USGrant1962
Thinks s/he gets paid by the post
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Ex. we all knew it was coming, especially when we contributed to 401k's, IRA's, etc.
Nope. I never heard of an RMD until maybe 10 years ago when I started studying ER in earnest.
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Ex. we all knew it was coming, especially when we contributed to 401k's, IRA's, etc.
Whether it's a Hump or not depends on how you look at things.
Let's assume that 85% of SS income goes into your AGI for everybody, even low income folks who have no other income.
But then, we give a special Anti-poverty Tax Deduction to those folks on a sliding scale.
End result would be the same...
Nope. I never heard of an RMD until maybe 10 years ago when I started studying ER in earnest.
The first time I heard of the "tax torpedo" was from a Scott Burns article quite a few years ago. Every once in a while he revisits it.The phrase “Tax Torpedo” is inherently inflammatory, IMO. It sounds like something a partisan hack would invent to describe the political opposition and get people angry enough to send in more contributions to some politician, or dress in funny clothing and demonstrate outside the government buildings carrying home made signs they picked up at the printers.
I enjoyed his columns but it does seem needlessly dramatic to call it a torpedo.The first time I heard of the "tax torpedo" was from a Scott Burns article quite a few years ago. Every once in a while he revisits it.
Scott is non-political, he seems to dislike politicians of any party equally!
Good point.The first time I heard of the "tax torpedo" was from a Scott Burns article quite a few years ago. Every once in a while he revisits it.
Scott is non-political, he seems to dislike politicians of any party equally!
Good point.
"A rose by any other name would smell as sweet."
A 49.95% marginal tax rate, on the other hand, has a somewhat different aroma, regardless of the label used....
Good point.
"A rose by any other name would smell as sweet."
A 49.95% marginal tax rate, on the other hand, has a somewhat different aroma, regardless of the label used....
Good point.
"A rose by any other name would smell as sweet."
A 49.95% marginal tax rate, on the other hand, has a somewhat different aroma, regardless of the label used....
49.95% is correct. E.g., see the second example in the Married taxpayers section....and that 49.95% marginal tax rate seems incorrect nowadays, based on being in a 27% Federal tax bracket, which doesn't exist.
To the extent you are in the current 22% tax bracket, your tax hump marginal rate would be 1.85 * 22% = 40.7%.
But most of your tax hump is likely in the current 12% tax bracket, giving you a marginal rate of 1.85 * 12% = 22.2%...
Or the SSA has a record of what you paid in to SS since it is on your SS statement and your earnings are used to calculate your benefit so it should be easy for them to determine the taxable portion just like is done for life annuities and report the taxable amount on your 1099-SSA. Would be fairer IMO.That higher tax hump marginal rate is only for a small range of additional income as the low-income SS taxation discount phases out.
Some people would be happier if they just made 85% of your SS includable in your AGI no matter what your additional income is...
49.95% is correct. E.g., see the second example in the Married taxpayers section.
That 49.95% zone might not be more than ~$30K wide in most situations though.
Some people would be happier if they just made 85% of your SS includable in your AGI no matter what your additional income is...
The SS tax hump is gradually shrinking as the start of the 22% tax bracket increases each year.Where do you get that from? This is the very thing people who are in or short of the SS tax hump are trying to avoid. If it's not possible to avoid and the full 85% is taxable I'll accept it because what else are you going to do?
And yes, the tax hump really can be a 49.95% marginal tax. It's been spelled out many times how this can be.
The phrase “Tax Torpedo” is inherently inflammatory, IMO. It sounds like something a partisan hack would invent to describe the political opposition and get people angry enough to send in more contributions to some politician, or dress in funny clothing and demonstrate outside the government buildings carrying home made signs they picked up at the printers.
IMO, there are lot's of "countermeasures" to avoid/minimize the impact of the so called tax torpedo. To me, it's more of long tax planning and speed bumps than a torpedo. YMMV
Ex. we all knew it was coming, especially when we contributed to 401k's, IRA's, etc.
The first time I heard of the "tax torpedo" was from a Scott Burns article quite a few years ago. Every once in a while he revisits it.
Scott is non-political, he seems to dislike politicians of any party equally!
He wrote a book with Laurence J Kotlikoff "The Coming Generational Storm." IIRC that was where the authors went into a deep dive about the various issues surrounding SS (and maybe MC??.)
Kotlikoff was the fellow who introduced me to the Take SS at 70 and have more money to spend for life strategy. He’s good with numbers.
So is it true you're not protected from 65~70 if you delay SS?I believe the article is saying that you should have the Medicare payments taken out of the social security payment to avoid the potential scenario of paying higher rates.
So is it true you're not protected from 65~70 if you delay SS?
The $230.80 is the total premium, not the surcharge. From the linked source, the base rate is $164.90 so the surcharge is $230.80 - $164.90 = $65.90.
On the other hand, you wouldn't want to use total income in the denominator because that's an effective rate and you'd want to use a marginal rate. The Worth pushing through the Social Security hump and/or IRMAA cliffs? wiki section has some good illustrations.
The marginal rate for going $1 over the first IRMAA tier is ridiculously large, as happens with any tax "cliff". At best (and coincidental to the quoted calculation), if one can completely fill the $52K-wide tier, the marginal rate due to IRMAA alone is $65.90 * 12 * 2 / $52K = 3%, as the second chart in the above wiki section also shows.