One relatively easy way to reduce exposure to a possible stock market correction without taking taxable gains is to sell stocks held in a tax-advantaged retirement account such as an IRA or a 401(k). Transactions inside these accounts do not generate income tax liabilities.

Traditional Tactics

Some perennial year-end tax planning strategies for retirement apply for 2015, as usual.

• If you are not already maximizing your contributions to retirement accounts (i.e., IRAs, 401(k)s, etc.), see if you can add pretax salary deferrals this year. The annual limit for 401(k) plans is $18,000, or $24,000 if you’re 50 or older,

• If eligible, execute Roth IRA conversions. You must have the account for at least five (5) years (and be at least 59.5 years of age) to take totally tax-free withdrawals, but any conversion in 2015 gets a January 1, 2015 start date for the five year requirement. Your wait may be slightly more than four years, and

• If you are 70.5 or older, make sure you take the 2015 required minimum distribution (RMD) from retirement accounts no later than December 31, in order to avoid a 50% penalty on any shortfall.

Planning for Premiums

Some high-income retirees face a stealth tax: extra premiums for Medicare Part B, which covers medical costs. While most Medicare enrollees will pay approximately $105 per month for Part B in 2015, those with high incomes face monthly rates between $147 and $336.

The Medicare Access and CHIP Reauthorization Act of 2015, signed into law in April, raises the stakes. Starting in 2018, Medicare enrollees with modified adjusted gross income (MAGI) over $133,500 ($267,000 on a joint return) will pay about $273 per month, plus annual inflation adjustments, versus approximately $210 a month this year.  Taxpayers with MAGI in excess of $160,000 ($320,000 jointly) will pay $336 per month, up from $272 currently.

It is important to note that 2018 Medicare premiums are based on income reported on a taxpayer’s 2016 return. As such, shifting income from 2016 to 2015, with year-end acceleration shifts, may result in lower Part B premiums when those costs rise.

Planning for lower premiums should not include shifting to municipal bonds, however, because tax exempt income is counted in MAGI for this purpose. Instead, you might consider a Roth IRA conversion in 2015, rather than in 2016, to avoid boosting taxable income for next year.  Converting a traditional IRA to a Roth IRA will reduce future RMDs, and those distributions may cause increased Part B premiums in future years (i.e., 2018 and beyond).  We can assist in evaluating Roth IRA conversions, to assess your total tax position, including these lesser known pseudo taxes such as increased Part B premiums.