Question
One thing my Financial Advisors did to lower our retirement taxes was to convert our TSP Traditional to an IRA Roth and pay the taxes now within the next couple years. The reason was to ensure we are not in a higher income for Medicare Part B is one reason, trying to keep it at the $148 for my wife right now and me in 3 years. The other reason was because the 2017 Tax Cuts and Jobs Act (TCJA) rate will return in 2026 putting us in a higher tax bracket then what we are now. I would like to hear your thoughts and suggestions.
Answer
These are some good points. For those that don’t know if your income is higher than certain thresholds then you will pay more for Medicare part B than someone with lower income.
This does mean that if you think you will have higher income in retirement then doing Roth conversions before you turn 65 may make a lot of sense.
You are also right about the tax law changes. The current tax law is set to expire in 2025 and we don’t know if new laws will be enacted. But as a general rule it is often fare to believe that taxes will go up in the future.
Question
Thanks so much for your informational videos – I wish I had found them before I retired last year!
I’m a single with no dependents federal retiree. I have a brother in another state and a lot of distant cousins, but no really close relatives and I live alone. When I die, what will happen to my retirement and TSP? What arrangements should I make and with whom? Also, the same question regarding medical issues. If I need to go to the hospital and become incapacitated, who will make medical decisions for me? Thanks a lot!
Answer
Your questions come down to estate planning. Your TSP will go to whomever you appoint as your beneficiary. Your pension however, will just stop unless you elect a survivor benefit but this doesn’t happen very often if you aren’t married.
You will want to get medical directives and powers of attorney signed to give someone else the ability to make medical and financial decisions for you if you are incapacticated.
