Any way to "forfeit" income to avoid IRMAA cliff

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bob1234
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Any way to "forfeit" income to avoid IRMAA cliff

Post by bob1234 » Sun Jul 01, 2018 2:10 am

Let's say you go a few dollars over the next IRMAA bracket, such that you have a >100% marginal rate. Are there any clever ways to "forfeit" the income or create a loss somehow (assuming there aren't any capital losses left)? We don't know the exact amount of income until late in December due to dividends/distributions (in particular Vanguard Healthcare fund which is hard to predict), so it is hard to intentionally reduce income (e.g. moving money to a 0% interest checking account), since we don't know if we'll be near the boundary or not. My one thought was to use some sort of options or inverse ETF strategy, but I don't want to do anything that is too complicated or could backfire.

TwstdSista
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by TwstdSista » Sun Jul 01, 2018 3:41 am

Do you have any earned income you could put into a traditional IRA? Is that even allowed? (I recall reading somewhere that you can no longer contribute once certain conditions are met....)

Or if the markets tank at some point this year, you might then find yourself with a capital loss.

A thought for future years: If you can't reduce your income this year, would it make sense to sell something and take the gain this year to avoid this situation in future years? Or to take a larger withdrawal from a tax deferred account to reduce future RMDs? (keeping in mind the next IRMMA cliff and/or tax bracket).

vtMaps
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by vtMaps » Sun Jul 01, 2018 4:26 am

TwstdSista wrote:
Sun Jul 01, 2018 3:41 am
A thought for future years: If you can't reduce your income this year, would it make sense to sell something and take the gain this year to avoid this situation in future years? Or to take a larger withdrawal from a tax deferred account to reduce future RMDs? (keeping in mind the next IRMMA cliff and/or tax bracket).
+1
Go as far over the cliff as you can this year by making Roth conversions, and then avoid the cliff in future years.
--vtMaps
The optimist proclaims that we live in the best of all possible worlds; and the pessimist fears this is true. --James Branch Cabell

carolinaman
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by carolinaman » Sun Jul 01, 2018 6:45 am

If you are over 65, you can do qualified charitable deductions (QCDs) which reduce your MAGI accordingly

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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by jebmke » Sun Jul 01, 2018 6:47 am

carolinaman wrote:
Sun Jul 01, 2018 6:45 am
If you are over 65, you can do qualified charitable deductions (QCDs) which reduce your MAGI accordingly
You need to be 70.5 to do QCDs from an IRA. The easiest way to avoid IRA income prior to age 70.5 is to not take a distribution.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by The Wizard » Sun Jul 01, 2018 6:49 am

vtMaps wrote:
Sun Jul 01, 2018 4:26 am
TwstdSista wrote:
Sun Jul 01, 2018 3:41 am
A thought for future years: If you can't reduce your income this year, would it make sense to sell something and take the gain this year to avoid this situation in future years? Or to take a larger withdrawal from a tax deferred account to reduce future RMDs? (keeping in mind the next IRMMA cliff and/or tax bracket).
+1
Go as far over the cliff as you can this year by making Roth conversions, and then avoid the cliff in future years.
--vtMaps
This is sort of what I'm planning to do this year. My 2017 income was just a few thousand$ below the next IRMAA threshold (not the $85,000 first threshold).
But for 2018, based on first six months just completed, it looks like I'll be just over that threshold. So yes, I'll do an additional $20-25,000 Roth conversion after Thanksgiving when my 2018 AGI is accurately estimated.

But I don't expect to fall below that higher threshold in future years since I start both SS and RMDs in 2020...
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GrowthSeeker
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by GrowthSeeker » Sun Jul 01, 2018 8:29 am

Thank you for posting this. I looked up the 2018 figures for 2018 and calculated the "extra" IRMAA payments (which seems like a penalty to me) by IRMAA bracket. This is beyond the standard Medicare premium and beyond the standard Part D premium of whatever your plan is.
Numbers are annual:
..... Income ... IRMAA penalty
up to $ 85 K .... none
up to $107 K .... $ 798
up to $134 K .... $2,010
up to $160 K .... $3,222
over $160 K ..... $4,433


source: "New IRMAA Surcharges On Medicare Part B and Part D Taking Effect In 2018"
https://www.kitces.com/blog/irmaa-medic ... hresholds/

I hadn't thought of this as part of my Roth conversion plans for this year. The more I learn, the more complicated I realize it is. Note that the article points out not to let the "tail wag the dog" in making financial decisions. It looks like the punishment for going $1. over an IRMAA cliff is about $1,200 per cliff (and per person if you're married).
Just because you're paranoid doesn't mean they're NOT out to get you.

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FIREchief
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by FIREchief » Sun Jul 01, 2018 11:12 am

Smart Roth conversion strategies may be the best way to manage IRMAA premiums. This has been discussed on the forum from time to time. For those with other income that is variable (earned income, dividends, capital gains, etc.), it is often best to not convert the entire year's "target" in January, but to hold back a small amount (e.g. 10% - 20%) for the end of December when all other income is known.

