Required Minimum Distributions (RMDs) from tax-deferred retirement savings accounts can trigger hundreds of thousands of dollars in Medicare “means testing” surcharges during retirement in the form of higher premiums on Medicare Part B and Part D. Medicare means testing can threaten the retirement plans of millions of affluent Americans.

Smart planning can reduce the impact of means testing

Reducing your Modified Adjusted Gross Income in retirement can reduce Medicare means testing surcharges and strengthen retirement security.

Strategies for reducing retirement MAGI include: (1) prioritizing funding of HSA accounts, (2) shifting current 401(k) contributions to the aftertax Roth, (3) Roth conversions, and (4) asset location that places lower returning asset classes in tax deferred accounts. Tax planning isn’t just about minimizing taxes in the current year, where many CPAs and investors focus. It’s about minimizing taxes and other expenses (e.g. Medicare) over a person’s entire lifetime.