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I will still take the dividends

R Quinn | Sep 12, 2026

"Temporary and insignificant only because you are stubbornly refusing to grasp the core premise. You are in favour of good financial education but because this concept is not part of your personal Quinnonomics you are trying to reject it which is putting out bad financial education. Dividends are not free money. They cost a business real cash which could be being deployed to generate further growth and hence an enhanced share price. The idea that dividend or income stocks are in some way superior is old and largely redundant financial thinking also. They fill an emotional need for some investors who are less neuroplastic regarding accepting the fundamental fungibility of money when it comes to investing."

- bbbobbins

On Being a “Healthy” Person

DrLefty | Sep 8, 2026

"Dana, what an interesting perspective on what it means to be “healthy.” In some ways, knowledge really is power. You can’t change the genetics you inherited, but knowing what you’re dealing with gives you the opportunity to act before those risks become something more serious. There’s something wonderfully ironic about discovering you have cardiovascular disease potentially being the very thing that helps you remain healthy for many years to come. Wishing you many of those healthy years ahead."

- Andrew Clements

Locking it in

greg_j_tomamichel | Sep 5, 2026

"Thanks Martin. I figure that it's ok to imprecise, so long as the total plan works out."

- greg_j_tomamichel

What to do about the new ID.me login requirement at TreasuryDirect

William Perry | Sep 14, 2026

"Thanks for your comment. A number of comments on Humble Dollar and other sites I read gives me pause about continuing to buy I Bonds. I have not had the administrative headaches you and others have had and I certainly do not want them for myself or my heirs. Converting my login at TD to ID.me is a distant secondary consideration on if I am willing to continue buying I Bonds if TD does not improve their customer service when something occurs for a person like you who has taken reasonable actions which are deemed to be insufficient."

- William Perry

Free Breakfast

D.J. | Sep 9, 2026

"A good "free breakfast" is a win-win. A good breakfast helps shape a guest's positive experience and builds loyalty for a hotel, and it can offer a good breakfast at a low cost because it has economies of scale. But a guest also benefits from a good "free breakfast" even if it is paid for indirectly. I always found the breakfast time at a hotel to be a great time to get a solid start, and to eat nutritious food instead of the inevitable later mid-morning snacks. It is a great place to discuss or resolve one's final plan for the day when on vacation, and even on some business trips. It is one place where you bond rather than argue on vacation. You also save time running out and looking for something acceptable elsewhere, especially if you have a few people in your party. You also will tend to know what you will order (or grab from the buffet) every day in advance, since you know from day 1 what you like that is on the menu and what the hotel puts out on the buffet. This works for cruises, too. However, even if a breakfast has a separate charge, it may still be useful to pay, since the value to a hotel guest can more than offset the cost. (On the other hand, a breakfast of powdered eggs, rubbery bagels, bad coffee and half-stale pastries will make one think less of a hotel, and lead to a different choice for a place to stay in the future.)"

- Martin McCue

A Wedding Too Far

Mark Crothers | Sep 7, 2026

"Congratulations. I have what I call the definitive Father of the Bride reception speech outline, which covers every possible thing you need to remember to cover (or affirmatively elect to ignore.) I researched it for a month for my daughter's wedding, digging through almost every wedding book in print. (Did you know that Angela Lansbury wrote a really good wedding preparation book?) I've given it to a half dozen friends as their little girls began to get married, and it saved them a lot of work. Anyway, if there is a good (and safe) way to share it with you, I'm happy to send you a copy. (I've looked for a way to publish it online to give it a broader reach, but never really came up with a way to do that.)"

- Martin McCue

Being terminated…

gnussen623 | Sep 12, 2026

"That’s awesome Julie!"

- gnussen623

The Silent Committee

John Goodell | Sep 14, 2026

"John, thanks for a really interesting article. About 30 years ago my brother-in-law called me and told his company (Cincinnati Financial) announced that they were being included in the S&P 500, and asked me what that meant. I gave him the broad explanation, but did a little research to help him understand what it meant to be included. Your article and the latest dealings with SpaceX brought back fond memories of that discussion."

