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THE MOST GALLING moment came when the notice of a sheriff’s sale was nailed to a tree in our front yard. The message to passersby was all too clear: “Deadbeats live here.”
Except they didn’t. Our house was in foreclosure—but the debts weren’t ours. They belonged to the people we had bought the house from. How did we escape what turned out to be a two-year ordeal? Three words: owner’s title insurance. How did we get caught up in such a mess?
MY WIFE AND I PAID just $234 in federal income taxes on 2021 adjusted gross income of $98,370, giving us an effective tax rate of less than 1%.
How did we end up paying so little? It all started with my October 2020 layoff. I was age 57 and had, until then, enjoyed a 34-year newspaper career. One of my immediate concerns: getting health insurance coverage.
That turned out to be easy in 2021.
Comments
In addition to index funds generally incurring less in capital gains because of low turnover, Vanguard's special mutual fund structure, which now can be copied by other firms, allows avoiding most if not all capital-gains distributions. Vanguard's Total Stock Market Index Fund Admiral Shares (VTSAX) has not paid a capital gain (short-term or long-term) since 2000. In contrast, State Street Core Equity Fund, an active mutual fund that looks a lot like the S&P 500, has dumped huge capital gains on investors in recent years.
Post: The great uninformed and misinformed population worries Quinn
Link to comment from April 20, 2025
This story was in the news Wednesday: Trump administration plans to end the IRS Direct File program for free tax filing, AP sources say https://apnews.com/article/irs-direct-file-tax-returns-free-trump-4bb0bca02fab9b3d06ae6f45ac67b7ab
Post: Now it’s over, taxes are filed, but I have a question. How did prepare your your taxes?
Link to comment from April 17, 2025
This column on Social Security from the Conversation was cited in a Wall Street Journal newsletter this morning: Social Security’s trust fund could run out of money sooner than expected due to changes in taxes and benefits
Post: Ida M Fuller, Social Security, EVs, taxes and a 340 million person society-Quinn rambles on, but with a purpose
Link to comment from April 16, 2025
Given that Mike Piper is a big part of this discussion, I will note that he has disputed describing the 8%-per-year increase in Social Security benefits after Full Retirement Age as an 8% return. Here is a link to his 2020 post on the subject: https://articles.opensocialsecurity.com/8-return/ Key excerpts: "To know the actual return you would get from delaying Social Security, we’d have to know how long you will live (and how long your spouse will live, if you’re married). ... (W)e can calculate an expected return based on life expectancies. But that figure turns out to be nowhere near 8% in most cases. For an average unmarried male, the expected return from waiting to file for Social Security works out to about 1.8% above inflation. For an average unmarried female, it’s about 3% above inflation. For a married person, it depends on the difference in ages between the two spouses as well as the difference in primary insurance amounts. (In short, it’s usually significantly higher for the higher earner in the couple and lower for the lower earner in the couple.)"
Post: Open Social Security – interesting finding on optimization and mortality tables
Link to comment from January 15, 2025
Garrison Keillor, in a "News From Lake Wobegon" monologue many years ago, cited his mother's cautionary phrase to him and his five siblings when guests were invited for dinner: "Family, Hold Back." My wife and I have half-seriously adopted that phrase at times.
Post: Pass the mashed potatoes by Quinn
Link to comment from December 30, 2024
The column needs an update of this sentence (an update that Jonathan OK'd, by the way): "If you purchase coverage through your state or the federal government’s health-insurance exchange, you could receive a tax credit if your income, based on family size, is four times the federal poverty level or less." The past few years have seen legislative enhancements of Affordable Care Act eligibility and coverage. The premium tax credit's eligibility cutoff (aka, the "cliff") had been 400% of the federal poverty level for years; for a family of three in 2024, that would be $103,280. However, that cliff was temporarily eliminated in 2021 to expand eligibility to higher-income households. In my two-person household, if we have an adjusted gross income of $100,000 in 2025, I would get a tax credit of $328 a month. Without a tax credit, my 2024 high-deductible/HSA-eligible plan would have a full premium of just over $1,000 a month in 2025. As AGI rises, the 2025 tax credit for my household shows a glide path down until it zeroes out at an AGI above $146,000. (Your numbers are likely to vary.) The expansion of eligibility and the enhancements of subsidies are to expire at the end of 2025 -- if the new powers-to-be in D.C. don't change anything during the year.
Post: A Taxing Retirement
Link to comment from November 16, 2024
My wife and I both retired from our final newspaper editing positions by layoffs, she in January 2016 as a part-timer at age 59, and I in 2020 as a full-timer at 57. I had never had a retirement age as a goal and figured that if I ever won the lottery (highly unlikely, as I never play), I'd keep working while keeping it secret as long as possible. Well, as a result of decades of saving diligently, investing while benefiting from decades of a bull market, good luck, good health, etc., I decided that we had in effect won the financial lottery, despite neither of us ever coming close to earning six figures. I looked on the layoff as an unsought blessing because the newspaper industry, and my employer in particular, were making the daily grind unpleasant to the point that at times I dreaded it. In the three months between the announcement that my newsroom unit was being eliminated and the layoff date, I began a crash course in Social Security, Medicare, Obamacare, and other subjects that had lurched from theoretical to intensely personal. I continued to job hunt, twice nearly landing jobs that would have been a step up from my final job, but eventually I decided that I was retired -- with the exception of an 11-month position outside the newspaper world that I took much later, partly because it offered health insurance. I don't regret my decisions. I was more reactive than proactive, but I am content where we are at. Unplanned "early" retirement suits me.
Post: Time’s Up
Link to comment from November 15, 2024
The TIPS Watch site does extensive math -- more than I care to get into -- on TIPS and I Bonds, so I'd look there for the answers you need.
Post: David Enna’s Tipswatch.com tribute to Bob Brinker
Link to comment from September 5, 2024
Speaking of TIPS Watch, as I noted to Jonathan on Sunday, the site relayed the news that the IRS is ending the option of buying paper I bonds with a tax refund. I can say from experience that it was a hassle for buyers. https://tipswatch.com/2024/09/01/treasury-is-ending-paper-i-bonds-as-a-tax-refund/
Post: David Enna’s Tipswatch.com tribute to Bob Brinker
Link to comment from September 4, 2024
I am a WaPo subscriber. Here's the gift link; I hope it works: https://wapo.st/476evJZ
Post: Jonathan in Washington Post this am.
Link to comment from August 28, 2024