John, good to see you. I'm excited about today's topic, we are talking the hidden and not so hidden fees and penalties and taxes in retirement. It's not easy to determine exactly what you'll need to live on in retirement, that calculation is made even more difficult because there can be a few surprise expenses and some penalties that can last a lifetime. So we're going to break down some of those hidden fees in order of severity. Let's start with the IRMAA penalty. What is that?

Yes, so the IRMAA penalty is the income related penalty on Medicare, and this goes back two years worth of income. So whatever you're earning in 2023, will impact your 2025 Medicare and this is what we like to call the first of the three tax traps. So Medicare health premiums are not premiums, their taxes, they're based on your income, as I said, So why is this a big deal? Because to me, it's one of the most invasive taxes in that what retirees will face. If you go over these Medicare tax brackets, as you're seeing here by just $1 you can substantially increase your Medicare premiums. So in this example, if you go and you had your earnings show $194,001 Then your Medicare Part B premium goes up $66 per per person, and your Part D premium goes up $12 per person per month. So if you take that as a married couple, that's going to be well over $1,000 a month and for what the same coverage and that's why people have to understand that there's certain forms if you're retiring, and you had that life change, you need to you need to petition Medicare. Also you need to be vastly aware if you're doing Roth conversions not to exceed some of these brackets.

Right, right. That's really important. So let's talk more about the Medicare Part B and D penalty. This penalty is for life. How do you avoid it? Yes, sothis is a penalty, not so much taxes. This really has to do with Medicare. Claiming so when you are age 65 You have a seven-month window if you do not qualify for the exemptions, which we're not going to go into but you have a seven month window to claim Medicare. And that is three months before your 61st 65th birthday. Your 65th birthday and then three months after. If you fail to claim within this window you are subject to a penalty which will last your lifetime so do not miss the Medicare window.

Yikes. All right. Let's talk about inflation because we're always talking about inflation, John, I was surprised to learn that only 42% of people have calculated what they'll need to live on in retirement. And most of us don't even take inflation into account.

Yeah, and those that do are usually taken inflation at 2, 2.5%. I like to actually stress tests a little bit more at 4%. I rather be a little bit harsher on our plan and make sure we have a higher probability of success, but inflation as Ben Bernanke once said, is the most insidious tax known to man because it erodes your purchasing power. And for a lot of people who are you know, are in the market volatility and go to cash? Well, inflation gets you there. So inflation not only does it erode your purchasing power, but it increases your taxes. How does it do that? Well, let's take groceries for an example. Groceries have gone up 30% Or more here in the last couple years. So if you bought something that used to cost $1, now it's $1.30 and your taxes which used to be on $1 are now on $1.30. So you are paying more in taxes. And if you are having to spend more at the grocery store, guess what you're having to do? You're having to take out more withdrawals and that increases your ordinary income tax or your capital gains tax brackets.

Okay, now let's talk about taxes because that goes hand in hand with everything that we've already addressed. What tax strategy should people be considering today then to address this fee and penalty?

Well, the big thing is don't buy in two, I'm going to be in a lower tax bracket. Find some professional help. Advisors who specialize in tax management planning taxes will be your biggest expense in retirement. They've been your biggest expense your whole life. So you want to take into account that Social Security that 50 to 85% of your benefit could be subject to taxation. You want to take into account Medicare. And lastly, you want to take into account required minimum distributions which depending on your age, you could be claiming them as 70 and a half 7273 or 75. Now, if you were one of those people that said, I'm going to build I'm going to claim Social Security early so I can let my 401k or my IRAs build up and I don't have to touch it. Well guess what? You're doing, folks, you're adding to that larger RMD that's going to have to be taken out later on in life. And that's just going to increase your taxes and that's not even including a future tax hikes that the government throws the government might throw at us.

There's so much to consider. And again, it all comes back to proactive planning. So John, if somebody has questions about these hidden fees and penalties known and unknown that we've covered today, what's the best way to reach you?

Well, first of all, we've talked in depth about these over the last couple years Aaron so please visit our website www.co securus.com. And while you're on the website, checking out those resources, you can also go to our contact us page and schedule a 15-minute phone conversation to answer any questions or a complimentary vision and clarity consultation. or you can also give us a call at the office 858-935-6210

That's great. All right, John, thank you so much for your time today. Thank you Erin