- Rick Connor

Widow’s IRA Choice

ArticleJohn Urban | Sep 12, 2026

WHEN A HUSBAND dies, his widow inherits his IRA. Somewhere in the paperwork of the months that follow there is a decision to make, and nobody presents it to her as one. She can take the account as her own, or she can leave it titled as inherited. Taking it as her own means filling something in. Leaving it means doing nothing, and the IRS tells custodians they may assume that is what she wants. So the account sits where it is, at the same firm, holding money the household always treated as joint, and the decision gets made by nobody. It is the more expensive of the two. Not by a little. Two Tables Every year, a required minimum distribution, or RMD, has to come out of the account. The amount is the balance divided by a number from an IRS table, and there are two tables in play here. Beneficiaries use the Single Life Expectancy table. Owners use the Uniform Lifetime table, which spreads the money over a longer period and therefore asks for less each year. That is the whole mechanism, and it is worth about a third of the annual bill. Take a widow of 76 with $480,000. Left titled as an inherited account, she must take $34,043 that year. Had she taken the same account into her own name, she would have to take $20,253. Same money, same woman, same birthday. The difference is which box got ticked in the months after the funeral. It Does Not Happen Once That gap is not a one-year event. Run both versions forward 10 years, same account, same growth, taking exactly what is required and nothing more. The inherited schedule forces out $374,306 over the decade. As owner, $246,281. She pays about $30,600 more in federal income tax getting there, and reaches 85 with roughly $171,000 less still inside the IRA. She has not lost that money. She has been made to take it out early, pay tax on it sooner, and hold it somewhere less sheltered for the rest of her life. That is a slower kind of damage than a penalty, and a larger one, because it renews every January for as long as she lives. A Floor, Not a Ceiling The usual objection to taking the account as your own is that it locks the money up. It does the opposite. A required distribution is a floor, not a ceiling. She can take more in any year she wants it, for any reason, and nobody asks why. What she leaves alone stays sheltered and keeps compounding. The lower figure buys her the choice. The higher one makes it for her, every year, whether the money is needed or not. One Case Runs the Other Way There is a real exception, and it matters enough to state plainly. Money paid out of an inherited IRA escapes the 10% early-withdrawal penalty at any age, because the IRS exempts what is paid to a beneficiary on account of the owner's death. Take the account as your own and you are back under the ordinary rules. So a survivor who is young enough that an early withdrawal would be penalized, and who expects to need the money, has a genuine reason to leave the account exactly where it is. That threshold is 59 and a half. For most couples already retired this will not apply, and the rest of the article governs. Where it does apply, it outranks everything above. Nobody Will Prompt You I wrote recently about the letter that never comes. A custodian has to tell an IRA owner what must be withdrawn each year, and owes an inherited account nothing at all. So the choice decides more than the size of the bill. Take the account as your own and the letter starts arriving, every January, for the rest of your life. Leave it as inherited and you are on your own to remember the RMD. The branch that requires no paperwork is therefore both the more expensive one and the quiet one, and those two facts feed each other. The option that costs more is also the one that removes the annual nudge that might have made you reconsider it. Decide It Before You Have To None of this is hard to work out. It is hard to work out in the eight weeks after a funeral, which is exactly when it gets decided, usually by default. If you are married and you both hold IRAs, settle it now, while it is hypothetical for both of you. Talk through which of you would be likely to need the money soon after the other died. That is what the 59-and-a-half question really asks, and it is a conversation about your circumstances rather than about tax tables. Then decide which way the survivor should go, write it down, and put it with your trust, your will and the beneficiary designations, where a survivor or an executor will actually come across it. Tell whoever else needs to know that it exists. Look at it again as either of you nears the age your own distributions must begin. That is 70 and a half if you were born before July 1949, 72 if you were born between then and the end of 1950, 73 if you were born between 1951 and 1959, and 75 if you were born in 1960 or later. It is the birthday that makes the whole question live. The paperwork will not choose for you. It will simply do nothing, which is a choice, and on these numbers it is the wrong one for most people who make it by accident. ________________________________________________________________________________ John Urban is the founder of RetireSmartIRA, a retirement tax-planning app. Earlier, he founded GT Nexus, a supply-chain software company acquired by Infor in 2015. He lives in Northern California with his wife, Kathy, and enjoys time with family, travel, reading, Bay Area sports, and the occasional deep dive into the fine print of the tax code.

