ACA health insurance serves millions of people for many reasons. This post covers one group: retirees under 65 and people who plan to retire early. I dug up the premium history over these years. It revealed good learnings for early retirees.

ACA premiums have been climbing fast. After adjusting for general inflation, the full price for the benchmark Second Lowest Cost Silver Plan (SLCSP) in my area is up 43% since 2024, and the full price for the Bronze plan I buy is up 52%.

ACA Subsidy Cliff

Not everyone feels the large increases the same way. The ACA subsidy cliff, which returned in 2026, imposes a hard cutoff at 400% of the Federal Poverty Level (FPL). It splits participants into two groups. Below the income cutoff, a premium tax credit caps what you pay as a percentage of income. Above it, you pay the full price. A $1 difference in income can gain or lose over $20,000 in tax credit. Here are the income cutoffs in 2027 based on the household size and the state:

The income used to measure against these cutoffs is the Modified Adjusted Gross Income (MAGI) for ACA, which is basically AGI plus muni bond interest plus untaxed Social Security benefits.

What gets less attention is how differently the two sides of the cliff experience rising premiums. I’ve had ACA health insurance in three different states, on different plans, with five or six different insurance companies. I calculated what a two-person household with income right at the cliff would have paid each year.

Premium History

I adjusted everything by the applicable Federal Poverty Level each year, which itself is adjusted for inflation. I’m only showing the effect of the current law, as if it were in effect between 2021 and 2025 (ignoring the enhanced subsidies during those years).

The red line shows the full annual price of the Second Lowest Cost Silver Plan (SLCSP), which is a benchmark in ACA health insurance. The blue line shows the net cost after the premium tax credit (PTC) for a two-person household with an income at the cliff. Households with income below the cliff pay less. The net cost is flat after adjusting for inflation because it’s set to a percentage of income.

Premiums were relatively stable in the first several years. Then they started taking off in 2025. The increase in 2026 was twice as big as in 2025. 2027 will be a third year of large increases. The cumulative increase over these three years is 43%. Because everything in the chart is already adjusted for inflation, these increases are above and beyond general inflation.

This phenomenon isn’t unique to my area. KFF reported that the median proposed premium increase from insurers nationwide was 15% for 2027 after a 20% increase in 2026. Some places may have had smaller increases, and others may have had larger increases than my area.

Premium increases in my chart come from two sources. One is normal aging. The other is health insurance prices rising faster than general inflation. Healthcare costs more over time because we’re more prone to health problems as we age. Why premiums have substantially outpaced general inflation is a debate for economists and policymakers. This post is about what we can do in the face of large premium increases.

Effect of Premium Increases

Premium increases affect two sides of the cliff very differently.

Benchmark Plan

When your income falls on the left of the cliff, you’re shielded from premium increases in the benchmark plan. Your net cost after the premium tax credit is capped at a percentage of your income. If the premium doubled, your net cost would still stay the same as long as your income doesn’t change (after adjusting for general inflation).

The right side of the cliff doesn’t have that shield. You’re completely exposed to premium increases. Even if you can afford the full price today, it can become a problem down the road.

Bronze Plan

My wife and I have always used a Bronze plan because we’re relatively healthy. Bronze plans have lower premiums but high deductibles and high out-of-pocket maximums. All Bronze plans are HSA-eligible now. The plan we most likely will choose for 2027 has a $13,800 deductible and a $24,000 out-of-pocket maximum. We don’t expect to come close to meeting the deductible.

The chart below shows our plans’ annual prices over the years.

The red line shows the full price. The blue line shows the net cost after the premium tax credit for a two-person household with an income at the cliff. Again, I adjusted everything for inflation.

Bronze plans cost less than the SLCSP. Their premiums had a similar pattern. They were relatively stable through 2024. Then there were consecutive large increases in 2025, 2026, and now 2027. The cumulative increase over three years is 52% on top of general inflation.

