Steering through the shoals of IRMAA past the SS Tax Torpedo

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FiveK
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by FiveK »

capran wrote: Sat Jan 21, 2023 10:37 am Yes, thank you. I just wanted to make sure I understood the marginal rate issue correctly, especially in the context of IRMAA and the "tax torpedo". Since we're both over 65, the standard deduction is a little more, which keeps us from getting close to a change in the marginal rate. Staying under the IRMAA MAGI threshold is our main goal (have about 3k in tax free bonds), even though many here feel it's no big deal. Thanks again.
It does get more complicated than simply the nominal tax brackets, leading to marginal rates shown in charts such as the ones in this post. Just keep in mind the general equation for the marginal tax rate of something: (change in tax)/(change in something). In the case of Roth conversions, it is (change in tax)/(change in amount converted).
RetiredAL
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by RetiredAL »

Let's not forget what happens to the last one standing.

DW and I are at IRMAA-0 (base) with some hit from the SS Torpedo.

For the last one standing, I saw the potential of 'just crossing into' IRMAA-2. So I converted some to project staying in IRMAA-1 in the future. IRMAA-1 will happen to the last standing, no if's, and's, or but's. If we again get threatened with IRMAA-2, I'll convert, on top of the RMD, up to the top of IRMAA-1 for one year to better position us.

When my Mom passed, Dad went from IRMAA-0 to IRMAA-3, a pretty big hit. I restructured his investments (I fired the Advisor) to stop the buy/sell that was generating a huge amount of income each year (that he did not need), which got him down to IRMAA-2, but there was no chance of getting him to IRMMA-1. He had SS + Military Retirement + RMD's + Investment Income.

These calc's are highly personal situation driven. Do your homework. Paying IRMAA short-term to solve a long-term IRMAA charge is a good thing.
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by capran »

FiveK wrote: Sat Jan 21, 2023 1:29 pm
capran wrote: Sat Jan 21, 2023 10:37 am Yes, thank you. I just wanted to make sure I understood the marginal rate issue correctly, especially in the context of IRMAA and the "tax torpedo". Since we're both over 65, the standard deduction is a little more, which keeps us from getting close to a change in the marginal rate. Staying under the IRMAA MAGI threshold is our main goal (have about 3k in tax free bonds), even though many here feel it's no big deal. Thanks again.
It does get more complicated than simply the nominal tax brackets, leading to marginal rates shown in charts such as the ones in this post. Just keep in mind the general equation for the marginal tax rate of something: (change in tax)/(change in something). In the case of Roth conversions, it is (change in tax)/(change in amount converted).
I know I am paying a lot in taxes by doing conversions but still solidly within the 22% bracket. But I am acutely aware that as a filing single surviving spouse, she would be in a much higher tax bracket AND have a hefty IRMAA surcharge. So just as well to convert at 22% now, especially while the tax cuts are still in play. And if we were both to pass at the same time, one of the kids would be bumped into the top of the 24 if not the 32% bracket. And on top of that, our state has not raised the estate exclusion value for quite a few years, and I'm pretty sure that they would impose a 10% estate tax on the full tIRA balance rather than the after tax balance.
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by mouth »

Soon2BXProgrammer wrote: Sat Jan 21, 2023 10:23 am
mouth wrote: Sat Jan 21, 2023 8:46 am With a Military pension + disability (both COLA'ed) I'm at $74k gross today
If your talking about VA disability, it isn't taxable. So only your taxable pension part counts.
:oops: yup, I'm aware of that. I am the dumb today. So to amend my numbers (and I'll do it in my post after this) my Pension is $53k + my eventual $43k SS which still puts my above McQ's $95k "course rule"
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by Soon2BXProgrammer »

mouth wrote: Sat Jan 21, 2023 3:14 pm
Soon2BXProgrammer wrote: Sat Jan 21, 2023 10:23 am
mouth wrote: Sat Jan 21, 2023 8:46 am With a Military pension + disability (both COLA'ed) I'm at $74k gross today
If your talking about VA disability, it isn't taxable. So only your taxable pension part counts.
:oops: yup, I'm aware of that. I am the dumb today. So to amend my numbers (and I'll do it in my post after this) my Pension is $53k + my eventual $43k SS which still puts my above McQ's $95k "course rule"
No worries, I've had plenty of head smacking moments myself.
Earned 43 (and counting) credit hours of financial planning related education from a regionally accredited university, but I am not your advisor.
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McQ
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by McQ »

mouth wrote: Sat Jan 21, 2023 3:14 pm
Soon2BXProgrammer wrote: Sat Jan 21, 2023 10:23 am
mouth wrote: Sat Jan 21, 2023 8:46 am With a Military pension + disability (both COLA'ed) I'm at $74k gross today
If your talking about VA disability, it isn't taxable. So only your taxable pension part counts.
:oops: yup, I'm aware of that. I am the dumb today. So to amend my numbers (and I'll do it in my post after this) my Pension is $53k + my eventual $43k SS which still puts my above McQ's $95k "course rule"
Given your sources of income, do you have to take Medicare B or do you have alternative insurance? No Medicare B (or the smaller D) means no IRMAA to worry about.

And, if your other taxable income exceeds your SS payment, generally you will have blown past the SS tax torpedo ...
You can take the academic out of the classroom by retirement, but you can't ever take the classroom out of his tone, style, and manner of approach.
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by mouth »

McQ wrote: Sun Jan 22, 2023 1:23 pm
mouth wrote: Sat Jan 21, 2023 3:14 pm
Soon2BXProgrammer wrote: Sat Jan 21, 2023 10:23 am
mouth wrote: Sat Jan 21, 2023 8:46 am With a Military pension + disability (both COLA'ed) I'm at $74k gross today
If your talking about VA disability, it isn't taxable. So only your taxable pension part counts.
:oops: yup, I'm aware of that. I am the dumb today. So to amend my numbers (and I'll do it in my post after this) my Pension is $53k + my eventual $43k SS which still puts my above McQ's $95k "course rule"
Given your sources of income, do you have to take Medicare B or do you have alternative insurance? No Medicare B (or the smaller D) means no IRMAA to worry about.
Good point. I'm retired active duty military using Tricare Prime right now. My current understanding is that when I turn 65, to get/keep TRICARE for Life, I'm required to enroll in Parts A and B. https://tricare.mil/Plans/Eligibility/M ... and_Family

I'm not required to enroll in Part D and in fact the wording I see is that I "don't need Part D if enrolled in TRICARE " https://tricare.mil/Plans/Eligibility/MedicareEligible

and "For most TRICARE beneficiaries, there is almost NO advantage to enrolling in a Medicare prescription drug plan." https://www.tricare.mil/CoveredServices ... y/Medicare

And from what I've read on the forums, especially all those Medicare Advantage threads, this is all a pretty awesome deal.
McQ wrote: Sun Jan 22, 2023 1:23 pm
And, if your other taxable income exceeds your SS payment, generally you will have blown past the SS tax torpedo ...
If I'm following, by "other taxable income" you mean my retired pension; yes? If so, then yes it will surely exceed my SS payment almost regardless if I work until retirement age; and I have no plan to do THAT. If I have that right, then you're saying I'll have blown past the torpedo because that's how the math works when other taxable income (my pension) is more than the SS benefit?

Or am I misunderstanding you?
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McQ
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by McQ »

mouth wrote: Sun Jan 22, 2023 6:00 pm
McQ wrote: Sun Jan 22, 2023 1:23 pm
mouth wrote: Sat Jan 21, 2023 3:14 pm
Soon2BXProgrammer wrote: Sat Jan 21, 2023 10:23 am
mouth wrote: Sat Jan 21, 2023 8:46 am With a Military pension + disability (both COLA'ed) I'm at $74k gross today
If your talking about VA disability, it isn't taxable. So only your taxable pension part counts.
:oops: yup, I'm aware of that. I am the dumb today. So to amend my numbers (and I'll do it in my post after this) my Pension is $53k + my eventual $43k SS which still puts my above McQ's $95k "course rule"
Given your sources of income, do you have to take Medicare B or do you have alternative insurance? No Medicare B (or the smaller D) means no IRMAA to worry about.
Good point. I'm retired active duty military using Tricare Prime right now. My current understanding is that when I turn 65, to get/keep TRICARE for Life, I'm required to enroll in Parts A and B. https://tricare.mil/Plans/Eligibility/M ... and_Family

I'm not required to enroll in Part D and in fact the wording I see is that I "don't need Part D if enrolled in TRICARE " https://tricare.mil/Plans/Eligibility/MedicareEligible

and "For most TRICARE beneficiaries, there is almost NO advantage to enrolling in a Medicare prescription drug plan." https://www.tricare.mil/CoveredServices ... y/Medicare

And from what I've read on the forums, especially all those Medicare Advantage threads, this is all a pretty awesome deal.
McQ wrote: Sun Jan 22, 2023 1:23 pm
And, if your other taxable income exceeds your SS payment, generally you will have blown past the SS tax torpedo ...
If I'm following, by "other taxable income" you mean my retired pension; yes? If so, then yes it will surely exceed my SS payment almost regardless if I work until retirement age; and I have no plan to do THAT. If I have that right, then you're saying I'll have blown past the torpedo because that's how the math works when other taxable income (my pension) is more than the SS benefit?