Total portfolio approach?

baldscreen | Sep 14, 2026

"Your second paragraph says it all. The best plan for an individual is the one which is sensible and which he or she can stick with for the long term."

- Jack Hannam

Growing Up In A Big House

DAN SMITH | Sep 9, 2026

"Thank you Dan for the wonderful story"

- Nick Politakis

Financial Choices

ArticleAdam M. Grossman | Sep 12, 2026

FOR MUCH OF THE seventeenth and eighteenth centuries, European monarchs used a financial instrument known as a tontine to help finance their governments. Tontines were first developed in the 1650s by an Italian government worker named Lorenzo Tonti and were similar to annuities: In exchange for a single, lump-sum purchase, tontines offered guaranteed payments for life. But tontines also offered some unique features. Unlike an annuity, where payments end with the death of the owner, tontine holders had the option of tying the payments to another person. A parent, for example, could name their son or daughter on a tontine, thus extending the payments over a much longer period. In the 1750s, however, a Swiss banker named Jacob Beaumont had a realization: While the owners of tontines typically named their children, a quirk in the rules permitted a tontine owner to name any individual. To Beaumont, this presented an opportunity: Why not name the youngest possible person, thus extending the stream of payments even further? In his home town of Geneva, Beaumont identified ideal candidates for this role: young children who came from well-heeled backgrounds and were thus likely to have access to good healthcare. He then began loading up on tontines tied to the very long life expectancies of these children. The strategy worked exactly as expected and delivered Beaumont enormous profits. Other investors then piled in, mimicking Beaumont’s strategy, which, for a time, offered a virtually no-lose opportunity for profit. This went on until the French government, in frustration, discontinued its tontine program. When it comes to financial decisions, it’s the rare situation that’s as obvious as the one that Beaumont identified. Instead, most financial decisions entail some amount of uncertainty and are subject to judgment. Some choices, though, are closer than others to being obvious decisions. Here are six that I see frequently.

Certain Social Security claiming decisions are without question. For example, if you’re married and plan to claim the spousal benefit, it’s important to know that this benefit hits a maximum at full retirement age (FRA), which is now age 67 for most people. Unlike workers’ own benefits, which can continue to increase all the way to age 70, spousal benefits are subject to a different rule, so there’s no benefit for anyone to wait beyond FRA.
You may be familiar with umbrella insurance. This provides additional liability coverage on top of auto and homeowner’s (or renter’s) insurance. Because it covers low-likelihood situations, such as someone slipping and falling on your front walk, umbrella coverage is extremely cost effective—sometimes as low as a few hundred dollars per year. I see it as an obvious benefit because the situations it covers, however unlikely, are also the ones that could be the most expensive. And because it would be the insurance company that would face exposure, insurers provide legal defense, at their expense, if there is ever a claim. How much coverage should you have? I generally recommend between $1 million and $5 million, but the key point is that almost any coverage is better than none.
In choosing an asset allocation for your portfolio, I think it’s best to avoid rules of thumb, because everyone is different. At the same time, a recommendation that I see as universal is to avoid extremes. I wouldn’t get too close to 100% bonds because of the corrosive impact of inflation. And I don’t like getting too close to 100% stocks because of the volatility and risk of loss. That’s always been my view, but recent research can help investors narrow the range further. William Bengen, creator of the “4% rule,” published a book last year in which, for the first time, he looked at the question of portfolio longevity through the lens of asset allocation. What he found was that portfolios with stock allocations between 45% and 75% offered the highest sustainable withdrawal rates over multiple decades.

