Lots to comment on here.
- RMDs now begin at age 73, giving an extra "golden year".
- Several states give capped exclusions for retirement income including conversions; this is a consideration in deciding whether to exhaust the Trad IRA (via conversions) or spread out conversions & withdrawals past age 73 to benefit from lower (state) taxes.
https://rpea.org/resources/retirement-information/pension-tax-by-state/(See, e.g. Arkansas and Colorado; there are others.)
- Couples are often (usually?) not the same age. So a couple may be assessed a single IRMAA surcharge (if only one person is on Medicare) while still getting the benefit of broader (couple) tax brackets. This effectively halves the impact of IRMAA.
For example, in the first IRMAA bracket, a couple (same age) would pay $1874 more, while being able to increase income by $
52K before crossing into the next bracket. That's an effective surcharge rate of 1874/
52,000 = 3.6%.
Similarly, a single would pay half as much IRMAA, while being able to add only half as much income before reaching the next IRMAA level, so the single would also have an effective surcharge rate of 3.6%. But a couple with one IRMAA would pay just $1874 more while being able to add $
52K of income, for an effective surcharge rate half as much, "just" 1.8%.
- RMDs aren't necessarily subject to tax. They can be used for QCDs. If the T-IRA balance is low enough that RMD does not exceed cash needs plus intended charitable contributions, there is less value in converting more (especially if the additional amount pushes income into a higher tax bracket).
- Cash flow is a limiting factor, though the broader constraint is the amount of cash available, regardless of whether it comes from income or taxable account assets. The object of the game, so to speak, is to move everything into tax-sheltered accounts.
Once taxable assets are consumed, there is less value in doing further conversions.
Optimizing a Roth Conversion probably means converting as much as possible because the IRMAA decreases above $750,000 and the federal tax rates increase by small increments above $340,100It is true that taking a big IRMAA hit one year is better than taking smaller IRMAA hits in multiple years, all else being equal. The problem is that converting more in higher brackets can subject that conversion income to taxes (aside from IRMAA) that are much higher than they would be if spread out over multiple years.
It may be better to convert a little bit each year even before the "golden years", and then increase the conversion amounts as income drops in retirement. This is especially true if one is comparing small conversions at one's working year tax rate with a one-time conversion getting taxed at an even higher rate.
IOW, it can be rather painful to take a one-time hit in a 32%-37% bracket, especially compared with paying taxes at 22%-24% for several years of conversions (whether while working or in retirement).