Or am I misunderstanding you?
1. If Medicare B, then IRMAA; if no Medicare B, then no IRMAA

2. You might find this free calculator useful re the torpedo: https://www.covisum.com/resources/taxab ... calculator

Generally, as other income begins to approach the SS payment, you will reach the point where the maximum 85% of SS has become taxable. After that point, there is no longer a 1.85 multiplier, and no longer a 40.7% rate. Before that point, $1 dollar of other income makes $0.85 more of SS taxable, leading to a marginal rate of 1.85X the 22% that would otherwise apply to that other income (your taxable pension).
Please see the income tax breakdown for Cheryl toward the end of the OP for an example.
You can take the academic out of the classroom by retirement, but you can't ever take the classroom out of his tone, style, and manner of approach.
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by WhiteMaxima »

Delay SS to 71. Delay RMD to 75. You will couple of years to skip SS tax torpedo and hopefully avoid IRAMMA (do Roth conversion and withdraw right)
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by FiveK »

McQ wrote: Sun Jan 22, 2023 11:12 pm 2. You might find this free calculator useful re the torpedo: https://www.covisum.com/resources/taxab ... calculator

Generally, as other income begins to approach the SS payment, you will reach the point where the maximum 85% of SS has become taxable. After that point, there is no longer a 1.85 multiplier, and no longer a 40.7% rate. Before that point, $1 dollar of other income makes $0.85 more of SS taxable, leading to a marginal rate of 1.85X the 22% that would otherwise apply to that other income (your taxable pension).
Please see the income tax breakdown for Cheryl toward the end of the OP for an example.
For those who find pictures worth some large number of words, the heat maps in the Taxation of Social Security benefits wiki can be very helpful for the case of SS benefits and ordinary income.

When one adds qualified dividends and long term capital gains, as shown in the Married taxpayers example charts, then a tool like the personal finance toolbox Excel spreadsheet can draw those pictures.
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by mouth »

McQ wrote: Sun Jan 22, 2023 11:12 pm
1. If Medicare B, then IRMAA; if no Medicare B, then no IRMAA

2. You might find this free calculator useful re the torpedo: https://www.covisum.com/resources/taxab ... calculator

Generally, as other income begins to approach the SS payment, you will reach the point where the maximum 85% of SS has become taxable. After that point, there is no longer a 1.85 multiplier, and no longer a 40.7% rate. Before that point, $1 dollar of other income makes $0.85 more of SS taxable, leading to a marginal rate of 1.85X the 22% that would otherwise apply to that other income (your taxable pension).
Please see the income tax breakdown for Cheryl toward the end of the OP for an example.
#1 IRMAA it is :-\

#2 Got it. Thank you very much!
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by mouth »

FiveK wrote: Mon Jan 23, 2023 12:23 am For those who find pictures worth some large number of words, the heat maps in the Taxation of Social Security benefits wiki can be very helpful for the case of SS benefits and ordinary income.

When one adds qualified dividends and long term capital gains, as shown in the Married taxpayers example charts, then a tool like the personal finance toolbox Excel spreadsheet can draw those pictures.
Thank you very much
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by lomarica01 »

great post but it is overwhelming for me
is there a brief summary on how to reduce IRMAA and avoiding the tax torpedo or is it to dependent on ones own situation?

maybe a summary is already in the thread somewhere but I did not read everything

thanks
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by capran »

lomarica01 wrote: Mon Jan 23, 2023 11:18 am great post but it is overwhelming for me
is there a brief summary on how to reduce IRMAA and avoiding the tax torpedo or is it to dependent on ones own situation?

maybe a summary is already in the thread somewhere but I did not read everything

thanks
I'm still not clear about the "SS torpedo". I am assuming they are referencing the people that pay tax on 85% of their SS. I assume that's a given when there is some with a decent pension/social security/dividends income. As to the IRMAA, that's pretty easy. The financial Buff regularly puts out estimated based on different inflation estimates. We just stay below the most recent 0% estimates. https://thefinancebuff.com/medicare-irm ... ckets.html
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FiveK
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by FiveK »

lomarica01 wrote: Mon Jan 23, 2023 11:18 am is there a brief summary on how to reduce IRMAA
Keep your income below the IRMAA tiers.
and avoiding the tax torpedo or is it to dependent on ones own situation?
capran wrote: Mon Jan 23, 2023 12:04 pm I'm still not clear about the "SS torpedo". I am assuming they are referencing the people that pay tax on 85% of their SS.
It's generally the large jump in marginal tax rates that may occur over some some range of non-SS income. See the charts in the Taxation of Social Security benefits wiki. And yes, it is situation-dependent.
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by capran »

FiveK wrote: Mon Jan 23, 2023 12:46 pm
lomarica01 wrote: Mon Jan 23, 2023 11:18 am is there a brief summary on how to reduce IRMAA
Keep your income below the IRMAA tiers.
and avoiding the tax torpedo or is it to dependent on ones own situation?
capran wrote: Mon Jan 23, 2023 12:04 pm I'm still not clear about the "SS torpedo". I am assuming they are referencing the people that pay tax on 85% of their SS.
It's generally the large jump in marginal tax rates that may occur over some some range of non-SS income. See the charts in the Taxation of Social Security benefits wiki. And yes, it is situation-dependent.
It sure would be nice if the IRS hired non accountants to develop forms/worksheets. Why not just say "if you are single and your AGI is over 50,000 (income from all sources) your taxable SS is .85 of your total Social Security. I tend to be simplistic and concrete (not a good combination). I created a spreadsheet from the Social Security Benefits Worksheet on page 32 hoping it would help me see what that magical cut off number is where income from all other sources puts you into the 50% and 85% SS taxed benefits, but the form is so convoluted, I am not even sure that could give me the answer to "what's the income number" that puts a MFJ (or single) into the how much can I earn before SS is taxed at 50% and 85%. For example, if we didn't do any tIRA to Roth conversions, our income would be 125k less, which would put line 5 of the SS worksheet at 66,000. I am assuming even that would put us in the 85% of SS taxed camp. sorry for the rant. I failed to decipher the link info. (How the heck I ever did well in psych grad school I'll never know.)
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by McQ »

capran wrote: Mon Jan 23, 2023 3:45 pm ...

It sure would be nice if the IRS hired non accountants to develop forms/worksheets. Why not just say "if you are single and your AGI is over 50,000 (income from all sources) your taxable SS is .85 of your total Social Security.
You are still not getting it, capran. Back to grad school stats class. The IRS doesn't say that because it is false.

Use the social security calculator here: https://www.covisum.com/resources/taxab ... calculator

Enter $34,000 as social security and $16,000 as other income (Your $50,000 AGI example).

You will see that $28,900 of SS is NOT taxable--rather less. Add $1000 in other income at a time, until SS taxable does equal $28,900 (=.85 * $34,000). Discuss. (Hint: the formula starts with 50% of SS income. Search the web.)

MFJ? Start with $88,000 of SS income (2X the $44,000 MFJ threshold). Start other income at $12,000. keep iterating until taxable portion of SS equals $74,800. Discuss.

If it is any consolation, family member Cheryl (MBA, not psych degree) didn't grasp it either at the outset. She figured that if her (single) SS income was itself over the $34,000 threshold, that alone would make 85% of it taxable. Wrong.
You can take the academic out of the classroom by retirement, but you can't ever take the classroom out of his tone, style, and manner of approach.
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by capran »

McQ wrote: Mon Jan 23, 2023 11:23 pm
capran wrote: Mon Jan 23, 2023 3:45 pm ...

It sure would be nice if the IRS hired non accountants to develop forms/worksheets. Why not just say "if you are single and your AGI is over 50,000 (income from all sources) your taxable SS is .85 of your total Social Security.
You are still not getting it, capran. Back to grad school stats class. The IRS doesn't say that because it is false.

Use the social security calculator here: https://www.covisum.com/resources/taxab ... calculator

Enter $34,000 as social security and $16,000 as other income (Your $50,000 AGI example).

You will see that $28,900 of SS is NOT taxable--rather less. Add $1000 in other income at a time, until SS taxable does equal $28,900 (=.85 * $34,000). Discuss. (Hint: the formula starts with 50% of SS income. Search the web.)

MFJ? Start with $88,000 of SS income (2X the $44,000 MFJ threshold). Start other income at $12,000. keep iterating until taxable portion of SS equals $74,800. Discuss.

If it is any consolation, family member Cheryl (MBA, not psych degree) didn't grasp it either at the outset. She figured that if her (single) SS income was itself over the $34,000 threshold, that alone would make 85% of it taxable. Wrong.
I actually spent over 4 hours today with the SS Benefits worksheet and even went through all entries with my better half and ran several scenarios to test it out. I was first interested in what is the first zero out income number that would result in a zero tax liability with a stop here signal on line 7 of the worksheet. My SS is only 25,225. If we had an additional income of only 19,387 with no other income or deductions, we would not pay any income tax on my SS. But a dollar more income would result in a Yes answer that prompts further filling in of the worksheet, with an increasing amount of tax as income rises. Then I completed the computation form adjusting the numbers to what amount of income could be until the amount on line 16 was a few pennies less than the 85% of the full SS amount. I found that number to be 49,553. In other words, if our non social security income was 49,553 or less, we would pay ever so slightly less than the 85% of the full SS from line 1.(a few pennies) When I saw your link it was a perfect opportunity to check my work. Thank you so much. It made my night! Indeed, when I put in my full SS in the calculator, with no adjustments for the exclusions and adjustments lines, the link says the amount of SS that is taxable is 21,440.67, which is just a few pennies different from my computation work sheet. So that's a win. The worksheet works!

