Vol 3, Issue 7. Quarter 2 – 2026.

Every so-called retirement expert will go on and on about how to use a Roth Conversion strategy to avoid the demons of Required Minimum Distributions (RMD’s), and IRMAA surcharges. The sales pitch is that by having to take these RMD’s you add to your tax bill (later in life) and taxes are always bad. You also want to control your income numbers to avoid surcharges for Medicare, that kick in when your income is above a given threshold.

Here is my take on that particular issue. If your RMD’s are so great that it raises your tax bill, have a party and STHU. Spend your time worrying about important things like your health, or why the Cowboys can never win a playoff game. Let me explain three reasons why I believe that this is an overblown issue.

1. Levels where IRMAA taxes apply are pretty darn high.

If your MAGI over the past 3 years is above a fixed level, your Medicare Part B and/or Part D premiums are increased. MAGI stands for “Modified Adjusted Gross Income”.  For the vast majority of you this number will be your Adjusted Gross Income plus untaxed interest on things like municipal bonds, or savings bonds that you used to finance education. You also have to add back taxes avoided by living abroad.  That figure is then used to determine whether your “Income Related Monthly Adjusted Amount” (IRMAA) is to be charged. This is essentially a surcharge for Medicare levied on those with higher incomes.  The MAGI thresholds and added Medicare charges are shown below:

MAGI Threshold	Add’l Part B Fee	Add’l Part D Fee
$218,000	$0	$0
$274,000	$81	$15
$342,000	$203	$38
$410,000	$325	$60
$750,000	$446	$83

So here is my main point. If you have no mortgage, and you cannot live off of less than $218K, have your accountant figure out what to do next. If you are waiting for anyone to feel sorry for you, it ain’t happening. Let’s be honest here. At those income levels, the added monthly fee is not big enough for you to even notice. But here is the FAR LARGER ISSUE:

2. If we don’t force you to withdraw money from your retirement accounts – you won’t do it, and if you never withdraw the money, it never does you any good.

Most retirees with sizable retirement accounts die with more money in the account than they had when they retired. What you explain as an effort to avoid taxes, is really an excuse for not spending money because it’s not in your nature to do so. If it was, you wouldn’t have an account that large to begin with. I have referred multiple times to research with a common theme. Retirees don’t spend the money even when forced to withdraw it. That is not a character flaw. It’s just part of your character, and it is going to reduce the amount of fun that you have during the last days when you are healthy enough to have fun. I for one, am NOT going to apologize for pushing you to have as much fun as possible. Somebody’s got to do it and it may as well be me.

3) There are other ways to avoid IRMAA

This should be looked into in some detail because the Roth Conversion itself adds to the MAGI calculation. However, it is pretty easy to account for. Many planning sites or apps allow you to map out various plans. These include Income Lab,  Boldin, Right Capital, and Bettermint. These sites will also generate Roth conversion schedules to minimize IRMAA penalties, or income taxes, and some of them will account for state taxes as well. (Since I live in Texas, I typically skip that part.) However, when you run the numbers you will see that most of the tax savings linked with the Roth conversions could have been reaped by carefully managing when and which account money is taken from. If you even out withdrawals over time, even for years when you plan to spend less, you effectively manage the tax bill. Please note that I am not saying that Roth conversions are bad things. But I am saying that this is largely a solution looking for a problem, and that in fact tthere are bigger issues here. What you gain from the extra planning to avoid RMD’s, while real, is simply NOT the main problem. Your far bigger struggle is going to be figuring out how to relax enough to enjoy the work that you did. Counting pennies almost never leads to that outcome.

What is likely to happen is this. You will come up with a reasonable plan. You will then start to tweak it to save a little on taxes here, and there, and before you know it you will be living your final days under constraints that you never needed to surrender to.

It is certainly true that you should never spend money you don’t have on things you don’t need to impress people that you don’t like while you are young. But there is a flip side to that advice. Most of you are going to avoid spending money that you DO have, on things that you DO want to have a bigger nest egg that impresses people that you don’t like – – and you won’t even see how impressed they are because you will already be dead.

In stead of fighting with your own nature to get you to take the money out. Let the RMD rule be your friend. In a paper that I wrote back in 2022 I looked at the expected utility associated with a number of withdrawal rules. One of the key points that continued to fall out of that research was that the RMD rule increased utility precisely because it pushed you to spend. In this sense the RMD becomes part of the budget, and it is always healthier to look at the budget as a permission to spend, instead of a demand to live in austerity. When you use it this way the RMD is wonderful and I strongly advise you to embrace it, rather than hide from it.