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Messages - gocurrycracker

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Taxes / Re: Distributing an Inherited IRA as an early retiree
« on: November 07, 2022, 11:28:47 AM »
Let's look at the 2 extremes

If you take it all out today you pay about $60k in ACA premiums and income taxes, so you will have about $190k remaining to invest in accordance with your target asset allocation.

If you wait 10 years and do a large withdrawal at the end, assuming 7% annual return you will make a $500k withdrawal with marginal rates up to 35%+/- (total tax ~= $113k.)

At the same time, that 190k may have grown to $380k or so (same 2x.) 

Total value is roughly the same in both cases - in the former the $60k in taxes not paid gets to grow longer but then you pay taxes at a higher rate on withdrawal.
In the latter case you have a bunch of unrealized capital gains which may never be taxed, and you will have taxable income from dividends / interest along the way. As you say, more income means higher % FPL which may impact CSR. Independent of this choice, dividends can go up and down and many companies have been increasing dividends faster than inflation for some time.

FPL numbers do go up with inflation, but with a delay of 1 year... ACA enrollment for 2023 is based on FPL numbers reported in January 2022

Taxes / Re: Distributing an Inherited IRA as an early retiree
« on: October 29, 2022, 11:33:31 AM »
What is the underpayment penalty you are referring to? For underpayment of estimated tax?

I don't know IL's rules, but for federal it is easy - the tax is due as you go... if you realize a large chunk of income on December 31st, that is due with the estimated tax payment on Jan 15. No need to pay in January '22 because you think you will have a big income jump in December '22.

But even that may be unnecessary and you can just pay in April as long as you make estimated payments equal to or greater than 100% of the tax you owed last year... which is what, $0?

You shouldn't have to pay back any CSRs but you will have to repay the PTCs in full when you go over 400% FPL (edit: 600% FPL)

Do you concur with the #s in the spreadsheet?

Travel hacking / Re: Credit card points (maximize)
« on: October 24, 2022, 12:07:47 PM »
My pleasure.

If you have any questions as you work through a redemption, just ask.

Travel hacking / Re: Credit card points (maximize)
« on: October 16, 2022, 08:42:40 AM »
If your goal is to get the most $/point, that is typically done by transferring to an airline or hotel.

At best you can get 1.5 cents per point (cpp) through the Chase portal, for example. But by transferring to an airline and booking business or 1st class tickets you can sometimes get 10+ cpp.

One of our best redemptions was business class flights to Paris at 20cpp

If your goal is to get the most economy flights or hotel nights per point, sometimes transferring is best / sometimes using the card portal is best.
For airlines, if you book a fare through the card portal you will still earn miles for the flights (no points for award travel)

Travel hacking / Re: Credit card points (maximize)
« on: October 11, 2022, 09:44:52 AM »
Typically business or 1st class flights and high-end all-inclusive resorts.

Is there a specific scenario you are looking at?

Taxes / Re: Distributing an Inherited IRA as an early retiree
« on: October 01, 2022, 11:52:15 PM »
No worries, that is what the forum is here for :)

If I understand correctly, there is a silver plan (the 2LCSP) available to you that costs about $160/month but you opted into the $800/month plan?

OK, let's go from there. What matters is the delta from going over the subsidy cliff, either at 400% or 600% depending on the year. Coincidentally, that remains roughly the same so the analysis conclusions are the same.

I added a 2nd section to the spreadsheet using the new ACA numbers

Taxes / Re: Distributing an Inherited IRA as an early retiree
« on: September 27, 2022, 01:06:37 PM »
Hi Mike

Sorry for your loss :(

I wrote a post about the tradeoffs on an inherited IRA awhile back

The balancing act between withdrawing the IRA funds in 1 year or 10 years is going to be guided by the marginal tax rates you pay, including ACA subsidies.


The Inflation Reduction Act extended the enhanced ACA subsidies (up to 600% FPL) through 2025. After that subsidies halt at 400% FPL unless new legislation is passed.
There is a chart of ACA "tax rates" in this post.

This means through 2025 we have a wide 8.5% ACA tax bracket, which could be taken advantage of from 400% to 600% FPL (if beneficial)

For household size = 2
$45k = 258% FPL
$69,680 = 400% FPL
$104,520 = 600% FPL

Numbers from

Similarly we have Federal income tax
0% - $25900
10% - $46450
12% - $109,450
22% - $204,050
24% - above $204k

Numbers from


You have income of $45k, ~260% FPL. At most you pay ~$2k/year for an ACA silver plan ($1944)

You are nearly at the top of the 10% federal tax bracket, plus whatever you pay in State taxes (IL(?), flat 4.95%)
You pay 0% tax on qualified dividends at the federal level, so total tax is probably 0

State tax
With a flat state tax you pay the same rate whether you withdraw $1 or $250k, so I will ignore this.
If in a state like California with a big progressive tax system, this would need to be factored in.