But, as I suspected, our combined pensions have always been well over that 49,553 mark, as well as dividends, interest and tax free interest (line 4 of the worksheet adds in tax free interest). So even if we did zero tIRA conversions, our base income would still be over 66k which still results in paying tax on 85% of the total SS. I ran that through the worksheet and calculator which also matched up. Maybe I'll sleep better tonight with closure, knowing I have been filing OK (correctly putting down 85% of my SS on line 1040SR line 6b). I am so appreciative of your time and attention so that I can see and understand the moving parts!!! But am most surprised that many bogleheads would find themselves in a position where they had an income low enough to pay less than 85% tax on their SS. I always felt like we were on the low end of income and retirement savings. I figured a majority faced the torpedo! haha Thanks again! Maybe an old dog CAN learn new tricks!
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by sc9182 »

capran wrote: Tue Jan 24, 2023 12:48 am .. But am most surprised that many bogleheads would find themselves in a position where they had an income low enough to pay less than 85% tax on their SS. I always felt like we were on the low end of income and retirement savings. I figured a majority faced the torpedo! haha Thanks again! Maybe an old dog CAN learn new tricks!
The “SS-tax torpedo” irony as claimed by some of the loudest voices are the ones with 80k-100k+ double-max pensions, and double max-delayed SS folks. They turn around and complain Trad IRA (and dreaded RMDs) is the one shooting tax-torpedos at them; Not exactly - it’s mainly their max-pensions, dividends, Annuities, deferred-comp, K-1s income!!

The very folks now turn around with nearly 170k un-stoppable income (MFJ) and now try to convert IRAs to Roth under IRMAA tiers - in-turn to complain about how bad IRA withdrawals (and much worse RMDs) have been!!

I feel - it’s their “other” income (double max pensions, large dividend leaking brokerage portfolio, annuities, K-1s, possible inheritance - which are filing up lower tax buckets — their IRA/RMD is “not” the source to blame for their tax/torpedo problems - i say, try to postpone pensions till age-75 like IRA RMDs allow, or deferred-income or inheritance till age-75 :-)

Anyhow - glad having figured the ‘hard-to-escape’ SS-tax torpedo. Now let’s crack the IRMAA tiers :-)
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by Indyhou »

McQ- Interesting thread, thanks for starting.

Considering the effects of IRMAA and Social Security Taxes are important; however I think it is equally important to think about the “end game”..

At Caroline’s rate of spend and social security benefits she should have a fairly large portfolio when she passes (I did a quicky model of the data presented, it looks like she would have about $1.8M Real at age 93).

Depending on what she wants to happen dictates how aggressively she would do things like Roth Conversions:

a. She could spend more money…
b. If she wants it to all go the charity, she’d probably want to look at doing a qualified distribution and perhaps some donations to a Donor Advised Fund. There might be some room to do some Roth Conversions.
c. If she wants it to go to heirs, then she’d want to do some Roth Conversions (especially if they are high earners).
d. A combination of a,b, and c (ie 50% to charities and 50% to heirs).

One other thought: What if she’d do a couple of large Roth Conversions at the beginning of the retirement to reduce her RMDs to a point where she’d be below the IRMAA threshold after the first couple of years? Granted there would be more taxes (IRMAA and income) due to these conversions. But it would save taxes due to reduced RMDs and IRMAA. I’d need to model this but it might be a simpler option that a string of Roth Conversions.

Again, interesting scenario. I need to mull over it a bit…
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by capran »

sc9182 wrote: Tue Jan 24, 2023 4:38 am
capran wrote: Tue Jan 24, 2023 12:48 am .. But am most surprised that many bogleheads would find themselves in a position where they had an income low enough to pay less than 85% tax on their SS. I always felt like we were on the low end of income and retirement savings. I figured a majority faced the torpedo! haha Thanks again! Maybe an old dog CAN learn new tricks!
The “SS-tax torpedo” irony as claimed by some of the loudest voices are the ones with 80k-100k+ double-max pensions, and double max-delayed SS folks. They turn around and complain Trad IRA (and dreaded RMDs) is the one shooting tax-torpedos at them; Not exactly - it’s mainly their max-pensions, dividends, Annuities, deferred-comp, K-1s income!!

The very folks now turn around with nearly 170k un-stoppable income (MFJ) and now try to convert IRAs to Roth under IRMAA tiers - in-turn to complain about how bad IRA withdrawals (and much worse RMDs) have been!!

I feel - it’s their “other” income (double max pensions, large dividend leaking brokerage portfolio, annuities, K-1s, possible inheritance - which are filing up lower tax buckets — their IRA/RMD is “not” the source to blame for their tax/torpedo problems - i say, try to postpone pensions till age-75 like IRA RMDs allow, or deferred-income or inheritance till age-75 :-)

Anyhow - glad having figured the ‘hard-to-escape’ SS-tax torpedo. Now let’s crack the IRMAA tiers :-)
Thanks to so many great posts here, I have a fairly good understanding of the IRMAA numbers. At least enough to push closer to the top without going over into the first tier. I did the CPI math once to understand how it's derived, and I watch the updated financial buff IRMAA estimates which include a zero inflation and 5 % inflation estimates. I do find it interesting that our government does not provide a final number during the year that a person takes the income. Even if it meant changing the dates to go from 3rd quarter to 3rd quarter. At least SS can provide benefits estimates as each new year begins to allow for planning. Last year we bumped our MAGI to a smidge over 200 k. Might have left some on the table using that number, especially with such high inflation. And we'll adjust our near end of year tIRA to Roth conversion based on all available data in November. I guess these are not bad concerns to have, and feel confident we have the resources to provide for ourselves.
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by hppycamper »

sc9182 wrote: Tue Jan 24, 2023 4:38 am
The “SS-tax torpedo” irony as claimed by some of the loudest voices are the ones with 80k-100k+ double-max pensions, and double max-delayed SS folks. They turn around and complain Trad IRA (and dreaded RMDs) is the one shooting tax-torpedos at them; Not exactly - it’s mainly their max-pensions, dividends, Annuities, deferred-comp, K-1s income!!

The very folks now turn around with nearly 170k un-stoppable income (MFJ) and now try to convert IRAs to Roth under IRMAA tiers - in-turn to complain about how bad IRA withdrawals (and much worse RMDs) have been!!

I feel - it’s their “other” income (double max pensions, large dividend leaking brokerage portfolio, annuities, K-1s, possible inheritance - which are filing up lower tax buckets — their IRA/RMD is “not” the source to blame for their tax/torpedo problems - i say, try to postpone pensions till age-75 like IRA RMDs allow, or deferred-income or inheritance till age-75 :-)

Anyhow - glad having figured the ‘hard-to-escape’ SS-tax torpedo. Now let’s crack the IRMAA tiers :-)
We're lucky to fit the double pensions + nearly double maxed SS profile. I know that we're also lucky to learn from various tax-torpedo discussions early enough so that we have more options to manage them.
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McQ
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by McQ »

capran wrote: Tue Jan 24, 2023 12:48 am
I actually spent over 4 hours today with the SS Benefits worksheet and even went through all entries with my better half and ran several scenarios to test it out. I was first interested in what is the first zero out income number that would result in a zero tax liability with a stop here signal on line 7 of the worksheet. My SS is only 25,225. If we had an additional income of only 19,387 with no other income or deductions, we would not pay any income tax on my SS. But a dollar more income would result in a Yes answer that prompts further filling in of the worksheet, with an increasing amount of tax as income rises. Then I completed the computation form adjusting the numbers to what amount of income could be until the amount on line 16 was a few pennies less than the 85% of the full SS amount. I found that number to be 49,553. In other words, if our non social security income was 49,553 or less, we would pay ever so slightly less than the 85% of the full SS from line 1.(a few pennies) When I saw your link it was a perfect opportunity to check my work. Thank you so much. It made my night! Indeed, when I put in my full SS in the calculator, with no adjustments for the exclusions and adjustments lines, the link says the amount of SS that is taxable is 21,440.67, which is just a few pennies different from my computation work sheet. So that's a win. The worksheet works!

But, as I suspected, our combined pensions have always been well over that 49,553 mark, as well as dividends, interest and tax free interest (line 4 of the worksheet adds in tax free interest). So even if we did zero tIRA conversions, our base income would still be over 66k which still results in paying tax on 85% of the total SS. I ran that through the worksheet and calculator which also matched up. Maybe I'll sleep better tonight with closure, knowing I have been filing OK (correctly putting down 85% of my SS on line 1040SR line 6b). I am so appreciative of your time and attention so that I can see and understand the moving parts!!! But am most surprised that many bogleheads would find themselves in a position where they had an income low enough to pay less than 85% tax on their SS. I always felt like we were on the low end of income and retirement savings. I figured a majority faced the torpedo! haha Thanks again! Maybe an old dog CAN learn new tricks!
Now you've got it Capran: you are indeed affluent enough to have exited the other side of the tax torpedo, and can just enter .85 time your SS payment as taxable income and not look back.