If you’ve recently retired, you may be considering a Roth conversion, whereby you’d move dollars from your pre-tax IRA to a Roth IRA. This is a popular strategy, but the catch is that a tax must be paid when a conversion is completed, and your tax bracket can increase as you convert more. Convert too much, and you can negate the benefit of a conversion. For that reason, it isn’t always obvious whether a conversion is advisable. There is one situation, though, where a conversion offers an almost obvious benefit: If your income, even with a conversion, would be in one of the two lowest tax brackets (10% or 12%), then it’s unlikely you’d ever find yourself in a lower bracket than that in the future. In that case, especially because of special deductions provided by the new tax rules, I’d view it as an almost obvious choice to proceed with a conversion up to the top of the 12% bracket.

Looking to make charitable gifts? Because the standard deduction is now so high, fewer taxpayers are able to itemize deductions, and that can limit the tax benefit of donations. But there’s still a way to gain a tax benefit: If you have appreciated stocks in a taxable account, you can donate them to a donor-advised fund. That would allow you to sidestep the capital gains tax that would otherwise be due if you sold those stocks. Many donor-advised funds have no minimums, making this an easy choice, in my view.
If you believe your estate will top the estate tax threshold (about $15 million per person at the federal level, but much lower in certain states), then I would be sure to use the annual exclusion (currently $19,000 per donor and per recipient) to make incremental gifts to your heirs. That's because this annual exclusion is in addition to the lifetime exclusion and doesn’t carry over from year to year.

Note that these gifts don't have to be made in cash if the recipients aren't yet in a position to receive them. As alternatives, you could make contributions to a 529 account or to a trust for their benefit, and these contributions would count toward the annual exclusion. Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam's Daily Ideas email, follow him on X @AdamMGrossman and check out his earlier articles.

I will still take the dividends

R Quinn | Sep 12, 2026

- bbbobbins

On Being a “Healthy” Person

DrLefty | Sep 8, 2026

- Andrew Clements

Locking it in

greg_j_tomamichel | Sep 5, 2026

"Thanks Martin. I figure that it's ok to imprecise, so long as the total plan works out."

- greg_j_tomamichel

What to do about the new ID.me login requirement at TreasuryDirect

William Perry | Sep 14, 2026

- William Perry

Free Breakfast

D.J. | Sep 9, 2026

- Martin McCue

A Wedding Too Far

Mark Crothers | Sep 7, 2026

- Martin McCue

Being terminated…

gnussen623 | Sep 12, 2026

"That’s awesome Julie!"

- gnussen623

The Silent Committee

John Goodell | Sep 14, 2026

- Rick Connor

Widow’s IRA Choice

ArticleJohn Urban | Sep 12, 2026

Manifesto

Sep 16, 2026

NO. 27: RISK and potential return are inextricably linked. If an investment holds out the prospect of high returns, we should presume it’s highly risky—even if we can’t figure out what the risk is.

act

Sep 16, 2026

TAP HOME EQUITY to trim other debts. If you have high-interest auto loans or credit card debt, you might set up a home equity line of credit and then use it to pay off these higher-cost debts. That’ll reduce the interest you pay. You won’t, however, save on taxes. Thanks to 2017's tax law, such home-equity borrowing is no longer tax-deductible.

Truths

Sep 15, 2026

NO. 118: OWNING both U.S. and foreign stocks will smooth out a portfolio’s long-run performance, as those two sectors take turns posting strong results. But when shares turn lower, global stock markets become highly correlated—and salvaging your portfolio’s short-run results will hinge on owning other asset classes, notably high-quality bonds.

think

Sep 14, 2026

BE AN OWNER. Home buyers typically fare better than renters, provided they stay put for at least five years. Becoming a part owner of corporations, by investing in stocks for the long haul, should be more lucrative than lending money by buying bonds. Owning a car is typically cheaper than leasing, provided you keep the vehicle for more than three years.

Money Guide

Manifesto

Sep 16, 2026

Spotlight: Borrowing

Playing Your Cards

George Diaz | Jun 15, 2017

YOU’VE PROBABLY already asked yourself this question: Is it better for my credit score to have just one credit card—or many?
There’s no magic number, because it isn’t really about how many credit cards you have. Rather, what matters is your financial situation and how you handle your cards. For example, if you are just beginning to build a credit history, it’s best to have a single card. Try to follow three rules:

Pay your bills on time—and avoid late payments at all costs.