A further challenge is that, for example, if I'm planning 2018 income, it will only be applicable for 2020 IRMAA thresholds; which won't be known until late 2019. I will know 2019 IRMAA thresholds by the end of 2018, so I'll have one year of unknown inflation/deflation effects to deal with. Maybe best to allow for 1% deflation and roll the dice with that. I'm curious how others approach this. As the OP correctly points out, the penalty for slightly exceeding an IRMAA cliff is worth avoiding if at all possible.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by The Wizard » Sun Jul 01, 2018 11:24 am

FIREchief wrote:
Sun Jul 01, 2018 11:12 am

...A further challenge is that, for example, if I'm planning 2018 income, it will only be applicable for 2020 IRMAA thresholds; which won't be known until late 2019. I will know 2019 IRMAA thresholds by the end of 2018, so I'll have one year of unknown inflation/deflation effects to deal with. Maybe best to allow for 1% deflation and roll the dice with that. I'm curious how others approach this. As the OP correctly points out, the penalty for slightly exceeding an IRMAA cliff is worth avoiding if at all possible.
Good point.
I'm just going with present IRMAA tiers for 2018 income.
So, for instance, if I'm looking at the $107k threshold, I'll try not to get 2018 MAGI over $106k to be safe.

I'm baldly assuming that starting with 2020 Medicare premiums, IRMAA tiers will increase at roughly the same rate that SS benefits do.
But do we actually know what the law says about what CPI measure IRMAA will be tied to from thence on?
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FIREchief
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by FIREchief » Sun Jul 01, 2018 11:33 am

The Wizard wrote:
Sun Jul 01, 2018 11:24 am
FIREchief wrote:
Sun Jul 01, 2018 11:12 am

...A further challenge is that, for example, if I'm planning 2018 income, it will only be applicable for 2020 IRMAA thresholds; which won't be known until late 2019. I will know 2019 IRMAA thresholds by the end of 2018, so I'll have one year of unknown inflation/deflation effects to deal with. Maybe best to allow for 1% deflation and roll the dice with that. I'm curious how others approach this. As the OP correctly points out, the penalty for slightly exceeding an IRMAA cliff is worth avoiding if at all possible.
Good point.
I'm just going with present IRMAA tiers for 2018 income.
So, for instance, if I'm looking at the $107k threshold, I'll try not to get 2018 MAGI over $106k to be safe.

I'm baldly assuming that starting with 2020 Medicare premiums, IRMAA tiers will increase at roughly the same rate that SS benefits do.
But do we actually know what the law says about what CPI measure IRMAA will be tied to from thence on?
I believe it will revert to being adjusted annually based upon CPI-U changes (other than the new 2019 top tier, which will remain frozen until 2027). Of course, none of this is carved in stone, and hitting high income elderly for more IRMAA is an easy target. Message to readers: get those Roth conversions substantially completed prior to age 63! :sharebeer
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

ralph124cf
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by ralph124cf » Sun Jul 01, 2018 12:39 pm

Just a note: ROTH withdrawals as well as conversions count as IRMAA income. Yes, that is double counting.

Ralph

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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by The Wizard » Sun Jul 01, 2018 12:42 pm

ralph124cf wrote:
Sun Jul 01, 2018 12:39 pm
Just a note: ROTH withdrawals as well as conversions count as IRMAA income. Yes, that is double counting.

Ralph
Umm, no, Roth withdrawals do NOT affect your MAGI for this purpose...
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sport
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by sport » Sun Jul 01, 2018 1:53 pm

Does tax exempt income, such as municipal bond interest, count towards the IRMAA calculation?

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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by kaneohe » Sun Jul 01, 2018 2:08 pm

sport wrote:
Sun Jul 01, 2018 1:53 pm
Does tax exempt income, such as municipal bond interest, count towards the IRMAA calculation?
yes: "Notably, these “income-related monthly adjustment amount” (IRMAA) surcharges are applied based on Modified Adjusted Gross Income (which in this case is simply the individual’s Adjusted Gross Income, or AGI, plus any tax-exempt bond interest that must be added back to determine if the thresholds are reached)." "

https://www.kitces.com/blog/irmaa-medic ... hresholds/

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bob1234
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by bob1234 » Sun Jul 01, 2018 2:38 pm

This is on behalf of my mom, who is 67 years old, so before RMDs or QCD. Since she retired in 2017, she got approved for reduction in IRMAA for 2018 due to qualifying event by using 2018 estimated income. So, the 2018 income will determine IRMAA for 2018, I think 2019, and 2020. Which is why I want to be really careful about barely going over a bracket. I wish there was a way to say "I made this extra $10 of income that I don't want...I'll give it back to the government".

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BL
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by BL » Sun Jul 01, 2018 3:10 pm

What types of income does she have? Perhaps someone could spot something helpful in reducing a small amount of income.

Such as:
Set taxable funds to Specific Id so you can check each lot for losses.
Some re-invested dividends and Capital Gains lots could have a loss this year.
Bonds (including munis) could be sold a loss.
There could be other lots with losses, even with over-all gains.
If there are some higher-dividend or CGs amounts expected this year, can those funds be sold at a gain less than that amount?

