NY "Essential Plan" to Medicare and Roth Conversion

Forum|Forum|7 years ago
February 14, 2019
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I'm planning for the year when I go from NY Basic Health Plan (BHP) "Essential Plan" to Medicare, age 65. If I am on the BHP until November and then get Medicare in December, can I do a large IRA to Roth Conversion in December without any penalty? I'll receive a 1095-B for the 11 months and whatever you get for Medicare for one month.

When doing a tax return, you are asked if you are covered for 12 months. Yes. If you have a 1095-B you do not enter anything. I assume that with Medicare, I will not enter anything.

As long as I have $2,000 a month income for the 11 months I am on the "Essential Plan", can I do a large IRA to Roth conversion in December when I will be on Medicare, without any penalty for the large income for the whole year?

NCPERSON1

From what I understand from below, you are going to take a large distribution from your Traditional IRA and roll it over to a Roth iRA.

There is no age limitation on doing that. However, if you are less than 59.5 (I appreciate you are not), there is a 10% penalty on the conversion. Turning 65 and going on Medicare has no impact or create any sense of urgency with respect to a T-IRA to Roth rollover.

I would suggest a determining a strategy to define what 'large' means; you don't want to unnecessarily do so much in one year that is kicks you into a very high tax bracket when smoothing it out over a few years may leave you in a lower tax bracket across those years. it'll take some spreadsheet math or an advisor to figure out the best strategy

p.s. if you can afford it, most will advise that it's better to pay the taxes with money that is already outside the Trad IRA than using some of the distribution to pay the taxes, which means there is less to go into the Roth. Again, something to ask a financial advisor or work out on a spreadsheet