Almost went over the Subsidy Cliff

[scrabbler1]

The Fidelity year-end cap gain distributions came out a few days ago and I looked carefully to see if I will be going over the cliff again in 2019. If I am, and can't really do anything to stop it, I will make some big changes to prevent it from happening in 2020. However, it looks like this year I will only barely go over it, and I may be able to do something about it by using specific-ID to see some shares of one mutual fund at a loss. I recall others here mentioning how they TLH (tax-loss harvest) to create losses. I just changed my cost basis in Fido's website to specific-ID to prepare for this possibility.


It will be very close, as I may go over the cliff by about $1,000. Not going over the cliff will be worth about $2,500 in ACA subsidies, so it will be well worthwhile to do this. The timing will be close, because the main fund's cap gain distribution will not be announced until December 26th, giving me only a few days to figure out how much to sell to make sure I avoid going over the cliff.


Here is a link to Fido's 2019 year-end estimates:


https://www.fidelity.com/mutual-funds/information/distributions#/?table=estimated

 

[Rianne]

So, no tIRA contribution? We had the same concern earlier this year. Then, one of our posters said contribute to your tIRA in December. Solved our issue.

 

[scrabbler1]

So, no tIRA contribution? We had the same concern earlier this year. Then, one of our posters said contribute to your tIRA in December. Solved our issue.

Don't you need to have some wage income in order to contribute to an IRA? I have no wage income.

 

[PaunchyPirate]

Don't you need to have some wage income in order to contribute to an IRA? I have no wage income.

Yes you do need earned income in order to contribute to an IRA. I earned $4600 in my final paycheck in January (I retired in December). So I contributed $3600 of that to my tIRA to lower my MAGI. I contributed the other $1000 to a new Roth IRA that I wanted to open in case I need it in the future for Roth Conversions. I'm nervously watching the year-end distribution planning announcements to see if I calculated things correctly. I think I'll be about $5000 below the cliff, but it's been a good year in the stock markets, so I'm worried higher distributions than in the past popping up. If I calculated incorrectly, it will mean almost $6000 in tax credit payback. Ouch.

Good luck!

 

[skibum]

Most of my capital gains from from Fido funds, and in the past I have estimated capital gains coming in Dec based on prior year distributions before final year end financial moves.

Thanks for the link to estimated capital gains from Fidelity funds, this will help me better plan my year end moves before Dec distributions.