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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by dknightd » Sun Jul 01, 2018 3:45 pm

vtMaps wrote:
Sun Jul 01, 2018 4:26 am
TwstdSista wrote:
Sun Jul 01, 2018 3:41 am
A thought for future years: If you can't reduce your income this year, would it make sense to sell something and take the gain this year to avoid this situation in future years? Or to take a larger withdrawal from a tax deferred account to reduce future RMDs? (keeping in mind the next IRMMA cliff and/or tax bracket).
+1
Go as far over the cliff as you can this year by making Roth conversions, and then avoid the cliff in future years.
--vtMaps
This seems to make sense to me. I admit, I have not looked too hard at it yet. (only 60, with medical paid by employer)
I'd have to run the numbers. You might be better off paying IRMAA for a year or so to avoid bumping up your tax bracket.

Can you just make a charitable contribution to bring your taxable income down? I'm guessing this may not be a practical with the new higher standard deduction. Or just pay the IRMMA and be glad you can afford it? Honestly the cost does not appear to be huge, and it would help keep medicare afloat. Just a thought.

I think OP has a good problem ;) I like good problems, they do not really need to be solved

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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by dknightd » Sun Jul 01, 2018 3:53 pm

bob1234 wrote:
Sun Jul 01, 2018 2:38 pm
I wish there was a way to say "I made this extra $10 of income that I don't want...I'll give it back to the government".
There used to be, maybe still is, an option to donate to the Government to help reduce their deficit. I gave them a little one year just for fun and giggles. I'm not sure if doing that counts toward the IRMAA counted income. Could be handy if it does. Then you could donate to the government, to reduce your payments to the government. Ha :)

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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by The Wizard » Sun Jul 01, 2018 3:55 pm

dknightd wrote:
Sun Jul 01, 2018 3:45 pm
...Can you just make a charitable contribution to bring your taxable income down? I'm guessing this may not be a practical with the new higher standard deduction...
Just to be clear, the IRMAA MAGI starts with your AGI, formerly line 37 bottom of 1040 page 1 prior to any deductions.

OP's mom should put together a spreadsheet projecting her income (AGI) year by year through age 72 at least.
This will be helpful in dealing with all financial decisions...
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The Wizard
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by The Wizard » Sun Jul 01, 2018 4:00 pm

dknightd wrote:
Sun Jul 01, 2018 3:45 pm
...Or just pay the IRMAA and be glad you can afford it? Honestly the cost does not appear to be huge, and it would help keep medicare afloat...
This is what I've been doing starting at age 65 and continuing indefinitely (now age 68).
It would be nice if they sent me a thank you note every year and invited me to the annual dinner for excess contributants...
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by FIREchief » Sun Jul 01, 2018 5:21 pm

The Wizard wrote:
Sun Jul 01, 2018 4:00 pm
dknightd wrote:
Sun Jul 01, 2018 3:45 pm
...Or just pay the IRMAA and be glad you can afford it? Honestly the cost does not appear to be huge, and it would help keep medicare afloat...
This is what I've been doing starting at age 65 and continuing indefinitely (now age 68).
It would be nice if they sent me a thank you note every year and invited me to the annual dinner for excess contributants...
Well since they won't, I will. THANKS Wizard for paying IRMAA to help keep the Medicare system solvent for future recipients! (mainly, me and my spouse) :sharebeer My goal is to never pay a penny of IRMAA and I've developed the strategies and collected the tools to make that happen.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by Lynette » Sun Jul 01, 2018 5:33 pm

/////
Last edited by Lynette on Mon Jan 07, 2019 3:09 pm, edited 1 time in total.

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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by dknightd » Sun Jul 01, 2018 6:40 pm

The Wizard wrote:
Sun Jul 01, 2018 4:00 pm
dknightd wrote:
Sun Jul 01, 2018 3:45 pm
...Or just pay the IRMAA and be glad you can afford it? Honestly the cost does not appear to be huge, and it would help keep medicare afloat...
This is what I've been doing starting at age 65 and continuing indefinitely (now age 68).
It would be nice if they sent me a thank you note every year and invited me to the annual dinner for excess contributants...
Thank you :)

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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by WhiteMaxima » Mon Jul 02, 2018 12:07 pm

Donation.

sport
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by sport » Mon Jul 02, 2018 2:43 pm

WhiteMaxima wrote:
Mon Jul 02, 2018 12:07 pm
Donation.
A QCD donation will help. An itemized donation will not help.

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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by Dottie57 » Mon Jul 02, 2018 3:00 pm

FIREchief wrote:
Sun Jul 01, 2018 11:33 am
The Wizard wrote:
Sun Jul 01, 2018 11:24 am
FIREchief wrote:
Sun Jul 01, 2018 11:12 am

...A further challenge is that, for example, if I'm planning 2018 income, it will only be applicable for 2020 IRMAA thresholds; which won't be known until late 2019. I will know 2019 IRMAA thresholds by the end of 2018, so I'll have one year of unknown inflation/deflation effects to deal with. Maybe best to allow for 1% deflation and roll the dice with that. I'm curious how others approach this. As the OP correctly points out, the penalty for slightly exceeding an IRMAA cliff is worth avoiding if at all possible.
Good point.
I'm just going with present IRMAA tiers for 2018 income.
So, for instance, if I'm looking at the $107k threshold, I'll try not to get 2018 MAGI over $106k to be safe.