People on the right side of the cliff are fully exposed to these large increases. Choosing a Bronze plan saves some money initially, but prices can still escalate much faster than general inflation.

Price Gap Fluctuations

People receiving a tax credit while using a Bronze plan are rewarded for choosing a less expensive plan. The net premium formula is:

Percentage of Income – (Full Price of SLCSP – Full Price of Bronze Plan)

The component in the parentheses, i.e., the price difference between the SLCSP and the Bronze plan, isn’t stable. When the price gap shrinks, it can raise the net annual premium from $2,000 one year to $5,000 the next year in this example. However, we’re talking about lower total dollar amounts here. Whether it’s $2,000 a year or $5,000 a year, it’s still much more affordable than paying full price.

The price difference doesn’t necessarily change only in one direction. The net annual premium can drop back to $2,000 in another year when the price gap between SLCSP and the Bronze plan increases again.

Learnings for Early Retirees

Examining 9 years of premium history shows that the same large premium increases land very differently depending on where your income falls.

If your income falls on the left of the cliff, the premium tax credit absorbs most of the increases. After adjusting for general inflation, if your income stays the same, your net cost for the SLCSP in 2027 would be the same as in 2019, even though the full price rose sharply. The net cost for a Bronze plan swings from year to year as the price gap between the SLCSP and Bronze plan changes, but it stays far below the full price.

If your income falls on the right of the cliff, you don’t have such protection. Anyone paying full price is hit by the increases directly.

Know Your Cliff

The cliff is a hard cutoff. You must know where the cliff is and what counts and doesn’t count toward the cliff.

Track your income throughout the year and leave a cushion below the cliff. Don’t let a surprise year-end dividend or capital gain distribution blow you over. Choosing a Bronze plan and contributing to an HSA lowers your MAGI for ACA. So does making pre-tax 401k and IRA contributions when you have earned income. My tax calculator for retirees shows how far your income is from the cliff.

Retiring After 60

If you’re retiring at 63 and you’ll use ACA health insurance for only a couple of years, you can delay Social Security, set aside cash in an after-tax account, and withdraw from Roth accounts during those years. In some cases, it even makes sense to borrow from a HELOC or a securities-backed line of credit for a couple of years (please read the linked article for details). Spending after-tax cash, qualified withdrawals from Roth accounts, or spending borrowed money doesn’t increase your income for ACA.

Retiring Much Earlier

If you retire much earlier and expect to use ACA health insurance for many years, you need a plan to keep your income on the left side of the cliff. Self-employment, Social Security, interest and dividends, Roth conversions, withdrawals from pre-tax accounts, and realizing capital gains all increase your income for ACA. Keeping them low during years you’re on ACA health insurance will help. You can convert to Roth or realize large capital gains in years either before you get on ACA health insurance or after you get off.

If you can’t keep your income on the left of the cliff for the entire duration until you’re 65, it’s more important to land on the left in later years than in earlier years because premiums go up over time.

You can also bunch your income. If you must go past the cliff, go over big in one year to bank the money for the next several years. Spending banked money in subsequent years can help because it doesn’t add to your income.

Large premium increases above general inflation create challenges when you retire before 65. You can protect yourself from these increases by managing your income to the left of the cliff. Make a plan, track your income, and leave a cushion.

Learn the Nuts and Bolts

I put everything I use to manage my money in a book. My Financial Toolbox guides you to a clear course of action. Read Reviews

The post 9 Years on ACA: Learnings for Early Retirees appeared first on The Finance Buff.

Prompt engineering was a thing when AI chatbots first started. The quality of AI responses depended on what you included in your prompt. Companies reportedly paid as much as $300k in annual salary for prompt engineer positions.

AI has largely taken over that role. You can ask AI to write those prompts for itself. Or you can ask one AI to write prompts for another AI. The prompts that AI writes are often more detailed and effective than the prompts you write.

