FAQ - MISCELLaneous

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A Required Minimum Distribution (RMD) is the minimum amount you must withdraw annually from certain retirement accounts once you reach a specific age. It applies to traditional IRAs, 401(k)s, 403(b)s, and other tax-deferred retirement plans. The IRS mandates these withdrawals to ensure that tax-deferred funds are eventually taxed.

Key Points

• Starting Age: As of 2023, RMDs begin at age 73 (previously 72, and before that, 70½).
• Calculation: The required withdrawal amount is determined based on your account balance and IRS life expectancy factors.
• Penalty: Failing to take the full RMD can result in a steep tax penalty—typically 50% of the amount not withdrawn.
• Exceptions: Roth IRAs are exempt from RMDs during the account owner’s lifetime, though inherited Roth IRAs may have distribution requirements.

The Net Investment Income Tax (NIIT) is a 3.8% surtax imposed on certain investment income for individuals, estates, and trusts whose modified adjusted gross income (MAGI) exceeds specific thresholds. It was introduced in 2013 as part of the Affordable Care Act to help fund healthcare reform.

Who Pays NIIT?

You may owe NIIT if your MAGI exceeds:

• $200,000 for single or head of household filers
• $250,000 for married filing jointly
• $125,000 for married filing separately

What Counts as Net Investment Income?

NIIT applies to passive income, including:

• Interest & dividends
• Capital gains
• Rental & royalty income
• Non-qualified annuities
• Passive business income

What Income is Exempt?

NIIT does not apply to:

• Wages & unemployment compensation
• Social Security benefits
• Tax-exempt interest (e.g., municipal bonds)
• Self-employment income
• Qualified retirement accounts (401(k), IRA, etc.)

Since you're passionate about financial planning, this tax might be relevant when optimizing investment strategies and retirement withdrawals. 

Here are the key differences between a checking account and a savings account:

• Purpose:
  • Checking Account: Designed for everyday transactions, such as paying bills, making purchases, and withdrawing cash.
  • Savings Account: Intended for storing money and earning interest over time.
• Interest Rates:
  • Checking Account: Typically offers little to no interest on your balance.
  • Savings Account: Generally offers higher interest rates to help your money grow.
• Access to Funds:
  • Checking Account: Provides easy access to your money through checks, debit cards, and ATMs.
  • Savings Account: Access is more limited, often with restrictions on the number of withdrawals per month.
• Fees:
  • Checking Account: May have monthly maintenance fees, but some banks offer fee-free options if certain conditions are met (like maintaining a minimum balance).
  • Savings Account: Usually have fewer fees, but there may be penalties for exceeding the withdrawal limit.

In short, checking accounts are for daily use, while savings accounts are for growing your money over time.

A paid monthly subscription is a type of service where you pay a set fee every month to access specific products, services, or content. Think of it like a membership that renews automatically each month, allowing you to enjoy continued access as long as you keep paying the subscription fee. Here are some examples:

• Streaming Services: Platforms like Netflix, Spotify, or Disney+ offer access to their vast libraries of movies, shows, or music for a monthly fee.
• Software: Services like Microsoft 365 or Adobe Creative Cloud provide access to their software and tools on a subscription basis.
• Subscription Boxes: Monthly deliveries of curated products, such as beauty items, snacks, or fitness gear.
• Online Courses: Educational platforms like Coursera or Udemy may offer subscription options for unlimited access to courses.

Paid monthly subscriptions are convenient because they typically offer ongoing access to the service without requiring a long-term commitment. Be ware though of how many active ones you do have.

What Is IRMAA?

IRMAA (Income-Related Monthly Adjustment Amount) is a surcharge added to Medicare Part B and Part D premiums for higher-income individuals. It’s based on your income from two years ago — for 2025, the government looks at your 2023 tax return.

IRMAA Income Thresholds for 2025

• If you're single and your income is $106,000 or less, IRMAA does not apply.
• If you're married filing jointly and your income is $212,000 or less, IRMAA does not apply.
• If your income is above those thresholds, IRMAA applies and your premiums increase based on how much over you are.

Monthly Costs by Income (Single Filers)

• ≤ $106,000 → Part B: $185 / Part D: $0
• $106,001–$133,000 → Part B: $259 / Part D: $13.70
• $133,001–$167,000 → Part B: $370 / Part D: $35.30
• $167,001–$200,000 → Part B: $480.90 / Part D: $57.00
• $200,001–$500,000 → Part B: $591.90 / Part D: $78.60
• ≥ $500,001 → Part B: $628.90 / Part D: $85.80

(Source: NerdWallet)

Planning Tips

• Income sources that can trigger IRMAA: Roth conversions, capital gains, dividends, and tax-exempt interest.
• You can appeal IRMAA if you’ve had a major life change — like retirement, divorce, or the death of a spouse.
• Even $1 over a threshold bumps you up a bracket, so plan carefully.