Now, let's add inherited IRA withdrawals

Starting with the extreme
$250k withdrawal

Income now $295k
Will pay full fare on ACA insurance - let's swag $8.8k (fill in your own number if you have it - this is the max allowed at 600% FPL and assumes no subsidy cliff.
($8800 actually seems high for 2 people, we would pay $12k for 4.)
In 24% federal bracket, total federal tax assuming all ordinary income - ~$50,5k
State tax - $x
Effective tax rate on IRA withdrawal = ~$7k (extra ACA) + $50.5k (extra Federal) / $250k = 23%

Top of 600% FPL bracket
Income: $45k
IRA withdrawal: $59,520 (~5 years to deplete IRA +/-, but only guaranteed 600% FPL for 3 more years)
ACA - $8.8k
IRS - ~$6.6k
Effective tax rate on IRA withdrawal = ~$7k (extra ACA) + $6.6k (extra Federal) / $59,520 = 22.8%

By extending the withdrawals out over a longer period (5 years) we save 0.2% in tax
Making a very large withdrawal above the ACA subsidy cliff means a large portion of the withdrawal is not "ACA taxed" at all, so loss of ACA subsidies only contributes 2.8% tax rate

We can continue downward

Top of 400% bracket
Income: $45k
IRA withdrawal: ~$25k
ACA - ~6k
IRS - $2.5k
marginal rate: $4k (extra ACA) + 2.5k (extra Federal) / $25000 = ~$26%

This actually costs more because most of the withdrawal is ACA taxed at the highest point in the ACA tax curve (~15% vs 8.5%)

Some other things to consider:
Presently at $45k income you MIGHT get some CSR subsidies (they stop at 250% FPL and you may be over or under depending on which side of "roughly $45k" you are.)
If you do get them (meaning lower deductibles and co-pays) that can be worth $1000s of dollars if you need medical attention.
This is not factored into the above math.

It can be WORTH MAKING A SMALL IRA CONTRIBUTION to pull yourself under 250% FPL

You have the option of using a HDHP bronze plan, possibly with HSA option - this would make the 400% FPL scenario look mildly better with lower premiums. 

My math could be wrong, I just cranked this out in 10 minutes so please triple check
Here is my spreadsheet:

If my ACA premium assumptions are off, the numbers shift. Perhaps substantially (a few percent)
This is critical.

Were it me, I might go for the giant lump sum in 1 year and pay the extra ~0% tax for simplicity.
Then I would work to ensure I get CSR subsidies in the remaining years (<250% FPL.)

Doing this in a 20% down market has a silver lining (maybe withdrawing $200k instead of $250k?) AND we shift the future gains from a down market from ordinary income (IRA withdrawals) to long-term capital gains.

General Discussion / Re: Deciding when to invest after a transfer
« on: August 29, 2022, 09:37:52 AM »
Man what a mess. Sorry that this is not going well :(

No real thoughts to share, I was just wondering your thought process for making the transfer. Makes sense.

I kept my 401k with my old employer just because they have special funds with the lowest expense ratios available. It is basically admiral shares at Vanguard but for half the cost. I have enough non-401k funds outside of that (due to an old 401k transfer when I left my first job) that I can do Roth conversions as I wish.

I don't really recall my experience with the transfer process 20+ years ago but I remember it took awhile.

General Discussion / Re: Deciding when to invest after a transfer
« on: August 28, 2022, 08:49:17 PM »
market timing never works. Trying to not "lose" because the market has changed value during a transfer is market timing.

Why did you move funds out of the TSP?

General Discussion / Re: Bank on yourself
« on: August 28, 2022, 08:47:26 PM »
whole life is a scam

General Discussion / Re: Guidance for One Getting Started Very Late
« on: May 21, 2022, 09:14:10 AM »
Paying off a house and sending 4 kids to college is a heck of an accomplishment, congrats!

The difference with a later starting date is you have less time for compound interest to do its thing. Otherwise the principles are all the same.

Key principle: If your expected withdrawal marginal tax rate is higher than your current tax rate, then it is better to contribute to Roth accounts. If the opposite, then contribute to Traditional.

Most of your SS income will be tax-free. (I assume the $2,200/month is for both of you, either from spouse's own benefit or 50% spousal benefit.)
That puts a tax rate of 0% on a large chunk of other income due to standard deduction. 0% tax space shrinks a bit when the inevitable happens (switch to single from MFJ.)

With 0% tax rate in the future and 12% tax rate now (MFJ, $50k gross income) that says to contribute to Traditional accounts (take the tax deduction now), e.g. 403b

8% is a bit optimistic for real returns for 20 years, I'd plan for a percent or two lower - which means more of your nest egg needs to come from direct savings.

Taxes / Re: Minimizing tax
« on: May 09, 2022, 01:10:17 AM »
Congratulations on your big gain!

Unfortunately there isn't much you can do here beyond paying the tax and moving on.

Taxes / Re: Spiked or smoooooth income for ACA?
« on: May 05, 2022, 01:49:02 PM »
Thanks Mike

I don't plan to do this ever again. It was a 1-time thing as we transitioned from a low-tax to a not-low-tax environment.
Details here:

I'll be 48 this year, just 11.5 years away from unrestricted access to IRAs. Between this one-time $150k cap gain and debt ( we shouldn't have any issues hitting 59.5 without big tax bills or ACA premiums.

If that weren't the case, the ACA tick tock can be a good approach as long as there are no underlying (high cost) health issues.

General Discussion / Re: Beneficiary or Living Trust
« on: March 25, 2022, 11:14:57 AM »
I would discuss this with the person that helped you create the living trust.

Trusts add a layer. More layers = more complexity. I don't know or understand all the details of trusts. Worst case, trusts have more aggressive RMD rules than an inherited IRA (5 years vs 10.)

If your estate is worth ~$22 million+ (married couple) then the estate will pay some taxes (maybe state level estate tax on smaller amounts.) Else there are no taxes on an inherited Roth - the taxes have already been paid by definition of a Roth-type account (assuming meets 5-year rule.)

Yes, same 10 years to distribute funds from an inherited IRA, both Roth and Traditional. With traditional, the beneficiary will pay taxes at their rate. With Roth, no taxes (taxes paid previously at  legator's rate.)

General Discussion / Re: Roth or Taxable Account
« on: March 25, 2022, 10:19:14 AM »
Maybe. This is the general idea behind these posts:

Something to consider:
IRA contribution limits are ~$6k/person/year. If you are aiming for investments worth $1 million+, where you put $6k at the end probably doesn't matter that much

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