I'm baldly assuming that starting with 2020 Medicare premiums, IRMAA tiers will increase at roughly the same rate that SS benefits do.
But do we actually know what the law says about what CPI measure IRMAA will be tied to from thence on?
I believe it will revert to being adjusted annually based upon CPI-U changes (other than the new 2019 top tier, which will remain frozen until 2027). Of course, none of this is carved in stone, and hitting high income elderly for more IRMAA is an easy target. Message to readers: get those Roth conversions substantially completed prior to age 63! :sharebeer
:(

61 and have large severance this year. Next year will do over 100k of conversions. I will have to pay more the first years of Medicare. But the goal is to not have to pay much tax for SS at 70.

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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by megabad » Mon Jul 02, 2018 5:01 pm

Is she close to a cliff? Does she have excess income, or is it all being spent? If she has excess, I would put the income into a taxable account ASAP to get some recent cost bases. It is possible you will have a loss by the end of the year that may cover you if you are close (or you may have a net gain).
dknightd wrote:
Sun Jul 01, 2018 3:45 pm
...Or just pay the IRMAA and be glad you can afford it? Honestly the cost does not appear to be huge, and it would help keep medicare afloat...
Just to put it in perspective, last I checked the last tier of IRRMA reflects about a 150% increase in Part B and drug coverage premiums. The impact to a family can be something like an additional $7,000 a year. My complaint about this system is apolitical: too many of our older folks don't know it exists and get surprised by it which I think is unfortunate.

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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by The Wizard » Mon Jul 02, 2018 6:53 pm

megabad wrote:
Mon Jul 02, 2018 5:01 pm
... My complaint about this system is apolitical: too many of our older folks don't know it exists and get surprised by it which I think is unfortunate.
This is why Bogleheads.org exists: to educate and inform...
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by elgob.bogle » Wed Nov 06, 2019 4:03 pm

OK - say you take you MAGI over the IRMAA cliff, for one or even several years, until your conversions to ROTH IRAs are completed. Then you drop back into the "no-penalty zone". How do you stop the IRMAA Penalties (for both Medicare Part B & D). On the Medicare website, the only way that I could see to stop the IRMAA penalties was to submit form SSA-44 “Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event”. It listed the following reasons: In some situations, we can make a new decision about your income-related monthly adjustment amounts. Contact us to request a new decision if your MAGI has gone down at least one range in the table above or has gone below the lowest amounts in the table since you filed your 20xx tax return, AND the decrease in MAGI was caused by any of the following life-changing events(my bolding):

You married,
You divorced, or your marriage was annulled,
You became a widow or widower,
You or your spouse stopped working or reduced work hours,
You or your spouse lost income-producing property due to a disaster or other event beyond your control,
You or your spouse experienced a scheduled cessation, termination, or reorganization of an employer’s pension plan, or
You or your spouse received a settlement from an employer or former employer because of the employer’s closure, bankruptcy or reorganization.
We will use the new lower MAGI to see if we can make a new decision about your income related monthly adjustment amounts. We cannot make a new decision if your income has changed for a reason other than those listed above, such as receiving one-time income from capital gains.

You will need to submit proof of the event listed above that caused your income to go down (such as a death certificate, a letter from your pension fund administrator, or a letter from your employer about your retirement).

See also: Medicare Premiums: Rules For Higher-Income Beneficiaries.pdf
See also: https://www.marottaonmoney.com/how-to-a ... arge-2018/

After the reading this information, I immediately called the SSA toll free (45 minute wait) and was told by a nice representative not to fear, the IRS furnishes annual tax information and IRMAA is automatically removed if MAGI is below threshold.

I told her that I would like to see that in writing on the website, and suggested that she tell her supervisor of my concerns. Well, perhaps she did, because I cannot locate a copy of SSA-44 right now.

Any comment or help would be appreciated!

elgob.bogle

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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by Nowizard » Wed Nov 06, 2019 5:10 pm

Would it be correct to say that since IRMAA is a medical expense, it could be a factor in itemizing with a medical deduction?
Tim

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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by Gill » Wed Nov 06, 2019 5:16 pm

Nowizard wrote:
Wed Nov 06, 2019 5:10 pm
Would it be correct to say that since IRMAA is a medical expense, it could be a factor in itemizing with a medical deduction?
Tim
Yes, the premium is deductible.
Gill
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by kaneohe » Wed Nov 06, 2019 6:04 pm

elgob.bogle wrote:
Wed Nov 06, 2019 4:03 pm
.........................................................................................
After the reading this information, I immediately called the SSA toll free (45 minute wait) and was told by a nice representative not to fear, the IRS furnishes annual tax information and IRMAA is automatically removed if MAGI is below threshold.

I told her that I would like to see that in writing on the website, and suggested that she tell her supervisor of my concerns. Well, perhaps she did, because I cannot locate a copy of SSA-44 right now.

