- I was a participant in a webinar as a part of my continuing education plan. Another financial professional attending this event wanted to know why his client received an unexpected tax bill for a few thousand dollars on their 2022 tax return. This professional knew his client was in the 0% tax bracket for long-term capital gains and recommended that they realize some capital gains in an investment since the professional assumed those gains would be taxed at 0%. However, the professional realized too many gains, with the unintended consequence of the client being kicked into a higher bracket and being subjected to additional tax.
- A person in the real estate business had a high-income year in 2021 when the housing market experienced its post-COVID boom. The unintended consequence was that this person’s Medicare Part B premiums doubled for 2023, due to an often-forgotten rule known as the income-related monthly adjustment amount (IRMAA). This causes Medicare Parts B and D premiums to be adjusted for incomes over certain thresholds.
Actions always carry consequences. As a result, through our Total Wealth Management planning process, our goal is to create and implement beneficial planning strategies while keeping the impact of unintended consequences to a minimum.
What have you learned from experiencing the effects of unintended consequences in your own life? We love hearing from you!