As to other Bogleheads: there are many mansions in father Bogle's house. Here is a personal example. My spouse and I will postpone Social Security to age 70. If we were the same age (we're not), and if we were turning 70 in 2023, we would have about $105,000 in social security income (near-max age 70 deferral). In which case, we'd need about $100,000 in other income to exit the tax torpedo. If we were 73 and subject to RMDs, we'd need a $2.65 million TDA balance to produce that much income (no pension in our world, or much in the way of a taxable account). Any less, and we'd be stuck back in the torpedo.

I consider us quite affluent, and give this example to show how the tax torpedo can be a factor even in comparatively affluent situations. (Shout out to curmudgeon for opening my eyes on this front.)
You can take the academic out of the classroom by retirement, but you can't ever take the classroom out of his tone, style, and manner of approach.
technovelist
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Joined: Wed Dec 30, 2009 8:02 pm

Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by technovelist »

capran wrote: Tue Jan 24, 2023 12:48 am
But, as I suspected, our combined pensions have always been well over that 49,553 mark, as well as dividends, interest and tax free interest (line 4 of the worksheet adds in tax free interest). So even if we did zero tIRA conversions, our base income would still be over 66k which still results in paying tax on 85% of the total SS. I ran that through the worksheet and calculator which also matched up. Maybe I'll sleep better tonight with closure, knowing I have been filing OK (correctly putting down 85% of my SS on line 1040SR line 6b). I am so appreciative of your time and attention so that I can see and understand the moving parts!!! But am most surprised that many bogleheads would find themselves in a position where they had an income low enough to pay less than 85% tax on their SS. I always felt like we were on the low end of income and retirement savings. I figured a majority faced the torpedo! haha Thanks again! Maybe an old dog CAN learn new tricks!
Believe it or not, there are actually bogleheads who pay $0 in federal income tax.
That's not too difficult if you have most of your savings in post-tax assets that produce no current income other than when you sell them, e.g., 50% each in Berkshire Hathaway and gold.
Then you just "tax harvest" as much as needed to get up to the top of the 0% bracket.
You probably won't be buying very many yachts on this plan but I'd guess not too many bogleheads own yachts anyway.

Of course there is no free lunch. To get to this position, you must already have paid taxes on all your initial investments.
In theory, theory and practice are identical. In practice, they often differ.
capran
Posts: 1074
Joined: Thu Feb 18, 2016 9:45 am

Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by capran »

technovelist wrote: Wed Jan 25, 2023 8:19 am
capran wrote: Tue Jan 24, 2023 12:48 am
But, as I suspected, our combined pensions have always been well over that 49,553 mark, as well as dividends, interest and tax free interest (line 4 of the worksheet adds in tax free interest). So even if we did zero tIRA conversions, our base income would still be over 66k which still results in paying tax on 85% of the total SS. I ran that through the worksheet and calculator which also matched up. Maybe I'll sleep better tonight with closure, knowing I have been filing OK (correctly putting down 85% of my SS on line 1040SR line 6b). I am so appreciative of your time and attention so that I can see and understand the moving parts!!! But am most surprised that many bogleheads would find themselves in a position where they had an income low enough to pay less than 85% tax on their SS. I always felt like we were on the low end of income and retirement savings. I figured a majority faced the torpedo! haha Thanks again! Maybe an old dog CAN learn new tricks!
Believe it or not, there are actually bogleheads who pay $0 in federal income tax.
That's not too difficult if you have most of your savings in post-tax assets that produce no current income other than when you sell them, e.g., 50% each in Berkshire Hathaway and gold.
Then you just "tax harvest" as much as needed to get up to the top of the 0% bracket.
You probably won't be buying very many yachts on this plan but I'd guess not too many bogleheads own yachts anyway.

Of course there is no free lunch. To get to this position, you must already have paid taxes on all your initial investments.
We started off our retirement with 1.8 in deferred and only one pension, and could have easily stayed in a zero tax bracket, but concern about future increases in the second pension and SS and RMDs on da surviving spouse convinced me to pay 22% now rather than 32% or more later.

Funny you would mention yachts. We had spent 40 years sailing and full time sailing every summer since 86 (including 29 months over 13 summers exploring the Bahamas), until last spring when we moved from our little 34 foot sailboat to our first trawler. Pretty yacht, but at nearly 6 times what we sold the sailboat for. I'm still having nightmares and residual shock over that, but the first mate is happy.
jhawktx
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by jhawktx »

technovelist wrote: Wed Jan 25, 2023 8:19 am
capran wrote: Tue Jan 24, 2023 12:48 am
But, as I suspected, our combined pensions have always been well over that 49,553 mark, as well as dividends, interest and tax free interest (line 4 of the worksheet adds in tax free interest). So even if we did zero tIRA conversions, our base income would still be over 66k which still results in paying tax on 85% of the total SS. I ran that through the worksheet and calculator which also matched up. Maybe I'll sleep better tonight with closure, knowing I have been filing OK (correctly putting down 85% of my SS on line 1040SR line 6b). I am so appreciative of your time and attention so that I can see and understand the moving parts!!! But am most surprised that many bogleheads would find themselves in a position where they had an income low enough to pay less than 85% tax on their SS. I always felt like we were on the low end of income and retirement savings. I figured a majority faced the torpedo! haha Thanks again! Maybe an old dog CAN learn new tricks!
Believe it or not, there are actually bogleheads who pay $0 in federal income tax.
That's not too difficult if you have most of your savings in post-tax assets that produce no current income other than when you sell them, e.g., 50% each in Berkshire Hathaway and gold.
Then you just "tax harvest" as much as needed to get up to the top of the 0% bracket.
You probably won't be buying very many yachts on this plan but I'd guess not too many bogleheads own yachts anyway.

Of course there is no free lunch. To get to this position, you must already have paid taxes on all your initial investments.
If you "already have paid taxes on all your investments" then you most likely have screwed up in the past to get yourself in that situation.
capran
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by capran »

McQ wrote: Tue Jan 24, 2023 11:54 pm
capran wrote: Tue Jan 24, 2023 12:48 am
I actually spent over 4 hours today with the SS Benefits worksheet and even went through all entries with my better half and ran several scenarios to test it out. I was first interested in what is the first zero out income number that would result in a zero tax liability with a stop here signal on line 7 of the worksheet. My SS is only 25,225. If we had an additional income of only 19,387 with no other income or deductions, we would not pay any income tax on my SS. But a dollar more income would result in a Yes answer that prompts further filling in of the worksheet, with an increasing amount of tax as income rises. Then I completed the computation form adjusting the numbers to what amount of income could be until the amount on line 16 was a few pennies less than the 85% of the full SS amount. I found that number to be 49,553. In other words, if our non social security income was 49,553 or less, we would pay ever so slightly less than the 85% of the full SS from line 1.(a few pennies) When I saw your link it was a perfect opportunity to check my work. Thank you so much. It made my night! Indeed, when I put in my full SS in the calculator, with no adjustments for the exclusions and adjustments lines, the link says the amount of SS that is taxable is 21,440.67, which is just a few pennies different from my computation work sheet. So that's a win. The worksheet works!

But, as I suspected, our combined pensions have always been well over that 49,553 mark, as well as dividends, interest and tax free interest (line 4 of the worksheet adds in tax free interest). So even if we did zero tIRA conversions, our base income would still be over 66k which still results in paying tax on 85% of the total SS. I ran that through the worksheet and calculator which also matched up. Maybe I'll sleep better tonight with closure, knowing I have been filing OK (correctly putting down 85% of my SS on line 1040SR line 6b). I am so appreciative of your time and attention so that I can see and understand the moving parts!!! But am most surprised that many bogleheads would find themselves in a position where they had an income low enough to pay less than 85% tax on their SS. I always felt like we were on the low end of income and retirement savings. I figured a majority faced the torpedo! haha Thanks again! Maybe an old dog CAN learn new tricks!
Now you've got it Capran: you are indeed affluent enough to have exited the other side of the tax torpedo, and can just enter .85 time your SS payment as taxable income and not look back.

As to other Bogleheads: there are many mansions in father Bogle's house. Here is a personal example. My spouse and I will postpone Social Security to age 70. If we were the same age (we're not), and if we were turning 70 in 2023, we would have about $105,000 in social security income (near-max age 70 deferral). In which case, we'd need about $100,000 in other income to exit the tax torpedo. If we were 73 and subject to RMDs, we'd need a $2.65 million TDA balance to produce that much income (no pension in our world, or much in the way of a taxable account). Any less, and we'd be stuck back in the torpedo.

