA-401K funds to roth be aware of a not so subtle gotcha
            > >
            > > http://www.ssa.gov/pubs/10161.pdf
            > >
            > > The thumjbnail of the above two pages is that if your Modified adjusted gross income (MAGI) is over 170,000 for a couple, then you get to pay MORE for your medicare B coverage
            > >
            > > If it is over 214,000, your premiums will double !
            > >
            > > Plan ahead - your gubbermint is about ready to help you !
            > >
            >
          • DonW
            One of the better discussions on roth conversions and medicare part b, etc can be found at
            Message 5 of 7 , Mar 4, 2010
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              One of the better discussions on roth conversions and medicare part b, etc can be found at
              https://personal.vanguard.com/us/insights/article/rothconversion-webcast-QA

              pay close attention to how the MAGI income affects your medicare premiums TWO years later.

              Don

              --- In ibmpension@yahoogroups.com, lwbonne <no_reply@...> wrote:
              >
              > Please be aware that the medicare B premiums are adjusted annually so in the case of the IRA-401K conversion, you will pay a higher premium the year following the conversion year, but the premium will be readjusted in the succeeding year based on the previous year's income.
              >
              > Leon
              >
              > --- In ibmpension@yahoogroups.com, "DonW" <donwshuper@> wrote:
              > >
              > >
              > >
              > > For those of you near 65 or older, and who may be considering converting most or all of your IRA-401K funds to roth be aware of a not so subtle gotcha
              > >
              > > http://www.ssa.gov/pubs/10161.pdf
              > >
              > > The thumjbnail of the above two pages is that if your Modified adjusted gross income (MAGI) is over 170,000 for a couple, then you get to pay MORE for your medicare B coverage
              > >
              > > If it is over 214,000, your premiums will double !
              > >
              > > Plan ahead - your gubbermint is about ready to help you !
              > >
              >
            • DonW
              PLEASE BE CAREFUL re medicare calcs- consider this extract as to WHAT YEAR is used. Basically a year or two delay which MAY MEAN that by the time your rates
              Message 6 of 7 , Mar 4, 2010
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                PLEASE BE CAREFUL re medicare calcs- consider this extract as to WHAT YEAR is used. Basically a year or two delay which MAY MEAN that by the time your rates go up because of your higher income in 2010, it will be 2012 ! and by then, the existing rates as shown in 2010 will almost certainly be higher still

                from the pdf file I suggested be downloaded

                http://www.ssa.gov/pubs/10161.pdf

                "Which tax return will you use?
                To determine your 2010 Part B premium, we will use the most recent tax return information provided by IRS. Generally, this information is from a tax return filed in 2009 (for tax year 2008). Sometimes, IRS can only provide information from a return filed in 2008 (for tax year 2007). If we use tax year 2007 data and you filed a return for tax year 2008 or did not need to file a tax return for tax year 2008, call us or visit any local Social Security office. We will update our records.
                If you amended your tax return and it changes the income we count, let us know. Send Social Security a copy of the amended tax return that you filed and your acknowledgment receipt from IRS. We will update our records with the information you provide, and correct your Part B premiums back to the earliest time in the year you had Part B."

                ++++++












                --- In ibmpension@yahoogroups.com, lwbonne <no_reply@...> wrote:
                >
                > Please be aware that the medicare B premiums are adjusted annually so in the case of the IRA-401K conversion, you will pay a higher premium the year following the conversion year, but the premium will be readjusted in the succeeding year based on the previous year's income.
                >
                > Leon
                >
                > --- In ibmpension@yahoogroups.com, "DonW" <donwshuper@> wrote:
                > >
                > >
                > >
                > > For those of you near 65 or older, and who may be considering converting most or all of your IRA-401K funds to roth be aware of a not so subtle gotcha
                > >
                > > http://www.ssa.gov/pubs/10161.pdf
                > >
                > > The thumjbnail of the above two pages is that if your Modified adjusted gross income (MAGI) is over 170,000 for a couple, then you get to pay MORE for your medicare B coverage
                > >
                > > If it is over 214,000, your premiums will double !
                > >
                > > Plan ahead - your gubbermint is about ready to help you !
                > >
                >
              • yamee
                I can corroborate DonW s warning, as I got caught in this Medicare premium adjustment quagmire. IBM RA d me in 2008 with a separation package. My wife
                Message 7 of 7 , Mar 6, 2010
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                  I can corroborate DonW's warning, as I got caught in this Medicare premium adjustment quagmire.

