"The pension creates a permanent income floor that compresses the window for Roth conversions, limits control over taxable income in early retirement, and nearly guarantees IRMAA surcharges once RMDs begin."
"A physician with a $150,000 pension has already consumed most of that space before converting a single dollar, leaving only $61,400 for Roth conversions before crossing into the 24% bracket."
"Stack that on a $150,000 pension, and the combined income reaches $230,000, well into the 24% bracket, triggering significant IRMAA surcharges for Medicare."
A physician with a $150,000 pension and $2 million in a 401(k) faces unique retirement tax challenges. The pension creates an income floor that restricts Roth conversion options and increases taxable income. Generic advice fails to account for the pension's impact, leaving limited room for conversions before reaching higher tax brackets. This situation can lead to substantial tax liabilities and IRMAA surcharges once required minimum distributions begin. Effective strategies include rebalancing investments, aggressive Roth conversions before pension income locks in, and precise modeling of income during gap years.
Read at 24/7 Wall St.
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