I consider us quite affluent, and give this example to show how the tax torpedo can be a factor even in comparatively affluent situations. (Shout out to curmudgeon for opening my eyes on this front.)
Thank you again. We too consider ourselves among the fortunate. Had a friend not slipped on ice. bumped his head, walked home, took a nap and never woke up, I too, would have delayed SS to 70. But I panicked and started at 64. But when spouse starts SS at 70, she should add about 40k which, when combined with my SS and our two modest school pensions should put us north of 110. We could survive higher RMDs and avoid IRMAA as a MFJ, but her as a survivor would never escape IRMAA and a higher tax bracket if we didn't get our TDAs down, which we've been doing.
technovelist
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by technovelist »

jhawktx wrote: Wed Jan 25, 2023 10:06 am
technovelist wrote: Wed Jan 25, 2023 8:19 am
capran wrote: Tue Jan 24, 2023 12:48 am
But, as I suspected, our combined pensions have always been well over that 49,553 mark, as well as dividends, interest and tax free interest (line 4 of the worksheet adds in tax free interest). So even if we did zero tIRA conversions, our base income would still be over 66k which still results in paying tax on 85% of the total SS. I ran that through the worksheet and calculator which also matched up. Maybe I'll sleep better tonight with closure, knowing I have been filing OK (correctly putting down 85% of my SS on line 1040SR line 6b). I am so appreciative of your time and attention so that I can see and understand the moving parts!!! But am most surprised that many bogleheads would find themselves in a position where they had an income low enough to pay less than 85% tax on their SS. I always felt like we were on the low end of income and retirement savings. I figured a majority faced the torpedo! haha Thanks again! Maybe an old dog CAN learn new tricks!
Believe it or not, there are actually bogleheads who pay $0 in federal income tax.
That's not too difficult if you have most of your savings in post-tax assets that produce no current income other than when you sell them, e.g., 50% each in Berkshire Hathaway and gold.
Then you just "tax harvest" as much as needed to get up to the top of the 0% bracket.
You probably won't be buying very many yachts on this plan but I'd guess not too many bogleheads own yachts anyway.

Of course there is no free lunch. To get to this position, you must already have paid taxes on all your initial investments.
If you "already have paid taxes on all your investments" then you most likely have screwed up in the past to get yourself in that situation.
I didn't say "on all my investments", but "on all my initial investments". E.g., Roth accounts have already had taxes paid on all the initial investments.
In theory, theory and practice are identical. In practice, they often differ.
utvolfan
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by utvolfan »

The IRMAA "brackets" change with inflation if I remember correctly. Have the single and MFJ figures for determining how much of your SS is taxable ever changed (I don't recall seeing that they do)?
ModifiedDuration
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by ModifiedDuration »

utvolfan wrote: Wed Jan 25, 2023 5:28 pm The IRMAA "brackets" change with inflation if I remember correctly. Have the single and MFJ figures for determining how much of your SS is taxable ever changed (I don't recall seeing that they do)?
The original income brackets for the up to 50% of social security income being taxable have not changed since they were implemented in 1984.

The 85% brackets were added in 1994 and have not been changed since.
curmudgeon
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by curmudgeon »

McQ wrote: Tue Jan 24, 2023 11:54 pm
As to other Bogleheads: there are many mansions in father Bogle's house. Here is a personal example. My spouse and I will postpone Social Security to age 70. If we were the same age (we're not), and if we were turning 70 in 2023, we would have about $105,000 in social security income (near-max age 70 deferral). In which case, we'd need about $100,000 in other income to exit the tax torpedo. If we were 73 and subject to RMDs, we'd need a $2.65 million TDA balance to produce that much income (no pension in our world, or much in the way of a taxable account). Any less, and we'd be stuck back in the torpedo.

I consider us quite affluent, and give this example to show how the tax torpedo can be a factor even in comparatively affluent situations. (Shout out to curmudgeon for opening my eyes on this front.)
There are indeed many variations in economic circumstances for folks coming into retirement. I'm afraid that sometimes our discussions about Roth conversions give too many people the impression that it's some sort of "magic pixie dust" that everyone should use. It's good to be aware of the quirks in the tax code, but as this thread illustrates, there are limits to how much you can maneuver around them (or on the less affluent side, have any need to worry about them).
technovelist
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by technovelist »

McQ wrote: Tue Jan 24, 2023 11:54 pm
capran wrote: Tue Jan 24, 2023 12:48 am
I actually spent over 4 hours today with the SS Benefits worksheet and even went through all entries with my better half and ran several scenarios to test it out. I was first interested in what is the first zero out income number that would result in a zero tax liability with a stop here signal on line 7 of the worksheet. My SS is only 25,225. If we had an additional income of only 19,387 with no other income or deductions, we would not pay any income tax on my SS. But a dollar more income would result in a Yes answer that prompts further filling in of the worksheet, with an increasing amount of tax as income rises. Then I completed the computation form adjusting the numbers to what amount of income could be until the amount on line 16 was a few pennies less than the 85% of the full SS amount. I found that number to be 49,553. In other words, if our non social security income was 49,553 or less, we would pay ever so slightly less than the 85% of the full SS from line 1.(a few pennies) When I saw your link it was a perfect opportunity to check my work. Thank you so much. It made my night! Indeed, when I put in my full SS in the calculator, with no adjustments for the exclusions and adjustments lines, the link says the amount of SS that is taxable is 21,440.67, which is just a few pennies different from my computation work sheet. So that's a win. The worksheet works!

But, as I suspected, our combined pensions have always been well over that 49,553 mark, as well as dividends, interest and tax free interest (line 4 of the worksheet adds in tax free interest). So even if we did zero tIRA conversions, our base income would still be over 66k which still results in paying tax on 85% of the total SS. I ran that through the worksheet and calculator which also matched up. Maybe I'll sleep better tonight with closure, knowing I have been filing OK (correctly putting down 85% of my SS on line 1040SR line 6b). I am so appreciative of your time and attention so that I can see and understand the moving parts!!! But am most surprised that many bogleheads would find themselves in a position where they had an income low enough to pay less than 85% tax on their SS. I always felt like we were on the low end of income and retirement savings. I figured a majority faced the torpedo! haha Thanks again! Maybe an old dog CAN learn new tricks!
Now you've got it Capran: you are indeed affluent enough to have exited the other side of the tax torpedo, and can just enter .85 time your SS payment as taxable income and not look back.

As to other Bogleheads: there are many mansions in father Bogle's house. Here is a personal example. My spouse and I will postpone Social Security to age 70. If we were the same age (we're not), and if we were turning 70 in 2023, we would have about $105,000 in social security income (near-max age 70 deferral). In which case, we'd need about $100,000 in other income to exit the tax torpedo. If we were 73 and subject to RMDs, we'd need a $2.65 million TDA balance to produce that much income (no pension in our world, or much in the way of a taxable account). Any less, and we'd be stuck back in the torpedo.

I consider us quite affluent, and give this example to show how the tax torpedo can be a factor even in comparatively affluent situations. (Shout out to curmudgeon for opening my eyes on this front.)
Unless I'm missing something, "exiting the tax torpedo" means that you have already paid the maximum tax that the torpedo can inflict, which isn't that big a "win" as I see it.
In theory, theory and practice are identical. In practice, they often differ.
smitcat
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by smitcat »

technovelist wrote: Thu Jan 26, 2023 6:47 am
McQ wrote: Tue Jan 24, 2023 11:54 pm
capran wrote: Tue Jan 24, 2023 12:48 am
I actually spent over 4 hours today with the SS Benefits worksheet and even went through all entries with my better half and ran several scenarios to test it out. I was first interested in what is the first zero out income number that would result in a zero tax liability with a stop here signal on line 7 of the worksheet. My SS is only 25,225. If we had an additional income of only 19,387 with no other income or deductions, we would not pay any income tax on my SS. But a dollar more income would result in a Yes answer that prompts further filling in of the worksheet, with an increasing amount of tax as income rises. Then I completed the computation form adjusting the numbers to what amount of income could be until the amount on line 16 was a few pennies less than the 85% of the full SS amount. I found that number to be 49,553. In other words, if our non social security income was 49,553 or less, we would pay ever so slightly less than the 85% of the full SS from line 1.(a few pennies) When I saw your link it was a perfect opportunity to check my work. Thank you so much. It made my night! Indeed, when I put in my full SS in the calculator, with no adjustments for the exclusions and adjustments lines, the link says the amount of SS that is taxable is 21,440.67, which is just a few pennies different from my computation work sheet. So that's a win. The worksheet works!

But, as I suspected, our combined pensions have always been well over that 49,553 mark, as well as dividends, interest and tax free interest (line 4 of the worksheet adds in tax free interest). So even if we did zero tIRA conversions, our base income would still be over 66k which still results in paying tax on 85% of the total SS. I ran that through the worksheet and calculator which also matched up. Maybe I'll sleep better tonight with closure, knowing I have been filing OK (correctly putting down 85% of my SS on line 1040SR line 6b). I am so appreciative of your time and attention so that I can see and understand the moving parts!!! But am most surprised that many bogleheads would find themselves in a position where they had an income low enough to pay less than 85% tax on their SS. I always felt like we were on the low end of income and retirement savings. I figured a majority faced the torpedo! haha Thanks again! Maybe an old dog CAN learn new tricks!
Now you've got it Capran: you are indeed affluent enough to have exited the other side of the tax torpedo, and can just enter .85 time your SS payment as taxable income and not look back.