Any comment or help would be appreciated!

elgob.bogle
https://www.ssa.gov/pubs/EN-05-10507.pdf

"Each fall, when we ask the IRS for information to
determine next year’s premiums, we ask for tax
information to verify your reports of changes affecting
your income-related monthly adjustment amounts, if
any
. We also ask the IRS for your two-year-old MAGI
if we’ve temporarily used three-year-old MAGI. When
we find a difference between the IRS information and
information we previously used, and the difference
results in a change in your income-related monthly
adjustment amounts, we notify you of the change.
"

Our income varies from yr to yr and is in the IRMAA range. My experience is that the adjustments happen automatically
as the rep reported. Note that stopping of Roth conversions is not a valid listed reason on that form and so an appeal will
not change the IRMAA adjustments any sooner than they naturally will by the normal process.

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elgob.bogle
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by elgob.bogle » Wed Nov 06, 2019 8:17 pm

Thank You!

elgob

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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by smitcat » Thu Nov 07, 2019 8:02 am

FIREchief wrote:
Sun Jul 01, 2018 5:21 pm
The Wizard wrote:
Sun Jul 01, 2018 4:00 pm
dknightd wrote:
Sun Jul 01, 2018 3:45 pm
...Or just pay the IRMAA and be glad you can afford it? Honestly the cost does not appear to be huge, and it would help keep medicare afloat...
This is what I've been doing starting at age 65 and continuing indefinitely (now age 68).
It would be nice if they sent me a thank you note every year and invited me to the annual dinner for excess contributants...
Well since they won't, I will. THANKS Wizard for paying IRMAA to help keep the Medicare system solvent for future recipients! (mainly, me and my spouse) :sharebeer My goal is to never pay a penny of IRMAA and I've developed the strategies and collected the tools to make that happen.
"My goal is to never pay a penny of IRMAA and I've developed the strategies and collected the tools to make that happen."
Would you please share the strategies and tools to avoid all IRMMA cost? That would be very valuable to many of us.

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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by mhalley » Thu Nov 07, 2019 11:29 am

I think people worry a little too much about paying the IRMAA penalty. If you are doing Roth conversions and not getting a subsidy, then your insurance premiums are sky high, plus you have a huge deductible. Before I went on Medicare, my non subsidized premium was $2845 a month for my wife and I, and the won’t pay a penny till We each spend $6k. Even paying the IRMAA, Medicare is nowhere close to that, plus we have a $135 deductible for a and b, and $315 for Rx insurance. I don’t begrudge paying the IRMAA at all. Avoiding the IRMAA is great, but I don’t find it onerous. Certainly if you are near one of the cliffs, being mindful of going over is prudent.

michaeljc70
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by michaeljc70 » Thu Nov 07, 2019 12:13 pm

mhalley wrote:
Thu Nov 07, 2019 11:29 am
I think people worry a little too much about paying the IRMAA penalty. If you are doing Roth conversions and not getting a subsidy, then your insurance premiums are sky high, plus you have a huge deductible. Before I went on Medicare, my non subsidized premium was $2845 a month for my wife and I, and the won’t pay a penny till We each spend $6k. Even paying the IRMAA, Medicare is nowhere close to that, plus we have a $135 deductible for a and b, and $315 for Rx insurance. I don’t begrudge paying the IRMAA at all. Avoiding the IRMAA is great, but I don’t find it onerous. Certainly if you are near one of the cliffs, being mindful of going over is prudent.
But you didn't pay a tax for your private insurance your whole life like for Medicare so comparing the premiums is comparing apples and oranges.

oxothuk
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by oxothuk » Thu Nov 07, 2019 12:23 pm

mhalley wrote:
Thu Nov 07, 2019 11:29 am
I think people worry a little too much about paying the IRMAA penalty.
The worry comes from the "cliff effect" nature of IRMAA. If the penalty were computed like the regular tax brackets, I don't think people would worry about it so much.

jj
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by jj » Thu Nov 07, 2019 12:23 pm

Gill wrote:
Wed Nov 06, 2019 5:16 pm
Nowizard wrote:
Wed Nov 06, 2019 5:10 pm
Would it be correct to say that since IRMAA is a medical expense, it could be a factor in itemizing with a medical deduction?
Tim
Yes, the premium is deductible.
Gill
Also reimbursable from an HSA account, I presume...

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tenkuky
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by tenkuky » Thu Nov 07, 2019 12:45 pm

michaeljc70 wrote:
Thu Nov 07, 2019 12:13 pm
mhalley wrote:
Thu Nov 07, 2019 11:29 am
I think people worry a little too much about paying the IRMAA penalty. If you are doing Roth conversions and not getting a subsidy, then your insurance premiums are sky high, plus you have a huge deductible. Before I went on Medicare, my non subsidized premium was $2845 a month for my wife and I, and the won’t pay a penny till We each spend $6k. Even paying the IRMAA, Medicare is nowhere close to that, plus we have a $135 deductible for a and b, and $315 for Rx insurance. I don’t begrudge paying the IRMAA at all. Avoiding the IRMAA is great, but I don’t find it onerous. Certainly if you are near one of the cliffs, being mindful of going over is prudent.
But you didn't pay a tax for your private insurance your whole life like for Medicare so comparing the premiums is comparing apples and oranges.
I worry about the timing of conversions between 60-65 (keeping in mind the 63 for IRMAA too). The cliff penalty for ACA subsidy is higher than IRMAA penalty and at a lower MAGI. So stuck...
Do I do substantial conversions between 60-63 (when I need ACA) and get hammered on ACA?
Do I do less conversions between 60-63, and get hammered doing more between 63-70 on IRMAA?
Got to pay the piper sometime, just trying to pay him less :?

