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When out of the blue the timing of something good = IRMAA ************************

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  • When out of the blue the timing of something good = IRMAA ************************

    The best laid plans... are still subject to Murphy's law. So a little whining.

    Earlier this month I received a tender offer to purchase private equity shares I had from a startup I left twelve (12) years ago. I had given up hope of receiving a penny long ago.

    I had spent considerable time, effort and cost in my financial planning to have tax-free sources of income in retirement. I planned to use capital loss carry over and Roth accounts in retirement to manage MAGIs. First to maximize ACA premiums and cost sharing subsidies and then to minimize IRMAA tiers.

    However, I had already finetuned my IRMAA MAGI for this year when this tender arrived. There was a fixed amount of money to purchased tendered shares. If all stock holders submitted all there shares there would only be a 10% subscription rate. Doing the best I could, I estimated 50% participation rate and a 20% subscription rate which would have bumped me two IRMAA tiers.

    The actual participation rate was far lower and there was a 42% subscription rate. I was hoping to receive payment in 2022. Despite being more than twice the amount I thought I would get. If it was 2022 income I would have mostly just used that amount to live on with no IRMAA effect. I was doing everything I could to delay distribution. Unfortunately, I received the check today. which may very well bump me four (4) IRMAA tiers.

    Certainly this is first world whining, but shows you you can plan but there are just things you have no control over.

  • #2
    Really!!!

    The automatic censor filters out the less desirable biblical afterlife location.

    It's almost 2022.

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    • #3
      Unexpectedly got a windfall is far better than unexpectedly got flattened by a Mack truck.

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      • #4
        Originally posted by Hank View Post
        Unexpectedly got a windfall is far better than unexpectedly got flattened by a Mack truck.
        Yeah, but getting flattened by a truck could be a boon for your heirs.

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        • #5
          You made money on the deal.

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          • #6
            Unplanned windfalls can really be a pain in the butt to deal with. One of my first years in practice I received handsome payment for an out of network surgery I had mentally written off. Threw me over the direct Roth IRA contribution limit. And this was before I really knew WCI & Bogleheads so I had no idea how to fix it.
            $1 saved = >$1 earned. ✓

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            • #7
              Actually, not really.

              I received an option for one share of common stock for each $2.72 of deferred compensation 17 years ago.

              I received $1.60/share in the tender offer. I'm not even remotely whole never mind any interest or considering the lost opportunity costs over the 17 years.

              Don't get me wrong, something is better than nothing after all these years.

              However, I most definitely did not; "make money on the deal."

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              • #8
                Can you refuse the income and somehow donate it to charity without it hitting your AGI?

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                • #9
                  At some point, you always have to pay the Piper. You can't have it both ways. There are certainly worse problems to have.

                  Figure out how the appeal process works so you can know when to submit. It will not be forever.

                  It will only take one stay in the hospital, rounds of chemo, multiple tests or specialty doctor visits to realize how fortunate you are to have Medicare.





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                  • #10
                    Originally posted by FIREshrink View Post
                    Can you refuse the income and somehow donate it to charity without it hitting your AGI?
                    With normal shares, that would be relatively easy. Either donate the shares directly or to a DAF. However, this was private equity which requires a Board of Directors approval to sell or gift shares.

                    The tender offer specifically and proactively denied any sales or gifts during the short tender period. Probably because it could have been a logistical nightmare to have the board review in such a short time period.

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                    • #11
                      Originally posted by Bev View Post
                      Figure out how the appeal process works so you can know when to submit. It will not be forever.
                      The appeal process is based on meeting one of seven (7) specific enumerated justifications for a reduction in income since the base year*. The absence of a windfall is not one of them

                      *If you haven't had the joy of dealing with IRMAA. Your tier is calculated based on the prior prior tax year IRMAA MAGI. E.g. 2021's IRMAA MAGI determines any IRMAA tiers in 2023. This is always a challenge, because you have to tune your MAGI before the tiers two years in advance are known.

                      You are correct. It will only be for 2023, because I now have plenty of cash/basis to mange my IRMAA MAGI for a while.

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                      • #12
                        Since this will just affect IRMMA in two years, can you not simply file an SSA4 that year documenting a loss of income producing property (i.e., the company was bought out) and ask SS to consider your income from the subsequent year instead?

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                        • #13
                          I have concluded that I will pay some IRMAA over the next few years because of Roth conversions and selling off a legacy mutual fund that is paying a lot of capital gains every December. I also recognize that I will stop Roth converting at 70 0r 72 and my Medicare premium will go down. It is hard to plan perfectly with all these variables.

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                          • #14
                            Unfortunately, the company was not bought out. This was essentially a limited company buyback directed and funded by a significant capital investment. POMS HI 01120.035 Life Changing Event (LCE) – Loss of Income-Producing Property does not cover these circumstances. Not to mention, I voluntarily participated in the tender offer for the company to repurchase shares.

                            I'm just whining about the lack of transparency and timing. You had to submit your maximum number of shares without any idea what the participation rate would be. I.e. you had no idea how many shares would be repurchased. They couldn't wait a week? Pretty much all shareholders were lamenting this. Why couldn't they have done this early in 2022 when everyone could then do tax and other planning for the year. Dumping it in the last week of the year, screwed up everyone's planning.

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                            • #15
                              it probably help THEIR planning/taxes to do it this year rather than wait a week.

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