As to other Bogleheads: there are many mansions in father Bogle's house. Here is a personal example. My spouse and I will postpone Social Security to age 70. If we were the same age (we're not), and if we were turning 70 in 2023, we would have about $105,000 in social security income (near-max age 70 deferral). In which case, we'd need about $100,000 in other income to exit the tax torpedo. If we were 73 and subject to RMDs, we'd need a $2.65 million TDA balance to produce that much income (no pension in our world, or much in the way of a taxable account). Any less, and we'd be stuck back in the torpedo.

I consider us quite affluent, and give this example to show how the tax torpedo can be a factor even in comparatively affluent situations. (Shout out to curmudgeon for opening my eyes on this front.)
Unless I'm missing something, "exiting the tax torpedo" means that you have already paid the maximum tax that the torpedo can inflict, which isn't that big a "win" as I see it.
It is a win - if you have exhausted all of the strategies to maintain SS taxation below the maximum level and have risen to the point where it is no longer placing you in the torpedo area (see bogle heat map) - it is a win.
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teen persuasion
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by teen persuasion »

technovelist wrote: Thu Jan 26, 2023 6:47 am
McQ wrote: Tue Jan 24, 2023 11:54 pm
capran wrote: Tue Jan 24, 2023 12:48 am
I actually spent over 4 hours today with the SS Benefits worksheet and even went through all entries with my better half and ran several scenarios to test it out. I was first interested in what is the first zero out income number that would result in a zero tax liability with a stop here signal on line 7 of the worksheet. My SS is only 25,225. If we had an additional income of only 19,387 with no other income or deductions, we would not pay any income tax on my SS. But a dollar more income would result in a Yes answer that prompts further filling in of the worksheet, with an increasing amount of tax as income rises. Then I completed the computation form adjusting the numbers to what amount of income could be until the amount on line 16 was a few pennies less than the 85% of the full SS amount. I found that number to be 49,553. In other words, if our non social security income was 49,553 or less, we would pay ever so slightly less than the 85% of the full SS from line 1.(a few pennies) When I saw your link it was a perfect opportunity to check my work. Thank you so much. It made my night! Indeed, when I put in my full SS in the calculator, with no adjustments for the exclusions and adjustments lines, the link says the amount of SS that is taxable is 21,440.67, which is just a few pennies different from my computation work sheet. So that's a win. The worksheet works!

But, as I suspected, our combined pensions have always been well over that 49,553 mark, as well as dividends, interest and tax free interest (line 4 of the worksheet adds in tax free interest). So even if we did zero tIRA conversions, our base income would still be over 66k which still results in paying tax on 85% of the total SS. I ran that through the worksheet and calculator which also matched up. Maybe I'll sleep better tonight with closure, knowing I have been filing OK (correctly putting down 85% of my SS on line 1040SR line 6b). I am so appreciative of your time and attention so that I can see and understand the moving parts!!! But am most surprised that many bogleheads would find themselves in a position where they had an income low enough to pay less than 85% tax on their SS. I always felt like we were on the low end of income and retirement savings. I figured a majority faced the torpedo! haha Thanks again! Maybe an old dog CAN learn new tricks!
Now you've got it Capran: you are indeed affluent enough to have exited the other side of the tax torpedo, and can just enter .85 time your SS payment as taxable income and not look back.

As to other Bogleheads: there are many mansions in father Bogle's house. Here is a personal example. My spouse and I will postpone Social Security to age 70. If we were the same age (we're not), and if we were turning 70 in 2023, we would have about $105,000 in social security income (near-max age 70 deferral). In which case, we'd need about $100,000 in other income to exit the tax torpedo. If we were 73 and subject to RMDs, we'd need a $2.65 million TDA balance to produce that much income (no pension in our world, or much in the way of a taxable account). Any less, and we'd be stuck back in the torpedo.

I consider us quite affluent, and give this example to show how the tax torpedo can be a factor even in comparatively affluent situations. (Shout out to curmudgeon for opening my eyes on this front.)
Unless I'm missing something, "exiting the tax torpedo" means that you have already paid the maximum tax that the torpedo can inflict, which isn't that big a "win" as I see it.
It's a win in that your marginal rate drops back to the baseline 1.00x instead of 1.85x when you are IN the top part of the tax torpedo. Extra income no longer increases the amount of your SS that is taxable.

You can look at it as now your taxable SS income is a constant.
Walkure
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by Walkure »

teen persuasion wrote: Thu Jan 26, 2023 8:29 am
technovelist wrote: Thu Jan 26, 2023 6:47 am Unless I'm missing something, "exiting the tax torpedo" means that you have already paid the maximum tax that the torpedo can inflict, which isn't that big a "win" as I see it.
It's a win in that your marginal rate drops back to the baseline 1.00x instead of 1.85x when you are IN the top part of the tax torpedo. Extra income no longer increases the amount of your SS that is taxable.

You can look at it as now your taxable SS income is a constant.
What I would like to know is how much deferring social security saves in taxes for the same income. Let's say every year I want an AGI of exactly to the top of the 25% bracket (assume this is after expiry of TCJA rates and no further changes). I can take SS at 62 and fill in the rest from Trad withdrawals, or take everything from Trad until 70, then start max SS with top up from Trad. Ignore the whole defer and use the space for Roth conversions sideshow. My gut says the net after-tax disposable income in the defer scenario is way higher because you are increasing the share of income attributable to SS (which is capped at 85% taxable) in a greater number of years while filling lower brackets with Trad withdrawals early (100% taxable). Also, this backloads the 85% income on the surviving spouse.
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by smitcat »

Walkure wrote: Thu Jan 26, 2023 8:52 am
teen persuasion wrote: Thu Jan 26, 2023 8:29 am
technovelist wrote: Thu Jan 26, 2023 6:47 am Unless I'm missing something, "exiting the tax torpedo" means that you have already paid the maximum tax that the torpedo can inflict, which isn't that big a "win" as I see it.
It's a win in that your marginal rate drops back to the baseline 1.00x instead of 1.85x when you are IN the top part of the tax torpedo. Extra income no longer increases the amount of your SS that is taxable.

You can look at it as now your taxable SS income is a constant.
What I would like to know is how much deferring social security saves in taxes for the same income. Let's say every year I want an AGI of exactly to the top of the 25% bracket (assume this is after expiry of TCJA rates and no further changes). I can take SS at 62 and fill in the rest from Trad withdrawals, or take everything from Trad until 70, then start max SS with top up from Trad. Ignore the whole defer and use the space for Roth conversions sideshow. My gut says the net after-tax disposable income in the defer scenario is way higher because you are increasing the share of income attributable to SS (which is capped at 85% taxable) in a greater number of years while filling lower brackets with Trad withdrawals early (100% taxable). Also, this backloads the 85% income on the surviving spouse.
"What I would like to know is how much deferring social security saves in taxes for the same income"
You can model these various scenarios for after tax disposable income inflation adjusted by using RPM and/or Pralana and/or equivalent calculators.
The results will vary based on your exact inputs and your goals - just a few of the variables that will affect the outputs will be:
- size of accounts ($$)
- placement of accounts (pretax, post tax. Roth, etc.)
- portfolio performance
- election age of SS (X2)
- age of demise (X2)
- drawdown amounts
- charitable goals
- goals for heirs and their tax level

It will vary for each person's input(s). It will also vary for the same person modeling different future scenarios.
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by capran »

technovelist wrote: Thu Jan 26, 2023 6:47 am
McQ wrote: Tue Jan 24, 2023 11:54 pm
capran wrote: Tue Jan 24, 2023 12:48 am
I actually spent over 4 hours today with the SS Benefits worksheet and even went through all entries with my better half and ran several scenarios to test it out. I was first interested in what is the first zero out income number that would result in a zero tax liability with a stop here signal on line 7 of the worksheet. My SS is only 25,225. If we had an additional income of only 19,387 with no other income or deductions, we would not pay any income tax on my SS. But a dollar more income would result in a Yes answer that prompts further filling in of the worksheet, with an increasing amount of tax as income rises. Then I completed the computation form adjusting the numbers to what amount of income could be until the amount on line 16 was a few pennies less than the 85% of the full SS amount. I found that number to be 49,553. In other words, if our non social security income was 49,553 or less, we would pay ever so slightly less than the 85% of the full SS from line 1.(a few pennies) When I saw your link it was a perfect opportunity to check my work. Thank you so much. It made my night! Indeed, when I put in my full SS in the calculator, with no adjustments for the exclusions and adjustments lines, the link says the amount of SS that is taxable is 21,440.67, which is just a few pennies different from my computation work sheet. So that's a win. The worksheet works!

But, as I suspected, our combined pensions have always been well over that 49,553 mark, as well as dividends, interest and tax free interest (line 4 of the worksheet adds in tax free interest). So even if we did zero tIRA conversions, our base income would still be over 66k which still results in paying tax on 85% of the total SS. I ran that through the worksheet and calculator which also matched up. Maybe I'll sleep better tonight with closure, knowing I have been filing OK (correctly putting down 85% of my SS on line 1040SR line 6b). I am so appreciative of your time and attention so that I can see and understand the moving parts!!! But am most surprised that many bogleheads would find themselves in a position where they had an income low enough to pay less than 85% tax on their SS. I always felt like we were on the low end of income and retirement savings. I figured a majority faced the torpedo! haha Thanks again! Maybe an old dog CAN learn new tricks!
Now you've got it Capran: you are indeed affluent enough to have exited the other side of the tax torpedo, and can just enter .85 time your SS payment as taxable income and not look back.