michaeljc70
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by michaeljc70 » Thu Nov 07, 2019 12:53 pm

tenkuky wrote:
Thu Nov 07, 2019 12:45 pm
michaeljc70 wrote:
Thu Nov 07, 2019 12:13 pm
mhalley wrote:
Thu Nov 07, 2019 11:29 am
I think people worry a little too much about paying the IRMAA penalty. If you are doing Roth conversions and not getting a subsidy, then your insurance premiums are sky high, plus you have a huge deductible. Before I went on Medicare, my non subsidized premium was $2845 a month for my wife and I, and the won’t pay a penny till We each spend $6k. Even paying the IRMAA, Medicare is nowhere close to that, plus we have a $135 deductible for a and b, and $315 for Rx insurance. I don’t begrudge paying the IRMAA at all. Avoiding the IRMAA is great, but I don’t find it onerous. Certainly if you are near one of the cliffs, being mindful of going over is prudent.
But you didn't pay a tax for your private insurance your whole life like for Medicare so comparing the premiums is comparing apples and oranges.
I worry about the timing of conversions between 60-65 (keeping in mind the 63 for IRMAA too). The cliff penalty for ACA subsidy is higher than IRMAA penalty and at a lower MAGI. So stuck...
Do I do substantial conversions between 60-63 (when I need ACA) and get hammered on ACA?
Do I do less conversions between 60-63, and get hammered doing more between 63-70 on IRMAA?
Got to pay the piper sometime, just trying to pay him less :?
Yep. I won't get Medicare for 16 years and SS for 21 years (probably). I am still trying to figure out balancing taxes, ACA subsides, Roth conversions, tIRA withdrawals (for living expenses), etc. I have no clue what my income will be in 21 years so it is hard to plan. I cannot predict what IRAs (if any) I will inherit and when. I cannot predict what my portfolio balance will be in 21 years. My spouse still works so there's that too.

Dinosaur Dad
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by Dinosaur Dad » Thu Nov 07, 2019 1:20 pm

michaeljc70 wrote:
Thu Nov 07, 2019 12:53 pm
tenkuky wrote:
Thu Nov 07, 2019 12:45 pm
michaeljc70 wrote:
Thu Nov 07, 2019 12:13 pm
mhalley wrote:
Thu Nov 07, 2019 11:29 am
I think people worry a little too much about paying the IRMAA penalty. If you are doing Roth conversions and not getting a subsidy, then your insurance premiums are sky high, plus you have a huge deductible. Before I went on Medicare, my non subsidized premium was $2845 a month for my wife and I, and the won’t pay a penny till We each spend $6k. Even paying the IRMAA, Medicare is nowhere close to that, plus we have a $135 deductible for a and b, and $315 for Rx insurance. I don’t begrudge paying the IRMAA at all. Avoiding the IRMAA is great, but I don’t find it onerous. Certainly if you are near one of the cliffs, being mindful of going over is prudent.
But you didn't pay a tax for your private insurance your whole life like for Medicare so comparing the premiums is comparing apples and oranges.
I worry about the timing of conversions between 60-65 (keeping in mind the 63 for IRMAA too). The cliff penalty for ACA subsidy is higher than IRMAA penalty and at a lower MAGI. So stuck...
Do I do substantial conversions between 60-63 (when I need ACA) and get hammered on ACA?
Do I do less conversions between 60-63, and get hammered doing more between 63-70 on IRMAA?
Got to pay the piper sometime, just trying to pay him less :?
Yep. I won't get Medicare for 16 years and SS for 21 years (probably). I am still trying to figure out balancing taxes, ACA subsides, Roth conversions, tIRA withdrawals (for living expenses), etc. I have no clue what my income will be in 21 years so it is hard to plan. I cannot predict what IRAs (if any) I will inherit and when. I cannot predict what my portfolio balance will be in 21 years. My spouse still works so there's that too.
+1 - and I'm a lot older than you!

I'm 63, expect to retire within 12 months. Seems like managing to projected tax rates is nearly impossible. I'm just trying to manage Roth conversions so that my marginal rate after RMDs at age 70 does't go from 24% Federal to 32% Federal. High income this year due to some much-needed rebalancing brought income way up, so I'll get hit with IRMAA. But seems to me that rebalancing and positioning assets is much more important at this point...I was up to 75% equity which is way too high for this stage. But am certainly trying to figure out an optimal sweet spot with everything. I don't have the issue with the ACA cliff because I'm still working and could go on Cobra if I'm laid off and there's only 1.5 years until medicare.

