Q: We recently read an article that said we might actually want to sell some stocks or mutual funds to trigger capital gains. It seems awfully strange to us. Can you explain why it makes sense?

A: The idea that you would voluntarily sell something at a gain certainly sounds odd. But it can be really smart for some people. It’s a tax strategy reserved for people with “modest” income. As you’ll see, modesty is in the eye of the beholder.

Specifically, we’re talking about long-term capital gains and also qualified dividends. They simply aren’t taxed when you live in the 12% federal tax bracket. But, you’ll need to plan carefully.

Let’s start with your deductions. In 2025, a married couple filing jointly gets a standard deduction of $31,500. If you happen to be over 65, you also get to add another $1,600 deduction for each of you. And thanks to the new tax law, there’s now also an additional $6,000 “enhanced” senior deduction for both of you for those over 65. That all adds up to a whopping $46,700 in deductions!

Now, let’s say your adjusted gross income – before applying those deductions and also before any possible capital gains – is $110,000. After your deductions, your taxable income would sit at only about $63,000.

Compare this amount to the upper threshold of the 12% tax bracket. That’s about $97,000. You’d have leftover “room” in the 12% bracket for about $34,000 of long-term gains without paying a penny in federal taxes. You can sell and immediately re-buy your holdings, if you want. It effectively resets your cost basis; an almost-free lunch. Remember, your state tax return will include those gains.

Q: I retired earlier this year after working in a high-income career. I just noticed that my Medicare Part B premium is much higher than the standard amount. I’ve learned it’s based on my income from before I retired. But, I’m now earning way less in retirement. Is there anything I can do to get my premium lowered?

A: Yes, absolutely. As background, Medicare Part B premiums are adjusted based on your income. Technically, it’s called the Income-Related Monthly Adjustment Amount (IRMAA, for short.)

They make you pay more than the standard premium once your adjusted gross income exceeds about $200,000. Here’s the catch. They use your income from two years ago to determine your Medicare premium for the current year. This explains why you’re currently paying so much, even as you’re earning way less. They just don’t know it yet.

You can request an adjustment by filing Form SSA-44. The form is meant for certain “life changing events.” Retirement qualifies as one of eight eligible life changing events. If you file one for 2025, you may even get a refund of overpaid amounts this year. Certainly do it for 2026 after you get your annual notice in a few weeks.

By the way, it looks like the standard Medicare Part B premium is going to jump about $20 per month next year. I suspect many retirees are going to be negatively surprised.

We’re getting close to the end of another year. This one has been wild, for sure. The economy is sending mixed signals viewed through the lens of highly-charged emotions. It’s no wonder investors are having trouble finding their footing. You can put me in that camp. Publicly admitting that as a pro takes a healthy dose of humility. That’s called experience.

I’m obviously watching the economy pretty closely. The job market is always a focus. Hiring has clearly slowed and – despite what President Trump wants to believe – it’s not due to a Biden appointee or a cabal of government employees cooking the books just to make him look bad. That’d be delusional thinking.

At the same time, tariffs are still a big deal, despite the fact that the stock market has more than recovered from the sheer panic in early April. The Supreme Court won’t decide on the legality of the Trump tariffs until some time in November. They look illegal to me. After all, trade deficits are not a national emergency. This whole tariff debacle is yet another sad case of Republicans in Congress willing to abdicate their constitutional duty out of political fear or opportunism.

Speaking of political heat, the Federal Reserve is feeling it. They finally cut rates by a quarter point as they also see our economy slowing. We can expect another cut in a few weeks and again in December. After that meeting, it’s kind of a coin toss. The current government shutdown can now be added to their list of concerns. The shutdown seems like bad politics for both sides. One thing is certain, it reinforces the general view that our political system is broken.

Then there is artificial intelligence. It’s hard to remember another technology that has impacted things as quickly as AI has. Undeniably, it’s a game-changer for so many workers and businesses. But it’s also fueling a wave of investor enthusiasm that feels like either too-good-to-be-true or too-much-too-soon. Once again, in the name of humility, I won’t call it a bubble just yet. What I do know is AI has far-reaching implications that our elected officials are – yet again – failing to address. The tech titans are running circles around them and likely lining their pockets.

In face of these cross-currents, the markets have weathered it incredibly well so far. For the year, stocks are up around 15% and bonds have delivered about 7%. It’d be naive to think things will continue at this pace.

This means some portfolio rebalancing is wise to consider. Yes, it might require the realization of some capital gains before the end of the year. But, with thoughtful planning, the tax bite can at least be minimized. What to do with the cash? Well, that’s a problem best left for another day.