As to other Bogleheads: there are many mansions in father Bogle's house. Here is a personal example. My spouse and I will postpone Social Security to age 70. If we were the same age (we're not), and if we were turning 70 in 2023, we would have about $105,000 in social security income (near-max age 70 deferral). In which case, we'd need about $100,000 in other income to exit the tax torpedo. If we were 73 and subject to RMDs, we'd need a $2.65 million TDA balance to produce that much income (no pension in our world, or much in the way of a taxable account). Any less, and we'd be stuck back in the torpedo.

I consider us quite affluent, and give this example to show how the tax torpedo can be a factor even in comparatively affluent situations. (Shout out to curmudgeon for opening my eyes on this front.)
Unless I'm missing something, "exiting the tax torpedo" means that you have already paid the maximum tax that the torpedo can inflict, which isn't that big a "win" as I see it.
Maybe I'm not getting it all straight, but In my mind, tax and fees, current and future, are all a part of the equation. And if part of that equation are the IRMAA "fees", and I can avoid them by some strategic decisions, then that's a win in my feeble (old age) mind, especially if IRMAA would be applied to two of us on Medicare. I also consider the future of income tax rates, and if I can save 3% now on withdrawals, that too, is a win. (Of course, who knows if the current tax cuts set expiration date is really an issue, but that is the current law- having my bracket go from 22% to 25% when the tax cuts expire in a few years. I suppose I shouldn't be concerned about taxes of my estate, but I think about that too. I know some might think an inheritance that jumps someone from the 22/25% bracket up to 32 ish is no big deal, but to me, that's a loss of my estate value that is unnecessary. Paying 22% now is much preferred to having a much higher amount of taxes paid by my heirs.
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by busdriver »

capran wrote: Thu Jan 26, 2023 12:23 pm Maybe I'm not getting it all straight, but In my mind, tax and fees, current and future, are all a part of the equation. And if part of that equation are the IRMAA "fees", and I can avoid them by some strategic decisions, then that's a win in my feeble (old age) mind, especially if IRMAA would be applied to two of us on Medicare. I also consider the future of income tax rates, and if I can save 3% now on withdrawals, that too, is a win. (Of course, who knows if the current tax cuts set expiration date is really an issue, but that is the current law- having my bracket go from 22% to 25% when the tax cuts expire in a few years. I suppose I shouldn't be concerned about taxes of my estate, but I think about that too. I know some might think an inheritance that jumps someone from the 22/25% bracket up to 32 ish is no big deal, but to me, that's a loss of my estate value that is unnecessary. Paying 22% now is much preferred to having a much higher amount of taxes paid by my heirs.
My feelings as well. :wink:
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by HomeStretch »

One thing that has gelled for me/my situation with these type of threads is that while Roth conversions may be somewhat helpful to increase my after-tax income, they won’t create a significant financial windfall for me in retirement. I really debated whether to take ACA subsidies this year when I move onto the exchange for the first time or whether to continue to do large Roth conversions (last year was year 1 for them). I will take the subsidies, do smaller Roth conversions and not debate myself about it so much.
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by Munir »

A very valuable thread. I am an 85 year old widower with 95% of my portfolio in a traditional IRA (a mistake, I know). I just received my new year's social security benefits statement for 2023 and my monthly benefit is less than last year because of these IRMAA and Medicare deductions. I want to consult an advisor who is knowledgeable in these issues (like many are on this thread) but am not sure what kind of credentials should such an advisor have. I prefer just a one-time fee-only advisor. If this is too much of a digression to the topic, I apologize.
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by bsteiner »

Munir wrote: Thu Jan 26, 2023 1:51 pm A very valuable thread. I am an 85 year old widower with 95% of my portfolio in a traditional IRA (a mistake, I know). ... I want to consult an advisor who is knowledgeable in these issues (like many are on this thread) but am not sure what kind of credentials should such an advisor have. I prefer just a one-time fee-only advisor. ...
Not necessarily. IRAs are better than taxable accounts since the income and gains on your share (1 minus the tax rate) are tax-free. Even if Roth conversions would otherwise make sense, you don't have enough other money to pay the tax on the conversion, which makes conversions less attractive (though depending on your situation they could nevertheless make sense).

Probably either the lawyer who handles your estate planning, or your accountant if he/she understands Roth conversions.
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by Carl53 »

Munir wrote: Thu Jan 26, 2023 1:51 pm A very valuable thread. I am an 85 year old widower with 95% of my portfolio in a traditional IRA (a mistake, I know). I just received my new year's social security benefits statement for 2023 and my monthly benefit is less than last year because of these IRMAA and Medicare deductions. I want to consult an advisor who is knowledgeable in these issues (like many are on this thread) but am not sure what kind of credentials should such an advisor have. I prefer just a one-time fee-only advisor. If this is too much of a digression to the topic, I apologize.
You could ask on BHs but I'd start a new thread. Since the IRMAA jumped this year for you, did you do a conversion or was it just a progression in RMDs? Are you interested in leaving an inheritance, estate at risk for taxation, interested in leaving charitable bequests or maybe making Qualified Charitable Distributions. Those that might help will need to know most of the usual stuff as in base SS and regular income amounts as well as projected RMDs.
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by LilyFleur »

Munir wrote: Thu Jan 26, 2023 1:51 pm A very valuable thread. I am an 85 year old widower with 95% of my portfolio in a traditional IRA (a mistake, I know). I just received my new year's social security benefits statement for 2023 and my monthly benefit is less than last year because of these IRMAA and Medicare deductions. I want to consult an advisor who is knowledgeable in these issues (like many are on this thread) but am not sure what kind of credentials should such an advisor have. I prefer just a one-time fee-only advisor. If this is too much of a digression to the topic, I apologize.
Having a 401k big enough and the personal longevity to generate a large enough RMD to owe more in IRMAA could be viewed as a blessing, though. It is not uncommon for those of us in the single tax brackets. This is perhaps a different situation than yours, but I have a single friend whose pension means he will forever be paying more IRMAA than someone who doesn't have a nice pension like he does.
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by Munir »

Carl53 wrote: Thu Jan 26, 2023 2:06 pm
Munir wrote: Thu Jan 26, 2023 1:51 pm A very valuable thread. I am an 85 year old widower with 95% of my portfolio in a traditional IRA (a mistake, I know). I just received my new year's social security benefits statement for 2023 and my monthly benefit is less than last year because of these IRMAA and Medicare deductions. I want to consult an advisor who is knowledgeable in these issues (like many are on this thread) but am not sure what kind of credentials should such an advisor have. I prefer just a one-time fee-only advisor. If this is too much of a digression to the topic, I apologize.
You could ask on BHs but I'd start a new thread. Since the IRMAA jumped this year for you, did you do a conversion or was it just a progression in RMDs? Are you interested in leaving an inheritance, estate at risk for taxation, interested in leaving charitable bequests or maybe making Qualified Charitable Distributions. Those that might help will need to know most of the usual stuff as in base SS and regular income amounts as well as projected RMDs.
Thank you for the replies. The questions asked by Carl above are what I want to discuss with an adviser/consultant but my answer is yes to all the questions. I feel they are too complicated to discuss on this forum.
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by McQ »

Postscript

[This is a postscript because the thread is complete without it. It is also a postscript because I have not yet wrapped my head around the spreadsheet representation of the benefits of preferentially locating the high-return, high-risk asset in the Roth account. Those benefits look different for, say, a 1929 conversion, versus a 2009 conversion…]

Cheryl, head exploding from too many spreadsheets, decided it was time to get some fresh air. She headed down her front walk and opened the gate. Turning right, she hadn’t gone far when next door neighbor Cassius hailed her from his garden.

“Looks like you were burning the midnight oil last night.”

Cheryl waved at his wife Pamela, rocking on the front porch. Pamela called out to her husband: “Don’t keep the lady from her walk, Cassius.”

Cheryl 2.0, walking up to the fence, engaged Cas: “Yeah, I’ve been pounding on the spreadsheet to see if I can escape IRMAA once my RMDs start. Not looking good.”

Cas was one of her favorite neighbors, he’d retired after 30 years as a Chartered Financial Analyst, and was always up for a financial conversation.
“You followed your cousin Celia’s advice, and heavied up on Roth conversions before Social Security?”

“Yeah. And if I convert enough, she was right, I will never have to pay IRMAA. But I have to incur taxes at a rate of 32% and 35% on a big chunk on those conversions. When I do the present value analysis, I lose money on the prepaid IRMAA, and I lose more money paying income tax at 32% and 35% now relative to my future income tax rate at 22%/25%.”

Cassius pulled on his chin. “You really think the Congress is gonna raise the tax rate from 22% to 25% on a population of tens of millions of voters, many affluent and older, with a very high propensity to vote?”