Net: this is a multivariate puzzle, I'm not sure if there's one solution as much as there are many solutions with different arguments for and against. I do think that tax rates will not go lower, and could well go up.
"Take calculated risks - that is quite different from being rash." | General George S. Patton

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FIREchief
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by FIREchief » Thu Nov 07, 2019 3:17 pm

smitcat wrote:
Thu Nov 07, 2019 8:02 am
FIREchief wrote:
Sun Jul 01, 2018 5:21 pm
The Wizard wrote:
Sun Jul 01, 2018 4:00 pm
dknightd wrote:
Sun Jul 01, 2018 3:45 pm
...Or just pay the IRMAA and be glad you can afford it? Honestly the cost does not appear to be huge, and it would help keep medicare afloat...
This is what I've been doing starting at age 65 and continuing indefinitely (now age 68).
It would be nice if they sent me a thank you note every year and invited me to the annual dinner for excess contributants...
Well since they won't, I will. THANKS Wizard for paying IRMAA to help keep the Medicare system solvent for future recipients! (mainly, me and my spouse) :sharebeer My goal is to never pay a penny of IRMAA and I've developed the strategies and collected the tools to make that happen.
"My goal is to never pay a penny of IRMAA and I've developed the strategies and collected the tools to make that happen."
Would you please share the strategies and tools to avoid all IRMMA cost? That would be very valuable to many of us.
Mostly what I already posted earlier.
FIREchief wrote:
Sun Jul 01, 2018 11:33 am
Message to readers: get those Roth conversions substantially completed prior to age 63! :sharebeer
I've also developed an extensive financial planning spreadsheet over the years that I use to project the various effects of early Roth conversions on things such as IRMAA at 63 and RMDs/Social Security taxation at 70. Regarding the Roth conversions, I will remind others that in many scenarios there is a balance to be considered. Total early conversion is likely not the optimal approach for many situations, just as "not enough conversions" can be sub-optimal. The exercise is not trivial and, as with all financial planning, it will be based upon assumptions on things like what the market will do, what Washington will do and how long Mrs. FIREchief and I will live. Unfortunately, there are no one-size-fits-all "rules" that can be applied and paying a financial planner by the hour could quickly become prohibitive.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

smitcat
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by smitcat » Thu Nov 07, 2019 5:22 pm

FIREchief wrote:
Thu Nov 07, 2019 3:17 pm
smitcat wrote:
Thu Nov 07, 2019 8:02 am
FIREchief wrote:
Sun Jul 01, 2018 5:21 pm
The Wizard wrote:
Sun Jul 01, 2018 4:00 pm
dknightd wrote:
Sun Jul 01, 2018 3:45 pm
...Or just pay the IRMAA and be glad you can afford it? Honestly the cost does not appear to be huge, and it would help keep medicare afloat...
This is what I've been doing starting at age 65 and continuing indefinitely (now age 68).
It would be nice if they sent me a thank you note every year and invited me to the annual dinner for excess contributants...
Well since they won't, I will. THANKS Wizard for paying IRMAA to help keep the Medicare system solvent for future recipients! (mainly, me and my spouse) :sharebeer My goal is to never pay a penny of IRMAA and I've developed the strategies and collected the tools to make that happen.
"My goal is to never pay a penny of IRMAA and I've developed the strategies and collected the tools to make that happen."
Would you please share the strategies and tools to avoid all IRMMA cost? That would be very valuable to many of us.
Mostly what I already posted earlier.
FIREchief wrote:
Sun Jul 01, 2018 11:33 am
Message to readers: get those Roth conversions substantially completed prior to age 63! :sharebeer
I've also developed an extensive financial planning spreadsheet over the years that I use to project the various effects of early Roth conversions on things such as IRMAA at 63 and RMDs/Social Security taxation at 70. Regarding the Roth conversions, I will remind others that in many scenarios there is a balance to be considered. Total early conversion is likely not the optimal approach for many situations, just as "not enough conversions" can be sub-optimal. The exercise is not trivial and, as with all financial planning, it will be based upon assumptions on things like what the market will do, what Washington will do and how long Mrs. FIREchief and I will live. Unfortunately, there are no one-size-fits-all "rules" that can be applied and paying a financial planner by the hour could quickly become prohibitive.
"Mostly what I already posted earlier."
Is this the earlier post that shows the tools to avoid all IRMMA costs?...

"Smart Roth conversion strategies may be the best way to manage IRMAA premiums. This has been discussed on the forum from time to time. For those with other income that is variable (earned income, dividends, capital gains, etc.), it is often best to not convert the entire year's "target" in January, but to hold back a small amount (e.g. 10% - 20%) for the end of December when all other income is known."