                  IBM RA'd me in 2008 with a separation package. My wife coincidentally lost her job (the company went bankrupt: no pension, no benefits), I started my IBM pension, moved to a new location (as we could no longer afford to live where we were) and cashed in stock to buy a home with a big down payment and small mortgage. In 2009, I turned 65 and started Social Security and Medicare. Then the problems began:

                  * Medicare informed me around the summer of 2009 that since our MAGI for 2007 (when we were both working) was above minimums, they were retroactively raising my Medicare premiums for 2009 by a considerable amount. This greatly reduced my Social Security income. I appealed. After a long and protracted battle - in which I argued that "that was then and this is now" and our income now was solely based on pension and SS - they agreed. My premium was restored to the minimum and the moneys they withheld were returned to me.

                  * Late in 2009, Medicare informed my that upon examining my 2008 tax return (wherein I reported the stock sale I used to buy my home along with the separation allowance), the MAGI was again well over premium minimums. Accordingly, they were reversing my appeal, reinstating even higher premiums retroactively for 2009 and throughout 2010. Again, I appealed ... with the same argument as before. This was rejected, on the grounds that "we base your premiums on MAGI from previous tax returns." I pointed out that this was probably NOT the intent of the law, that it was ludicrous to base premiums on income from past years that didn't reflect current income. After another long and protracted battle, I think I have won this point as well (at least until they examine my 2009 tax return!). However, somewhere along the way they mysteriously reduced my Social Security payment by $1!

                  There ARE provisions for life-changing events (e.g. marriage, death, loss of job) to mitigate the Medicare premium deduction. These are spelled out in the letter you will get from Medicare advising of your new premium; "Roth IRA conversion" however is not one of them. And the effect on your premium could be around an ADDITIONAL $150 or higher per month (depending on your circumstances and any additional rate hikes) over two or more years.

                  Also be aware that dealing with Social Security and Medicare can be painful in terms of time and frustration. My "fight" lasted 10 months, required 6 in-person visits to the local office (with an average 2-hour wait time per visit; no appointments are accepted for these issues), somewhere around 25 phone calls (5x more if you include all the busy signals), and nearly 30 hours of my time.

                  Jack
                  --- In ibmpension@yahoogroups.com, "DonW" <donwshuper@...> wrote:
                  >
                  >
                  >
                  >
                  > PLEASE BE CAREFUL re medicare calcs- consider this extract as to WHAT YEAR is used. Basically a year or two delay which MAY MEAN that by the time your rates go up because of your higher income in 2010, it will be 2012 ! and by then, the existing rates as shown in 2010 will almost certainly be higher still
                  >
                  > from the pdf file I suggested be downloaded
                  >
                  > http://www.ssa.gov/pubs/10161.pdf
                  >
                  > "Which tax return will you use?
                  > To determine your 2010 Part B premium, we will use the most recent tax return information provided by IRS. Generally, this information is from a tax return filed in 2009 (for tax year 2008). Sometimes, IRS can only provide information from a return filed in 2008 (for tax year 2007). If we use tax year 2007 data and you filed a return for tax year 2008 or did not need to file a tax return for tax year 2008, call us or visit any local Social Security office. We will update our records.
                  > If you amended your tax return and it changes the income we count, let us know. Send Social Security a copy of the amended tax return that you filed and your acknowledgment receipt from IRS. We will update our records with the information you provide, and correct your Part B premiums back to the earliest time in the year you had Part B."
                  >
                  > ++++++
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