Cheryl’s shoulders slumped. “If my future income tax rate is only 22%, then these large conversions can never pay out. I can’t be converting now at 35% to save 22% later!”

Cassius nodded, raising both his hands and then waving them down in a calming gesture. “Did you do look at the effects of asset relocation when you modeled the Roth conversions?”

Cheryl shook her head. “If I understand what you are asking, no. The 30/70 allocation comes straight off my investment policy statement. It reflects my risk aversion, and I use that allocation in my Roth account same as my TDA.”

Cassius shook his head. “Sounds like you never read that Reichenstein and Horan paper in the Financial Analysts Journal, 2012: https://www.researchgate.net/profile/Wi ... h-2012.pdf

Cheryl stared at him. She absolutely, positively hated it when people told her she hadn’t read some obscure scholarly article. On the other hand, Cas was always coming up with something new. That’s why she liked him. Then Cheryl gasped, remembering that FAJ was the official publication of the Chartered Financial Analysts Institute.

Gathering herself: “What’s your point, cas?”

Taking his gardening gloves off and moving toward the railing: “Your cousin Celia explained to you that a dollar in Roth is worth more than a dollar in the TDA, right?”

“Yeah …”

Cassius, levelling his gaze: “You know that she was just channeling a point made over and over by Professor Reichenstein? It’s not unique to cousin Celia.“

Cheryl stared back without saying anything.

Cassius sighed. “So if you have $700,000 in bonds in your TDA, and $300,000 in stock in your Roth, and that is your total portfolio, what is your stock/bond allocation?”

Cheryl, exasperated: “30/70, same as I have maintained throughout!”

Cas, in as gentle a tone as he could manage: “Wrong.”

Cheryl, rolling her eyes and beginning to jog in place: “Why is it not 30/70?”

Cas, slowly, as if speaking to a child: “You expect to be in the 22% bracket when RMDs begin, is that right?”

“Yes!”

Cas, firmly: “Then the $700,000 in bonds in the TDA is only worth $546,000 after tax. The $300,000 stock in Roth is worth that same $300,000. You actually have a 35/65 asset allocation, after-tax, not 30/70. If stocks outperform bonds, as most of us expect, that will drift up to a 40/60 allocation, and then a 45/55 allocation, etc. And since you are making withdrawals from the TDA but not the Roth, that shift will be accelerated. You may be at 50-50, after-tax, before you know it, with 60/40 coming down the pike.”

Cheryl practically spat it out: “Great! Now I feel like a character in a play by Moliere. Seems I have been following a bond tent strategy and didn’t know it. Fine!”

It was her neighbor’s turn to stare hard. “My point is a little different. What discount rate did you use in evaluating the present value of IRMAA and income tax savings?

“The projected return on a 30/70 portfolio of 6%.”

Cas sighed. “Under asset location theory, you would preferentially move your stock into the Roth shelter, leaving only bonds in the TDA, if you can convert enough.”

Cheryl, bouncing up and down on her toes, really wanting to start her walk: “I understand, I could do that. But what’s the payoff?”

Cas: “If it contains only bonds, your TDA will grow more slowly, appreciating at the bond rate, say 4.5%, not the 6% expected from a 30/70 mix.”

Cheryl, intrigued but skeptical: “4.5%, 6.0%, how much difference is that going to make in the first ten years?”

Cas nodded sagely. “Not much, in terms of TDA balances and RMD income. The big payoff comes in the discount factor over the longer term. Those future IRMAA savings, discounted back to the present at 4.5%, are going to be larger than if discounted at 6%.”

Cheryl’s eyes widened. “So you want me to rerun the analyses with that lower discount rate?”

Cas, picking up his pruning shears. “You will also need to introduce the Roth balances and do a wealth analysis. If the Roth holds all your stock, it’s going to grow quite a bit faster than the 6% expected from a 30/70 blend. Even if you lose money on the taxes and IRMAA analysis taken in isolation, you may more than make it up on the tax-free stock appreciation you get from relocating assets as part of those massive Roth conversions cousin Celia told you to consider.”

Turning back to his rose bushes, he added “One last thing. Be sure to run the results by your friend Dale the doctor. You need to be clear about the risk you shoulder with this sort of asset relocation.” https://www.whitecoatinvestor.com/asset-location/

“Thanks,” called Cheryl over her shoulder as she strode away. “No more spreadsheets today,” she promised herself.
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by AlphaLess »

jhawktx wrote: Fri Jan 20, 2023 8:42 am
AlphaLess wrote: Thu Jan 19, 2023 10:24 pm
Parkinglotracer wrote: Fri Jan 06, 2023 4:12 am I loved the story although It’s a little over my head - I’ll understand it better as I live it and complain after I do my taxes the next two decades lol

The good news for Cheryl and myself - lately the market decline is taking care of the projected high TDA RMDs.

I
Fun story. But so much chit-chat that I lost the purpose of the thread.
Can't speak to the purpose but the findings show that Roth conversions should be approached with caution. Some on this board are almost fanatical about recommending Roth conversions even when it makes no economic sense. This thread SHOULD be a wake up call to those folks. To some, if you have a hammer (Roth conversion), every retirement investing issue looks like a nail.

This thread COULD HAVE BEEN be a wake up call to those folks if it were written with such purpose.
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Re: Steering through the shoals of IRMAA past the SS Tax Torpedo

Post by #Cruncher »

McQ wrote: Sun Jan 22, 2023 11:12 pm2. You might find this free calculator useful re the torpedo: https://www.covisum.com/resources/taxab ... calculator
The following calculator instruction is wrong.
Enter taxable income excluding SS benefits
(IRS Form 1040 lines 1, 2a, 2b,3a,3b,4b,5b,7,8)
"Tax-exempt interest" (2a) should indeed be included, so it's misleading to say "Enter taxable income". "Ordinary dividends" (3b) includes "Qualified dividends" (3a). Therefore 3a should not be added in.
capran wrote: Tue Jan 24, 2023 12:48 amI actually spent over 4 hours today with the SS Benefits worksheet ... My SS is only 25,225. ... if our non social security income was 49,553 or less, we would pay ever so slightly less than the 85% of the full SS ...

When I saw your link [to the covisum.com calculator, McQ] it was a perfect opportunity to check my work. Thank you so much. It made my night! Indeed, when I put in my full SS in the calculator, with no adjustments for the exclusions and adjustments lines, the link says the amount of SS that is taxable is 21,440.67, which is just a few pennies different from my computation work sheet. So that's a win. The worksheet works!
The following spreadsheet also calculates the taxable portion of SS. I think it's easier to follow than the IRS SS Benefits worksheet. (For more on the calculations it uses, see the Wiki's Taxation of Social Security benefits.)

Code: Select all

Row                                    Col A     Col B   Formula in Column B
  2                   Single = 1 / Joint = 2         2
  3                  Social Security benefit    25,225
  4      Other income (including tax exempt)    49,553

Code: Select all

  5  Relevant income (1/2 SS + Other income)    62,166  =B3/2+B4
  6                            50% threshold    32,000  =IF(B2=1,25000,IF(B2=2,32000,"Enter 1 or 2 in cell B2"))
  7                            85% threshold    44,000  =IF(B2=1,34000,IF(B2=2,44000,"Enter 1 or 2 in cell B2"))
  8              Relevant income 50% taxable    12,000  =MAX(0,MIN(B5,B7)-B6)
  9              Relevant income 85% taxable    18,166  =MAX(0,B5-B7)
 10                         SS taxable @ 50%     6,000  =50%*MIN(B8,B3)
 11                         SS taxable @ 85%    15,441  =MIN(85%*B9,85%*B3-B10)
 12                         Total SS taxable    21,441  =B10+B11
 13                  % of SS that is taxable     85.0%  =B12/B3
 
 14      Other income to reach 50% threshold    19,388  =B6-B3/2
 15      Other income to reach 85% threshold    31,388  =B7-B3/2
 16      Other income to reach 85% of SS max    49,554  =(0.425*B3+0.5*B6+0.35*B7)/0.85
If you wish to use the spreadsheet with other assumptions in rows 2:4, Select All, Copy, and Paste the following at cell A1 of a blank Excel sheet. (If you have trouble pasting, try "Paste Special" and "Text".)

Code: Select all

Col A	Col B
Single = 1 / Joint = 2	2
Social Security benefit	25225
Other income (including tax exempt)	49553
Relevant income (1/2 SS + Other income)	=B3/2+B4
50% threshold	=IF(B2=1,25000,IF(B2=2,32000,"Enter 1 or 2 in cell B2"))
85% threshold	=IF(B2=1,34000,IF(B2=2,44000,"Enter 1 or 2 in cell B2"))
Relevant income 50% taxable	=MAX(0,MIN(B5,B7)-B6)
Relevant income 85% taxable	=MAX(0,B5-B7)
SS taxable @ 50%	=50%*MIN(B8,B3)
SS taxable @ 85%	=MIN(85%*B9,85%*B3-B10)
Total SS taxable	=B10+B11
% of SS that is taxable	=B12/B3
Other income to reach 50% threshold	=B6-B3/2
Other income to reach 85% threshold	=B7-B3/2
Other income to reach 85% of SS max	=(0.425*B3+0.5*B6+0.35*B7)/0.85
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