Medicare Taxes

Comments on “The Individual Investor’s Guide to Personal Tax Planning 2021,” by AAII Staff, in the December 2021 AAII Journal:

For those on Medicare, knowing the Income-Related Monthly Adjustment Amount (IRMAA) when adjusted gross income (AGI) slips over the thresholds is handy. Accidentally hitting the increase could be a nasty surprise for the next years.
—Blaine W. from Washington

AAII editors respond:
We included a link to the Medicare part B premiums and thresholds in the “Income, Medicare Part B and Social Security” box. Detailed Medicare cost information can be found at: www.medicare.gov/your-medicare-costs/medicare-costs-at-a-glance.

Save a Tree

Comments on “Print Magazines Are Not Immune to Supply Chain Issues,” by Charles Rotblut, CFA, in the December 2021 AAII Journal:

Charles, I’m happy to help out by changing my subscription to digital. Thanks for continuing to provide great value for my lifetime subscription!
—G.R. from Iowa

Although I often access the digital version of the AAII Journal, I very much value the print version. I also receive the print and digital version of The Wall Street Journal.
—James F. from Florida

Screening for Novices

Comment on “Buy Great Companies for the Long Term: Buffett Hagstrom Screening Strategy,” by Derek J. Hageman, in the November 2021 AAII Journal:

Being a construction worker with not much financial education, I found this article the easiest to follow—so much so that I’m going to give this screen a try. After being an AAII member for many years, I believe that I am the type of investor that Cloonan was trying to attract. I still don’t understand most of the stock market jargon, but I do follow the basic rules of investing, which are paying off nicely.
—Richard DiMattia from New Jersey

Opinions on When to Make Roth Conversions

Comments on “Can a Roth IRA Conversion Save You Money?,” by Roger Young, CFP, in the September 2021 AAII Journal:

Individuals with 30+ years of work will have upward of $1 million. To convert such to a Roth would not be wise. The federal tax would be over 40%. A person would never get an equal return for such a shortfall. Don’t do a Roth conversion except when you’re young and only have a small amount of money in the IRA to rollover.
—Gilbert L. from Texas

The article fails to mention one of the biggest advantages to doing conversions for married people. As another member noted, one spouse will eventually die, perhaps years ahead of the second spouse. Converting a much higher percentage of traditional IRA money to Roth money makes sense for those who are married as there will almost certainly be a point where retirement taxes are higher than now.
—Kevin V. from North Carolina

The amount incurred in taxes—say, 30% to 40% with state taxes (California)—is a lot of money that could be earning investment returns over another 20–30 years prior to having to pay taxes. Keeping the maximum amount of capital invested (even if pretax) far exceeds potential future tax consequences.
—Christopher B. from California

I’ve made conversions into Roth accounts and seen them grow nicely. I will owe no tax on that growth. The 22% federal income tax I pay today on my Roth conversion is pretty much repaid (to me) over the next three to four years.
—Paul V. from Maryland

If you strictly consider the Roth conversion, using money from the IRA to pay the taxes, after age 59½, assuming the same tax bracket now as when you withdraw the money, you end up with the same amount of money, after taxes, when you withdraw it with either the conventional IRA or the Roth.
—Ronald K. from Indiana

Taxing Corrections

The Income, Medicare Part B and Social Security box in our December tax guide incorrectly stated the calculation for combined income, which is used to determine how much of your Social Security benefits are taxed. The calculation should have started with modified adjusted gross income (MAGI) instead of AGI. The correct calculation is: MAGI + tax-exempt interest + one half of your Social Security benefits.

Also in the tax guide, the second footnote in Table 1 should say MAGI instead AGI: **3.8% net investment income tax (NII) surtax applies when MAGI is above $250,000/$200,000.

In December’s “Guide to Tax on Your Personal investments 2021,” the second paragraph under the heading Capital Gains Rates incorrectly states that tax rate thresholds are AGI levels. Those thresholds are taxable income ranges.

We regret the errors. Corrections have been made to the online versions of these articles.