RMDs, the Tax Cascade and Medicare IRMAA

For traditional IRA owners born from 1951 through 1958, the applicable starting age is 73. For those born in 1960 or later, it is 75 under SECURE 2.0. Earlier birth cohorts have earlier starting ages.

If you were born in 1959, confirm the applicable age against current IRS guidance with a qualified tax professional. Workplace-plan timing can differ from traditional IRA timing, so confirm the rule for each account.

The taxable part of an RMD generally enters your income. After-tax basis may exclude part of a distribution, so not every dollar is necessarily taxable.

The phrase tax cascade describes how that added income can interact with several different tax calculations. It is not a separate tax or a prediction of what you will owe.

Depending on combined income and filing status, up to 85% of Social Security benefits may be included in taxable income. That is the portion of benefits subject to tax, not an 85% tax rate.

Taxable IRA withdrawals can increase adjusted gross income used in this calculation. SSA describes combined income as adjusted gross income, tax-exempt interest and one-half of Social Security benefits.

IRMAA is an income-related adjustment added to Part B and Part D premiums. SSA normally uses tax-return income from two years before the premium year; if that information is unavailable, other rules can apply.

The thresholds and premium amounts can change. Use the current Medicare source rather than relying on a fixed dollar threshold here. Certain income-reducing life-changing events may support a request for a lower IRMAA.

Rates on net long-term capital gains depend on overall taxable income. Additional taxable retirement income may therefore affect how gains are taxed.

The net investment income tax is 3.8% and depends on net investment income and modified adjusted gross income. Qualified retirement-plan and IRA distributions are generally not themselves net investment income, but taxable withdrawals can raise modified adjusted gross income and expose other investment income to the tax.