RMDs/and qualifications for medical benefits
Client is turning 70.5 in 2017.
Pensions and ss combine at 55k.
RMD of 36m, then pushes them over income threshold of 80k to qualify for chemo medical benefits costing 200k per year.
options?
Pay penalty in lieu of taking RMD? (unless of course the money still required to come out…maybe in future years..)
Utilize QCD….
Other thoughts to keep the RMD income from interfering with medical benefits?
Spouse is essentially terminal but has lived two years beyond expectancy due to treatments herein described.
Permalink Submitted by Alan - IRA critic on Thu, 2016-03-17 17:59
GIven the situation, he should not be concerned with RMDs yet. His required beginning date is not until 4/1/2018. At the end of 2017 he should re assess the situation to determine the cost/benefit of taking his 2017 RMD in 2017 or deferring it to early 2018. He also likely has itemized medical costs not covered by the chemo benefit, and this is the final year that his medical deductions are offset by 7.5% of AGI, so he might want to consider taking an IRA distribution this year and pay all billed medical costs (or even prepay) so that the deductions offset the taxes on the distribution. After 2016 the 7.5% becomes 10%. By then the 80k threshold might also change as well. If the situation does not change by late 2017, he could then determine the best option. For example, he could do the QCD of 12k and then take the 24k RMD and still be under the 80k threshold.Note that while the IRS will always waive the penalty if the IRA owner overlooks an RMD, they must make up the RMD to get the penalty waiver and will also have to take the current year RMD that year as well and this would really spike his AGI. The waiver is also questionable if he does not overlook the RMD but rather intentionally delays it. The IRS might not waive the penalty with an intentional delay even if the spouse is terminal.