Silo Effect in Financial Planning

I have been on multiple interviews to alert people about the uncovered issues when people consider seemingly-unrelated financial topics separately. That is almost never the case. Here’s possibly a huge, very expensive example.

This is a table of Vanguard’s Target Retirement Date mutual funds, and this one is the 2030 dated fund. Note: there is no dispute about the underlying quality of Vanguard’s ability to put together the “glue” that is described in this video.

The point is that there are annual distributions, and they can affect your health insurance premiums if you receive a tax subsidy (APTC), and can also possibly create situations when you are subject to Part B and Part D IRMAA. If this is you, then you would have to pay back the excess APTC or be subject to IRMAA in the future. If you, and those that have “assisted” you have known this in advance, then ok, so be it.

More likely? Those that have “assisted” do not know, and of course, you would not be expected to know, unless you’re a subscriber (Comprehensive Financial Planning clients have this built in, obviously).

LOOK at the LT Cap Gain distribution; even if you did not buy or sell a single share, you would’ve received $5.9225 in LT capital gains, when the price of a share was $38.44 at that time.

For IRMAA, the tax subsidy changes for every extra dollar of income. For Medicare, this table (link). This has specific cutoff points. These are very different handling, and the implication to the asset location of specific holdings is powerful because depending on your age and how you are insured (individual vs Medicare markets), your premiums would be affected differently.

In turn, that is the same thing as “lower returns” on your portfolio holdings: it is the same thing, you don’t care about “money from here, money from there,” you would rightfully care about the total, after taxes.

Now, you can see why I think there is room for an already-crowded population of retirement and financial planning books. This type of detail isn’t well-explained even in books that are aimed at the professional market, much less in the consumer market.

More and more and more later.
Here’s the outline, as of today (link).