How timing can hurt

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bt365
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How timing can hurt

Post by bt365 » Thu Mar 26, 2020 2:08 pm

Newbie on board. Been with Vanguard awhile. My modest portfolio consists of Vanguard Index funds.
Inherited $200K in stocks in 2008. Holding individual stocks is not something
I would do with my money. My average annual income for past decade has been around $30K.
My household is just me. My wife passed many years ago. In 2019 decided to take capital gain hit selling all those stocks. They had appreciated nicely. 2021 is year I start paying into Medicare. Now I know Medicare bases my premium on my 2019 tax return income. Ouch. That's not all..
Government will use 2019 tax returns to determine if ones income qualifies them for a relief
check. I will not be getting one because of a single year in realizing large capital gain.
Silver lining is did not hold those stock shares into 2020 and Covid-19 market plunge.
Count my blessings? Yes, dumb luck selling my appreciated shares before Covid-19. If understand correctly, higher Medicare premiums may not be permanent, as when my annual income reverts back to around $30K, Medicare will adjust my premiums to my lower annual income. I hope so. Trying to reach customer service person anywhere in Covid-19 is
tough, and my emails are not being answered, and it's been two weeks. Understandable though. So much upheaval everywhere.

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cheese_breath
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Re: How timing can hurt

Post by cheese_breath » Thu Mar 26, 2020 4:46 pm

Is there question here?
The surest way to know the future is when it becomes the past.

delamer
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Re: How timing can hurt

Post by delamer » Thu Mar 26, 2020 5:44 pm

If you haven’t actually filed your 2019 taxes yet, they’ll use your 2018 return to determine your eligibility for the stimulus money.

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Phineas J. Whoopee
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Re: How timing can hurt

Post by Phineas J. Whoopee » Thu Mar 26, 2020 7:34 pm

By timing in a way that makes losses, or at least doesn't capture readily-available gains from not timing.

Why do you ask? Of course timing can, and often does, hurt. One might be an exceptional case, of course, and come out ahead. I have no reason to believe I would be an exceptional case.

Instead I follow the plan I wrote for myself, and turn the crank.

So far so good.

PJW

annu
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Re: How timing can hurt

Post by annu » Thu Mar 26, 2020 9:18 pm

delamer wrote:
Thu Mar 26, 2020 5:44 pm
If you haven’t actually filed your 2019 taxes yet, they’ll use your 2018 return to determine your eligibility for the stimulus money.
OP this seems to be the answer for you, if true. :D Delay filing return, now that you have extension through July. You still may have to pay it back though, so I am not sure how much it will help, but you will have help in time of need, if impacted directly by Covid19.
I think you can calculate your amount:

The key factor is your household's annual income, because the package is aimed at helping low- and moderate-income families. Some wealthier families might not receive a stimulus check.

- Individual taxpayers will get $1,200 each if their adjusted gross income (AGI) is less than $75,000.

- Individual taxpayers with AGIs above $75,000 will receive smaller checks, with a $5 reduction for every $100 in income above $75,000. In other words, if your AGI is $80,000, your check would be reduced by $250 — the total payout would be about $950.

https://www.omnicalculator.com/finance/stimulus-payment

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bt365
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Re: How timing can hurt

Post by bt365 » Fri Mar 27, 2020 11:24 am

Should have shortened my post to what I really wanted to know: Are Medicare premiums adjusted down when ones annual income drops from year they first filed for Medicare? With Covid-19 contacting Medicare/SS for answers has been fruitless either by phone or email.

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Eagle33
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Re: How timing can hurt

Post by Eagle33 » Fri Mar 27, 2020 9:28 pm

bt365 wrote:
Fri Mar 27, 2020 11:24 am
Should have shortened my post to what I really wanted to know: Are Medicare premiums adjusted down when ones annual income drops from year they first filed for Medicare? With Covid-19 contacting Medicare/SS for answers has been fruitless either by phone or email.
At the end of every year, Medicare will do their 2-year look-back and determine your next year's premium.
Rocket science is not “rocket science” to a rocket scientist, just as personal finance is not “rocket science” to a Boglehead.

MotoTrojan
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Re: How timing can hurt

Post by MotoTrojan » Fri Mar 27, 2020 9:43 pm

If your 2020 AGI is eligible you’ll get your $1200 then.