Refi or Not?

Richard Connor | Aug 10, 2020

MY WIFE AND I BOUGHT our first home in the mid-1980s. We were thrilled to get an 8% mortgage, though we had to pay three points—an upfront fee equal to 3% of the loan amount—to get that rate. Many of our friends had bought a few years earlier and were paying 14%, a common occurrence back then, according to Freddie Mac data.
We kept our eyes open for opportunities to refinance our high rate.

Facing the Truth

Venicio Navarro | Jun 18, 2024

WHAT WAS MY DAD thinking when he asked me to help him and my mom with their finances? Did he expect me to give him money? Maybe.
Up until that moment, my dad handled the family finances. Both he and Mom were retired, though my mom still worked occasionally as an adjunct professor. My mom assumed things were okay, though I had my suspicions.
One day, I saw a credit card bill that showed a large outstanding balance,

What’s the best strategy for collecting and using credit card rewards?

Jonathan Clements | Aug 17, 2021

Winning the Debt Game

David Powell | Apr 20, 2025

Our earliest days as independent fledgling adults, working our first job, living in our own place, are hard to forget. I still recall my first apartments in surprising detail. As I now watch my daughter live through her own such experiences, these memories are flooding back.
Mine are mostly happy, as I lived and worked through the first part of my lifetime happiness smile curve. There were a few rare exceptions. Buying my first car was one of them.

Home Rich Cash Poor

Mike Drak | Jul 1, 2022

ACCORDING TO MY local newspaper, the average home price in my town rose 450% over the past 25 years. That made me ponder how I could use my home equity to fund my desired retirement lifestyle. I’m certainly not alone in thinking this way.
There are three ways you can access home equity. You can sell your home and downsize, you can take out a home equity line of credit or you can take out a reverse mortgage.

Benefits of Work

Richard Connor | May 30, 2022

SOCIAL SECURITY’S complexity never fails to surprise. While many retirees have some sense for what factors determine the size of their Social Security check, few appreciate just how involved the benefits calculation can be. For example, have you ever wondered what the Social Security Administration does if you continue working after starting benefits? It’s not a simple answer. There are two distinct treatments depending on whether you start benefits before or after you reach your full Social Security retirement age, which is age 66 or 67, depending on the year you were born. If you start collecting Social Security prior to reaching your full retirement age, any employment income is subject to an earnings test and could cause a benefit reduction. The earnings test threshold in 2022 is $19,560. The government reduces your benefit by one dollar for every two dollars you earn above that amount. The reduction becomes much less severe in the year you reach your full retirement age. You lose one dollar for every three dollars earned above $51,960. The benefits that were withheld prior to full retirement age aren’t necessarily lost forever. Once you reach your full retirement age, your monthly benefit is adjusted upward to reflect the benefits surrendered over the prior years. And at that point, you can earn as much as you want, with no reduction in your Social Security benefit. The complexity doesn’t stop there. In some cases, additional work can actually raise the Social Security benefit you receive. I recently spoke with a neighbor who was in this position. He had been advised to file for Social Security at his full retirement age of 66, even though he planned to work longer. This strategy might not make sense at first. He didn’t need his Social Security check to cover his living expenses,…

