Municipal bond interest is not excluded. Am not aware how municipal bonds help for this IRMMA MAGI, unless you meant don't own them/cut back ownership. (Muni interest is also included in the MAGI for purposes of provisional income used for taxable social security benefits.) For the purposes of IRMAA, the government generally calculates MAGI as the sum of your adjusted gross income (AGI) plus tax-exempt interest reported in your tax return two years ago. This is recalculated annually.
Source: article at schwab.com
That 2 to 5 percent profit margin must have skipped over two years that I had an individual policy, where the health insurance medical loss ratio for my insurer was 69% and 74%, less than the 80% set by the ACA,. I received rebates. Insurers had to meet the ACA’s medical loss ratio (MLR) threshold: in the individual and small-group markets, insurers had to spend at least 80% of premium revenue on clinical care and quality improvement, with the rest going to administration, marketing, and profit. If they fell short, they owed rebates based on a three-year average.
Source: healthcare.gov Apparently there was a valid basis to set a medical loss ratio for health insurers.
Effectively a 2.52% COLA increase if the full 85% of SS benefits are taxable & 22% marginal tax rate. (1-(0.85x0.22))=0.813
and
(1-(0.85×0.22))×3.1%=2.5203% The temp senior deduction distorts this as does an argument for using an effective income tax rate. At the end of the day, however, higher income beneficiaries receive a net lower COLA due to the income tax on benefits paid to the SS trust funds. ($57.8 billion funded the SS trust fund from income tax paid by beneficiaries in recent year.) The income tax return is a bunch of numbers on schedules. It"s where you say "what's my refund" or "I owe what" with the taxation of SS benefits not pointing out a net COLA reduction. Your bank account balance saw it happen though.
For my estimates the 80% of my pre retirement salary made sense: no longer incurring payroll taxes (7.65%), no state & local income taxes (approx 6.57%) on SS & pension, not contributing +15% of salary to 401k plan. I ignored commuting/other work costs and simply viewed the above as reasonable approach to an 80% estimated need. Hard to argue with the math.
In 2025 the combined FICA/SECA payroll/self-employed taxes brought in $1.3 trillion. The rest of the revenue (for the SS Trust Funds) comes from these sources: $68.9 billion from interest on money that the trust funds invested in federally backed guaranteed securities. $57.8 billionfrom federal income taxes that people paid on their Social Security benefits. Less than $50 million from reimbursements to the trust funds from the U.S. Treasury. Above sourced per 6/15/26 updated AARP article. I see where you were going after I used 'return of benefits' in my post. My bad, it's all good.
Money is fungible, ergo $100 income tax paid in to the SS Trust Fund is equal to a $100 reduction of a benefit paid from the Trust Fund. That works the same for your bank balance, too.
Isn't the taxation of social security benefits (from 1983) the mechanism for returning benefits from higher income beneficiaries to the SS Trust Funds? Yes, the added taxes from 1993 fund the Medicare Hospital Insurance Trust Fund. However the mechanism already exists to 'not pay' higher income beneficiaries. Not necessary to introduce more convoluted rules as I see it.
I used the withdrawal withholding method late Dec 2025, withholding 96% fed tax from a 401k @ Fidelity (& no state tax applicable). While not meeting the prior year or 90% current year safe harbors the fed tax balance due was less than $1,000. And with this withholding spread evenly throughout the year the balance due was penalty free.
Had a similar experience with ACA, 7 figure portfolio & able to manage MAGI with regular brokerage a/c. A Silver plan with yearly premium calculated to equal the health plan reimbursement for gym membership & attendance. Felt kinda, well, healthy. And just received a Blue Cross/Blue Shield settlement past week. Winner, winner.
