Being Interviewed Helps Me and You
Come and listen to me on The Financial QB with host Josh Jalinski (great host), on WOR-NY, The Voice of New York (link).
The reality is that I spend most of my time thinking: “how can I explain it so that a common-sense person can understand it?” That will change, based on the audience. I explained this newsletter and how I wrote Maximize Your Medicare. The underlying information used to create the conclusions are not based on the sales points included in the advertisements you have received. The inputs are complicated, and can change through time.
Different interviews have different target audiences, Josh has the background and bandwidth to ask challenging questions, here’s a further explanation of a topic I was trying to explain (I need to improve on explaining it concisely, not easy).
Thanks to Josh for bringing up this topic, one that will be notably absent in most financial planning discussions. Why?
The technical details of APTC and IRMAA is largely a foreign language to “Mr StocksAreHigher.”
Tax-efficient financial planning is a largely a foreign language to “healthinsurancerus.com.”
Sounds like the starting point of new book? Hmm. The progression of that is within the paid Substack. But first, let’s examine one of the topics discussed with Josh Jalinski.
Key Takeaway: Segregating Health Insurance, Investment Planning and Financial Planning = Something BIG Will Get Missed, I am more certain of this, every single day. I have called this the “silo effect,” where you get fragments, each can seem logical, but the combination (which includes timing) matters, a lot.
2022 Example
Married couple, Chicago, ages 64 (male) and 63. Taxable income $75,000, which included a $25,000 Roth IRA conversion. This is the result (approx), $912 a month saved on health insurance x 12 = $10,900. Looks great, right?
2022 Alternative
Delayed the Roth IRA conversion, now the taxable income is $50,000. The couple could’ve saved $14,580 (=$1215 x 12) instead, a difference of $3,680 ($14,580 less $10,900).
If they waited until 2023
Wife has to continue to buy health insurance, receives a much smaller subsidy, $200/month, so her cost will be about $400/month.
Husband goes to Medicare and at $75,000, IRMAA = $0/month, because the “cutoff” for a married person’s income is $182,000. His premium, for the Rolls Royce of health insurance will cost approximately $170.1 + $140 + $30 = $310 (Medigap Part B + Medigap Plan G + Part D). Roughly.
Was the Roth IRA conversion in 2022 worth it?
Very uncertain. One one hand, the logic of Roth IRA conversion still exists. On the other hand, the term “sequence risk” has multiple variations and one is “sequence gain,” which is that this couple would have $3,680 more during the first years of early retirement, versus unknown (albeit logical) benefits of the Roth IRA conversion, later.
That is up to you, the fact is that most people don’t have this information, so they don’t know the range of choices available.
Important note: I have stated that failure of the Build Back Better Act will jeopardize the full extent of health insurance savings, the APTC will not be available beyond 2022, in which case, this exercise will change again.