Be Prepared

Richard Connor | Sep 14, 2021

I’M WRITING THIS a few days after Hurricane Ida ravaged parts of our country. We were lucky. Our home here on the South Jersey coast was spared from all but minor rainfall. Much of Pennsylvania and North Jersey saw enormous amounts of rain, flooding and tornadoes. In my 64 years living in this region, I don’t recall there ever being this much severe weather, especially the number of tornadoes. Prior to the hurricane landing in Louisiana, I read a Twitter thread by New Orleans resident and financial planner Jude Boudreaux. His Twitter thread talked about what it was like to live in a region about to be hit by a major hurricane, what to do and what goes through your mind. It’s a sobering read. He said that Hurricane Katrina changed many local people’s thinking about the seriousness of major storms and how best to prepare. Hurricane Sandy did that in my area of the country. Ida will reinforce this in both regions. Now that I live at the beach, this event made me realize that we need a preparedness plan. One of the first things you want to do is assess the types of emergency you might experience. Do you live in an area prone to, say, hurricanes, tornadoes, wildfires or frequent power outages? Research what the experts recommend. The federal government’s Ready.gov has good information to help you prepare for a wide variety of emergencies. The National Weather Service has advice on hurricane preparedness. At a minimum, here are some things you should be able to locate and pull together at short notice: Important papers, including passports, birth certificates, wills, powers of attorney, financial account information and Social Security cards. Personal IDs such as your driver’s license and health insurance cards. Cash. With large scale power outages, ATMs…

Hello Retirement

Richard Connor | Nov 2, 2021

MY WIFE AND I CONTINUE to modify our retirement plan in response to changes in our lives. Most of the changes have to do with the timing of both our retirements. But there’s also the puzzling question of which investment accounts we should draw on for income. More on that later. First, a bit of background: I started receiving my pension at the end of 2017, after I stopped working fulltime. We expected to start drawing on our retirement savings in 2018. But an unexpected career opportunity for my wife, plus some attractive consulting gigs for me, made that unnecessary. I just turned 64. My wife is six months younger. She originally thought she’d work through the end of 2021, but she stopped at the end of June. This required us to switch from her insurance to mine for medical benefits. During the pandemic, I’ve had limited opportunity for additional consulting work. That could change next year or even in the fourth quarter. But I’m not counting on a lot of income. Anything I earn, I’ll consider “found” money. With work winding down, it’s time to execute our retirement plan—including starting portfolio withdrawals in 2022. Here’s our general framework: Pension. When I started my pension, I chose the 75% joint-and-survivor option. Should I predecease my wife, she’d continue to collect three-quarters of my pension. Housing. We are now settled into our home on the New Jersey shore. We’re planning upgrades to the bathrooms, but those should be the last big-ticket improvements for a while. Health insurance. We’ll use my pension’s retiree medical plan until we enroll in Medicare. We chose a high-deductible plan, and use our health savings account to pay out-of-pocket costs. Once we’re enrolled in Medicare, we can join a subsidized Medigap plan offered by my pension plan.…

It’s All Relatives

Richard Connor | Dec 7, 2022

MY WIFE AND I JUST returned from our annual Thanksgiving vacation on North Carolina’s Outer Banks. This is a yearly outing for our immediate family, my wife’s four siblings and their families. This year we numbered 43, representing three generations of siblings, children, grandchildren, nieces and nephews, along with significant others. I wrote an article about this family tradition three years ago. It started in 1995, and has been held 25 times since. We’ve only missed two years—one because of a family wedding in California and another due to COVID-19. For the first several years, we rented a seven-bedroom house on the beach for the week. As the family has grown, so has the size of the house we rent. These past two years, we’ve rented a 27-bedroom beachfront home in Kill Devil Hills, N.C. It’s called an “event house” because it can sleep around 50 and hold a wedding or other special event with up to 100 guests. It has a heated pool, hot tub, kiddie pool, sports bar, theater room, exercise room and a catering-ready kitchen. The house is three years old and is rented about 50 weeks a year. Prime summer weeks rent for about $40,000—if you can reserve one. The Thanksgiving, Christmas and New Year’s weeks cost about $18,000 each. These figures may seem pretty pricey, but remember we’re housing 16 families for a week in a luxurious beachfront home. When you consider the number of bedrooms used and for how many nights, it works out to about $100 to $110 per night per bedroom. This compares favorably with a beachfront hotel, plus our rental includes far more amenities. In the early years, we split the cost six ways among our family, my wife’s parents and my wife’s four siblings. Since my wife’s parents died, we’ve…