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celia
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Re: How timing can hurt

Post by celia » Fri Mar 27, 2020 10:06 pm

bt365 wrote:
Fri Mar 27, 2020 11:24 am
Are Medicare premiums adjusted down when ones annual income drops from year they first filed for Medicare?
Yes, and if you are turning 65 next year, the higher premium probably won’t be for the whole year, unless you turn 65 in January. It will only apply to the months you need to pay premiums.

It also looks like you ‘lucked out’ by selling high. I’m not sure I would call this market timing unless you were intentionally waiting until the stock holdings were at an all time high.

Possibly another way this would have been more tax efficient is if you had spread the sales out over multiple years, instead of all in one year since your marginal tax rate would have been lower but apply to multiple years.

OP, on a different point, if you have an tax-deferred account (TIRA, 401K, etc) worth more than $1 million, have you considered what future RMDs will do to your taxes once you are 72? That could bring you a tax surprise if you haven’t planned for it.

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bt365
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Re: How timing can hurt

Post by bt365 » Sat Mar 28, 2020 10:30 am

MotoTrojan wrote:
Fri Mar 27, 2020 9:43 pm
If your 2020 AGI is eligible you’ll get your $1200 then.
No check for me. No way for me to have known ramifications of Covid-19. Though past twenty years my annual income has been around $24,000-$34,000, decided year end 2019 to sell stock I inherited many years ago. The stock really appreciated, so grateful for that. Being right on cusp of retirement, wanted to use sale proceeds to purchase and allocate to some lower risk investments. 2019 CG tax owed to state >$8500 and federal CG tax >$20,000. These cap gains + my $34,000 annual salary in 2019 put me over top for any government relief check. Irony is I'm a person of lower income for most part, just bad luck in deciding when to sell and take cap gains. Silver lining is did not have to sell stocks after a Covid-19 market fall. Dreadful to imagine those who have to sell shares in a big market downturn. In 2020 tax year have one last sizable investment that will produce another sizable amount of state/federal tax owed. I own small share of commercial property in NYS that's near closing. Waiting to hear if buyer got cold feet given Covid-19, and is attempting to back-out. My proceeds from sale will be about $200,000. Always interesting how many variants there are in individuals financial situations. My very modest Vanguard portfolio consists of four index funds. It could just as soon be T.Rowe, Schwab or Fidelity funds. Keeping costs low, and maintaining asset mix I can be comfortable with matters most to me. Plan is to delay SS till age 70, but my health may require me to adjust that along the way.

Alan S.
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Re: How timing can hurt

Post by Alan S. » Sat Mar 28, 2020 11:39 am

There is no question that the pandemic caused tax law changes tended to favor non planners and procrastinators since the plans made by planners have been largely upended by the pandemic. Once luck of the draw enters the equation, everyone is on an equally shaky footing.

For those detailed and efficient individuals that are being hammered by their actions due to the fallout, you can take comfort that you did well in prior years, but this year the black swan reared it's ugly head.

JBTX
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Re: How timing can hurt

Post by JBTX » Sat Mar 28, 2020 11:48 am

I would guess the benefits of selling at the 2019 high far out weigh the capital gains taxes, higher medicare premiums and loss of stimulus benefit. By a long shot.

As to whether you should still be invested for long term retirement, probably but we have no information given to determine that.

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celia
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Re: How timing can hurt

Post by celia » Sat Mar 28, 2020 12:11 pm

bt365 wrote:
Sat Mar 28, 2020 10:30 am
MotoTrojan wrote:
Fri Mar 27, 2020 9:43 pm
If your 2020 AGI is eligible you’ll get your $1200 then.
No check for me.
I wouldn’t be so sure about that. They will be looking at 2018 and 2019 AGI. If you haven’t filed for 2019 yet, hold off till you receive the payment.

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bt365
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Re: How timing can hurt

Post by bt365 » Sat Mar 28, 2020 12:37 pm

celia wrote:
Sat Mar 28, 2020 12:11 pm
bt365 wrote:
Sat Mar 28, 2020 10:30 am
MotoTrojan wrote:
Fri Mar 27, 2020 9:43 pm
If your 2020 AGI is eligible you’ll get your $1200 then.
No check for me.
I wouldn’t be so sure about that. They will be looking at 2018 and 2019 AGI. If you haven’t filed for 2019 yet, hold off till you receive the payment.
I sent my 2019 state, NYS and federal tax checks in weeks ago. Like I said, no check for me

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