It feels a little hard to believe, but there are only a few months left in the year. This means your tax planning window is still open. And, with this year’s new tax law, tax planning might be even more important than usual.

One of the most overlooked tax strategies – specifically designed for lower income taxpayers – is capital gains harvesting. For some investors, realizing gains before year-end can actually be tax-free. If your taxable income happens to fall in the 12% federal tax bracket, you can sell investments that have gone up – immediately repurchase that same investment to reset your cost basis higher – and magically owe zero federal tax. Too good to be true? It’s not.

For retirees, using your IRA as your charitable donation tool is a great tax trick. After age 70½, you are allowed to donate to charity directly from your IRA and your donations won’t count as taxable income. Once you hit age 73, it gets better. Your IRA donations will even help satisfy your annual required minimum distributions, known as RMDs. This tool is a no-brainer.

Your RMDs can also help you manage your tax payments. Withholding the right amount of taxes directly from your IRA distributions can completely eliminate the hassle of having to send in quarterly estimated tax payments. If you don’t really need your RMDs to fund your life during the year, you might want to wait to take your IRA distribution until you’ve done your year-end tax projection. After you estimate your overall tax liability, you can then just withhold what’s needed in one fell swoop. Tax season really shouldn’t feel very suspenseful.

With the new tax law’s senior deduction for those over age 65, Roth conversions might look even more favorable now. As a refresher, Roth conversions are about moving some money from your traditional IRA to a Roth IRA. The idea is to voluntarily pay your taxes now rather than later on in retirement. Of course, this decision needs to be backed up by a detailed tax analysis. This requires some tax expertise, so don’t wait until the holiday week between Christmas and New Year’s to ask for professional help.

For retirees considering Roth conversions, or realizing capital gains, you do need to keep an eye on triggering the Medicare premium surcharge, also known as IRMAA. If you don’t plan well, this surcharge can sneakily add hundreds, even thousands, to your annual Medicare premiums. It’s yet another reason to do a careful analysis late in the year when most of your tax data is known.

Finally, my list wouldn’t be complete without mentioning portfolio rebalancing. The markets have been surprisingly strong this year. It’s always tempting to let tax management crowd out risk management. That would be a mistake. In other words, don’t let the tail wag the dog.

Q: We’ve been putting away a lot each month into a 529 plan for our young son, but now I’m wondering if we’re saving too much. What happens if our child decides to skip college? Are we making a mistake?

A: Depending on how much you’re adding to the 529, I think you’ll be okay if your child doesn’t end up going to college. But, it’s smart to think things through, because the rules can be confusing.

If 529 plan money is used for something other than “qualified” education expenses, the earnings portion is going to get taxed and it will be subject to a 10% penalty. Not the whole balance, just the investment growth.

There are some ways to avoid the tax and penalty. You can always change the 529 plan’s beneficiary to another family member. The list of eligible family members is quite long. Changing the beneficiary will keep the 529 balance fully available without tax or penalty implications.

Another option is relatively new. Once your 529 account has been open at least 15 years, any leftover money can be rolled over to a Roth IRA for your child. The rollover rules are a bit restrictive, though. For example, a rollover is limited to annual Roth contribution caps at that time. And, there is a $35,000 lifetime limit for these rollovers. Regardless, this feature might be a really powerful way to shift the unused 529 balance toward your child’s future retirement.

Q: We sold our house this year and we’ll have a big capital gain to report. I’m now worried this means our Medicare premiums will jump. Someone told me we could file a form with Social Security to avoid an increase. How does that actually work?

A: Yes, there is a way to do this. But, the SSA-44 form can only be used for certain allowable reasons. Examples are your retirement, a divorce, or the death of your spouse. There are officially eight approved reasons listed on the form. The basic idea is to capture events that have a longer-term effect on your finances. Selling your home at a big gain isn’t on the list. So, filing an SSA-44 in your case won’t reduce your premiums.

It’s good for you to understand the timing of all of this. Your Medicare premiums are based on your income from two years before. Your capital gain on your home will show up on your 2025 tax return, but that gain won’t impact your Medicare premiums until 2027.

To be specific, in late 2026 when Social Security prepares your benefits letter for the upcoming year, they will look back at your 2025 tax return, see that capital gain, and adjust your Medicare premiums higher for 2027. Then, since your income in 2026 will have presumably dropped back down again, your Medicare premiums should reset to the lower amount starting in 2028. In other words, it all works on a two-year lag.