Coming Out Different

Richard Connor | Apr 15, 2022

I LEARNED SOMETHING new while preparing a tax return recently for a widowed senior citizen. I volunteer for AARP Foundation’s TaxAide program. A widow in her mid-70s had received her 2021 required minimum distribution (RMD) from her IRA—and it consisted entirely of Exxon Mobil stock. Her account’s custodian, instead of selling the stock and distributing cash, gave her the actual shares. This had never happened to her before, and she hadn’t requested it. Why did the custodian do it? She called to get an explanation and a rep claimed it was the “company’s decision.” Whatever that means. Needing the cash, she directed the custodian to immediately sell the stock and send her the proceeds. The client was financially sophisticated and said she usually did her own tax returns. But the change confused her, which is why she came to AARP for help. The three other seasoned tax preparers working that day had never heard of this kind of RMD before. I had heard it was possible to receive stock in lieu of cash, but had never seen it happen. A quick Google search cleared up the confusion and allowed us to prepare her tax return. Receiving stock instead of cash is known as an in-kind distribution, and it happens occasionally with, say, trusts, when disbursing an estate, with employer stock in a 401(k), and—as our TaxAide client discovered—with IRAs. The federal tax code doesn’t include any specific rules about making in-kind distributions from an IRA. But the IRS instructions for generating a 1099-R form—which is issued when there’s an IRA distribution—provide the following guidance when filling out the form: “If you distribute employer securities or other property, include in box 1 the FMV [fair market value] of the securities or other property on the date of distribution.” [xyz-ihs snippet="Mobile-Subscribe"] The…

What Gets Taxed

Richard Connor | Jan 23, 2023

INCOME SHOULD BE ONE of the simplest concepts in financial planning—and yet it turns out to be one of the most confusing, thanks to the multiple ways it’s calculated depending upon whether it applies to income taxes, Social Security and so on. My goal today: Help you sort out income’s shifting definition across the U.S. tax code. Gross income. This is the granddaddy—income from all sources, before almost any taxes or deductions. For an individual, this includes wages and salary, pensions, interest, dividends, tips, capital gains, alimony and rental income. It can also include up to 85% of a retiree’s Social Security benefits, as we’ll see later. Adjusted gross income. Commonly called AGI, this is gross income minus certain adjustments, such as up to $300 in educator expenses for teachers, student loan interest, alimony payments and contributions to retirement accounts. AGI determines eligibility for some tax deductions and credits. Modified adjusted gross income. MAGI is widely used to determine tax eligibility for such things as IRA contributions and the child tax credit, to name just two. For many folks, AGI and MAGI are almost identical because their adjustments to income are little to none. Unfortunately, the IRS calculates MAGI in multiple ways depending on the deduction or credit in question. Here are some of the most widely used formulas: The MAGI for the Affordable Care Act health insurance subsidy is AGI plus any untaxed foreign income, nontaxable Social Security benefits and tax-exempt interest from investments like municipal bonds. The MAGI for the child tax credit, the American Opportunity tax credit for higher education costs and the student loan interest deduction is AGI plus some sources of foreign income. The MAGI for the adoption tax credit is AGI plus tax-exempt interest and some sources of foreign income. The MAGI for Medicare premium…

I will still take the dividends

On Being a “Healthy” Person

Locking it in

What to do about the new ID.me login requirement at TreasuryDirect

Free Breakfast

A Wedding Too Far

Being terminated…

The Silent Committee

Widow’s IRA Choice

Total portfolio approach?

Growing Up In A Big House

Financial Choices

I will still take the dividends

On Being a “Healthy” Person

Locking it in

What to do about the new ID.me login requirement at TreasuryDirect

Free Breakfast

A Wedding Too Far

Being terminated…

The Silent Committee

Widow’s IRA Choice

Free Newsletter

Get Educated

Manifesto

act

Truths

think

Money Guide

Manifesto

Spotlight: Borrowing

Playing Your Cards

Refi or Not?

Facing the Truth

What’s the best strategy for collecting and using credit card rewards?

Winning the Debt Game

Home Rich Cash Poor

Spotlight: Connor

Benefits of Work

Be Prepared

Hello Retirement

It’s All Relatives

Coming Out Different

What Gets Taxed