Comments
Municipal bond interest is not excluded. Am not aware how municipal bonds help for this IRMMA MAGI, unless you meant don't own them/cut back ownership. (Muni interest is also included in the MAGI for purposes of provisional income used for taxable social security benefits.) For the purposes of IRMAA, the government generally calculates MAGI as the sum of your adjusted gross income (AGI) plus tax-exempt interest reported in your tax return two years ago. This is recalculated annually. Source: article at schwab.com
Post: IRMAA & late filing of tax returns
Link to comment from July 18, 2026
That 2 to 5 percent profit margin must have skipped over two years that I had an individual policy, where the health insurance medical loss ratio for my insurer was 69% and 74%, less than the 80% set by the ACA,. I received rebates. Insurers had to meet the ACA’s medical loss ratio (MLR) threshold: in the individual and small-group markets, insurers had to spend at least 80% of premium revenue on clinical care and quality improvement, with the rest going to administration, marketing, and profit. If they fell short, they owed rebates based on a three-year average. Source: healthcare.gov Apparently there was a valid basis to set a medical loss ratio for health insurers.
Post: A discussion on health insurance, premiums, profits and such- a 50 year perspective most people don’t want to accept
Link to comment from July 15, 2026
Effectively a 2.52% COLA increase if the full 85% of SS benefits are taxable & 22% marginal tax rate. (1-(0.85x0.22))=0.813 and (1-(0.85×0.22))×3.1%=2.5203% The temp senior deduction distorts this as does an argument for using an effective income tax rate. At the end of the day, however, higher income beneficiaries receive a net lower COLA due to the income tax on benefits paid to the SS trust funds. ($57.8 billion funded the SS trust fund from income tax paid by beneficiaries in recent year.) The income tax return is a bunch of numbers on schedules. It"s where you say "what's my refund" or "I owe what" with the taxation of SS benefits not pointing out a net COLA reduction. Your bank account balance saw it happen though.
Post: About that inflation in retirement
Link to comment from July 15, 2026
For my estimates the 80% of my pre retirement salary made sense: no longer incurring payroll taxes (7.65%), no state & local income taxes (approx 6.57%) on SS & pension, not contributing +15% of salary to 401k plan. I ignored commuting/other work costs and simply viewed the above as reasonable approach to an 80% estimated need. Hard to argue with the math.
Post: About that inflation in retirement
Link to comment from July 14, 2026
In 2025 the combined FICA/SECA payroll/self-employed taxes brought in $1.3 trillion. The rest of the revenue (for the SS Trust Funds) comes from these sources: $68.9 billion from interest on money that the trust funds invested in federally backed guaranteed securities. $57.8 billion from federal income taxes that people paid on their Social Security benefits. Less than $50 million from reimbursements to the trust funds from the U.S. Treasury. Above sourced per 6/15/26 updated AARP article. I see where you were going after I used 'return of benefits' in my post. My bad, it's all good.
Post: About that inflation in retirement
Link to comment from July 13, 2026
Money is fungible, ergo $100 income tax paid in to the SS Trust Fund is equal to a $100 reduction of a benefit paid from the Trust Fund. That works the same for your bank balance, too.
Post: About that inflation in retirement
Link to comment from July 12, 2026
Isn't the taxation of social security benefits (from 1983) the mechanism for returning benefits from higher income beneficiaries to the SS Trust Funds? Yes, the added taxes from 1993 fund the Medicare Hospital Insurance Trust Fund. However the mechanism already exists to 'not pay' higher income beneficiaries. Not necessary to introduce more convoluted rules as I see it.
Post: About that inflation in retirement
Link to comment from July 12, 2026
I used the withdrawal withholding method late Dec 2025, withholding 96% fed tax from a 401k @ Fidelity (& no state tax applicable). While not meeting the prior year or 90% current year safe harbors the fed tax balance due was less than $1,000. And with this withholding spread evenly throughout the year the balance due was penalty free.
Post: Don’t Let a Roth Conversion Trigger a Penalty
Link to comment from July 11, 2026
Wouldn't a national sales tax scheme cease Roth conversion planning (Yaaaa) but then tax spending from Roth account withdrawals (Yeeee)?
Post: …..taxes and you
Link to comment from June 13, 2026
Had a similar experience with ACA, 7 figure portfolio & able to manage MAGI with regular brokerage a/c. A Silver plan with yearly premium calculated to equal the health plan reimbursement for gym membership & attendance. Felt kinda, well, healthy. And just received a Blue Cross/Blue Shield settlement past week. Winner, winner.
Post: There is no such thing as a tax loophole, but here they are anyway
Link to comment from May 23, 2026