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FIREchief
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by FIREchief » Thu Nov 07, 2019 5:39 pm

smitcat wrote:
Thu Nov 07, 2019 5:22 pm
FIREchief wrote:
Thu Nov 07, 2019 3:17 pm
smitcat wrote:
Thu Nov 07, 2019 8:02 am
"My goal is to never pay a penny of IRMAA and I've developed the strategies and collected the tools to make that happen."
Would you please share the strategies and tools to avoid all IRMMA cost? That would be very valuable to many of us.
Mostly what I already posted earlier.
FIREchief wrote:
Sun Jul 01, 2018 11:33 am
Message to readers: get those Roth conversions substantially completed prior to age 63! :sharebeer
I've also developed an extensive financial planning spreadsheet over the years that I use to project the various effects of early Roth conversions on things such as IRMAA at 63 and RMDs/Social Security taxation at 70. Regarding the Roth conversions, I will remind others that in many scenarios there is a balance to be considered. Total early conversion is likely not the optimal approach for many situations, just as "not enough conversions" can be sub-optimal. The exercise is not trivial and, as with all financial planning, it will be based upon assumptions on things like what the market will do, what Washington will do and how long Mrs. FIREchief and I will live. Unfortunately, there are no one-size-fits-all "rules" that can be applied and paying a financial planner by the hour could quickly become prohibitive.
"Mostly what I already posted earlier."
Is this the earlier post that shows the tools to avoid all IRMMA costs?...
Not sure what you're asking here. Obviously, the way to avoid all IRMAA costs is to plan and control your AGI so that it never exceeds the IRMAA threshold(s). Everybody's situation is different. In my situation, well planned Roth conversions is all I need to avoid IRMAA. I explained how I accomplished that planning. :confused
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

smitcat
Posts: 4286
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by smitcat » Thu Nov 07, 2019 5:56 pm

FIREchief wrote:
Thu Nov 07, 2019 5:39 pm
smitcat wrote:
Thu Nov 07, 2019 5:22 pm
FIREchief wrote:
Thu Nov 07, 2019 3:17 pm
smitcat wrote:
Thu Nov 07, 2019 8:02 am
"My goal is to never pay a penny of IRMAA and I've developed the strategies and collected the tools to make that happen."
Would you please share the strategies and tools to avoid all IRMMA cost? That would be very valuable to many of us.
Mostly what I already posted earlier.
FIREchief wrote:
Sun Jul 01, 2018 11:33 am
Message to readers: get those Roth conversions substantially completed prior to age 63! :sharebeer
I've also developed an extensive financial planning spreadsheet over the years that I use to project the various effects of early Roth conversions on things such as IRMAA at 63 and RMDs/Social Security taxation at 70. Regarding the Roth conversions, I will remind others that in many scenarios there is a balance to be considered. Total early conversion is likely not the optimal approach for many situations, just as "not enough conversions" can be sub-optimal. The exercise is not trivial and, as with all financial planning, it will be based upon assumptions on things like what the market will do, what Washington will do and how long Mrs. FIREchief and I will live. Unfortunately, there are no one-size-fits-all "rules" that can be applied and paying a financial planner by the hour could quickly become prohibitive.
"Mostly what I already posted earlier."
Is this the earlier post that shows the tools to avoid all IRMMA costs?...
Not sure what you're asking here. Obviously, the way to avoid all IRMAA costs is to plan and control your AGI so that it never exceeds the IRMAA threshold(s). Everybody's situation is different. In my situation, well planned Roth conversions is all I need to avoid IRMAA. I explained how I accomplished that planning. :confused

"In my situation, well planned Roth conversions is all I need to avoid IRMAA."
I understand now - you had posted that you had developed the strategies and collected the tools to avoid all IRRMA costs.
That seemed to indicate multiple methods to lessen and/or avoid all IRMAA costs.

Lalamimi
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by Lalamimi » Thu Nov 07, 2019 6:19 pm

Nowizard wrote:
Wed Nov 06, 2019 5:10 pm
Would it be correct to say that since IRMAA is a medical expense, it could be a factor in itemizing with a medical deduction?
Tim
[/quote

I would like to see how it could be.

kaneohe
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by kaneohe » Thu Nov 07, 2019 11:13 pm

Lalamimi wrote:
Thu Nov 07, 2019 6:19 pm
Nowizard wrote:
Wed Nov 06, 2019 5:10 pm
Would it be correct to say that since IRMAA is a medical expense, it could be a factor in itemizing with a medical deduction?
Tim
[/quote

I would like to see how it could be.
IRMAA shows up as increased Medicare premiums and also pt D premiums which are medical expenses.

MathIsMyWayr
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Location: CA

Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by MathIsMyWayr » Fri Nov 08, 2019 12:24 am

Can you buy a number of super-volatile stocks and wait for any of them to drop in price for a loss?

sandramjet
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by sandramjet » Fri Nov 08, 2019 1:19 am

Well, I found one way to stay under at some of the IRMAA limits... have kids in college during these years and need to stay under the 160K limit for the AOTC!! That keeps me below the 170K IRMAA limit! :annoyed

Frankly, with all the various tax phase in/out limits and steps, etc in the code, I've pretty much given up worrying about the IRMAA limits ...

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OAG
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Re: Any way to "forfeit" income to avoid IRMAA cliff

Post by OAG » Fri Nov 08, 2019 2:18 pm

If you are really "close" in income one way to reduce it somewhat if you own any Bank/CU CD's. You can withdraw them early and incur a Early Withdrawal Penalty (EWP). Any penalty can be used to reduce AGI. Can also be done with brokered CD's too but is a bit more involved.
OAG=Old Army Guy. Retired CW4 USA (US Army) in 1979 21 years of service @ 38.

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