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How to maximize Social Security and minimize Medicare premiums

It’s generally known that you can start Social Security benefits at any time from age 62 - 70, and that the longer you wait the greater amount you'll collect. What’s less known is that income in retirement from part-time work, pensions, or IRA distributions, your Social Security benefits become taxable, therefore netting a lower benefit. The same is true with Medicare insurance as the cost increases with income. It’s crucial to understand your income in retirement as you plan Social Security and Medicare. Here are a few strategies that may help improve your benefits.

Income in retirement isn't just from employment but also from investment dividends and distributions from IRAs, 401(k)s, among others. After the age of 70.5, IRA distributions become required (RMD) as the IRS is now forcing you to take minimum distributions from these accounts every year. Required minimum distributions might be a leading reason that Social Security benefits are taxable in retirement. 50% of Social Security benefits are taxed with annual incomes of $25,000-$38,000 (single), $32,000-$44,000 (married), and 85% of benefits are taxed with incomes greater than $34,000 (single), $44,000 (married). ^1

Medicare Part B recipients will begin to see a premium surcharge with incomes greater than $85,000 (single) and $170,000 (married). The surcharge ranges from $54.10 to $325 monthly, depending on income, totaling $135.50 - $460 monthly, respectively.

If you have some time, you can change the type of income that you’ll receive in retirement which will increase your Social Security net benefits and reduce the cost of Medicare. Here are a few strategies:

Roth conversions: Unlike Traditional IRAs, distributions from Roth IRAs are not included in gross income and won’t be counted when calculating the treatment of Social Security and Medicare. Roth's are not subject to required minimum distributions and pass to your beneficiaries tax-free. You can convert your IRA to a Roth and pay the tax now, at the time of conversion, setting yourself up for tax-free Social Security benefits in the future.

Delay Social Security: Just when you needed another reason to delay benefits; not only would you be getting the highest possible benefit but you would less likely to be working at age 70 and then would enjoy a tax-free Social Security benefit.

Investments: Some investments are more taxing than others, which may unnecessarily add to gross income in retirement. Tax-free municipal bond interest isn’t counted and some real estate can be structured to net a lower profit. Capital gains can be realized preferentially, sometimes tax-free if you’re in a low enough tax-bracket.

Avoid pensions: If you’re approaching retirement, you may be deciding to rollover your pension or take a monthly lifetime annuity. There are many factors to consider when making this determination, however, once you take a lifetime annuity, you can’t stop it, and forever your income will be the same or higher. Alternatively, a rollover to your IRA means that you’ll be able to control when to take distributions or if to convert it to a Roth instead.

At Eureka Wealth Management, I design strategies and work with my clients’ tax advisors to keep taxes low in retirement and maximize retirement benefits. I manage clients’ money so that Roth conversions can be done annually up to the approaching tax-bracket and structure investments that are tax-aware. Call for a free, initial consultation at (760) 537-0791 or online at


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