A custom skill goes along these lines. You can ask AI to do something and go back and forth a few rounds to fine-tune it, or you can ask AI to create instructions for itself on how to do that task. The result is a reusable custom skill. You trigger the saved skill when you need to perform the same task again. AI reads the instructions and does it the way you wanted.

Skill Examples

I’ve created several custom skills so far. Here are two examples:

Reformat Text

I have a tax calculator for retirees. It produces a report with all the inputs and results. When someone questions an unexpected result, I ask them to send me the report so I can see the full picture. However, Gmail strips all the line breaks and formatting in the report. It comes over as a big block of text, making it hard to decipher what’s going on.

I asked AI to create a skill to reformat the big block of text back to how it looks in the original report. I gave it samples of the report and the text block. AI did a first round. I reviewed the output and asked it to make some adjustments. AI wrote and saved detailed instructions for itself on how to do it. That became a custom skill.

When I receive another big block of text next time, I paste it into chat and say, “Please reformat this.” AI reads the saved instructions and does it. I don’t have to explain the background or my requirements again. AI already has that in the custom skill.

Prescreen Advisors

I maintain a directory of financial advisors who give advice but don’t manage investments. Some advisors start as advice-only but add assets under management after I include them in the directory. Some advisors stop accepting new clients when they reach full capacity. I need to review advisors in the directory periodically.

I asked AI to create a skill for this review. I told AI where to look and what to look for. I asked AI to give me a confidence level for whether an advisor still meets my requirements. AI wrote instructions for itself as another custom skill.

When I need to review an advisor, I identify the firm and ask, “Is this advisor advice-only?” AI loads the saved skill, does the research, and gives me a confidence level and why. I still review manually afterward, but AI’s prescreening has made the review process much easier.

AI may have created software code behind the scenes to perform these tasks. I don’t see the code or run the code. I only make my requests in the chat, as I do in other interactions with AI.

Create a Custom Skill

Creating a skill in AI is like teaching a junior employee. Do it once and hand off the job. It takes some back-and-forth to create it, but it will be easy when you trigger the skill next time.

I’m using Claude in its desktop app. Claude says both free and paid accounts have access to skills. I’m not sure what account levels in other AI services let you create skills.

When you create a skill in AI, start your chat with something like “Please create a skill,” and then describe what you need. Or you can say “Please use your skill-creator skill …” The skill-creator skill is a built-in meta-skill in AI. It knows how to create other skills.

Downloadable Skills

You can also download pre-made skills. I haven’t used any because it’s so easy to create custom skills to do exactly what I want.

If you explore downloadable skills, treat them as any other downloadable software. Only install ones from sources you trust. Skills are human-readable. Read what a skill does before enabling it.

Trigger a Skill

AI knows what skills it has. You usually don’t need a secret handshake to trigger a saved skill. It detects from your chat when it should apply a saved skill. Or you can mention the skill to give it a nudge.

Please use the reformatting skill on this tax calculator report.

You don’t have to use the exact name of the skill. Enough context will give AI clues for which skill to use.

Refine a Skill

Skills are updatable. Like teaching a junior employee, you don’t have to do everything in one go. If your requirements change, or if you see AI getting something wrong when it applies a skill, you can tell AI to update the skill with your new requirements or what mistakes to avoid. The saved skill will become better over time.

Delete a Skill

You can read the skill AI created or delete it when you don’t need it anymore. Different AI services save skills in different places. The Claude desktop app has them under Skills in Settings. Technically, you can also update a saved skill manually, but I would ask AI to update it through chat.

Keep It Read-Only

AI can make mistakes, just like a junior employee. I don’t give AI any credentials or let it make any changes. If it reformats my block of text poorly, I still have the original. If it flags an advisor incorrectly, I still review and confirm. I let it do the legwork and report back, but I keep the final say.

It’s a great value to have a “junior employee” available 24/7, taught to perform tasks to my specifications. I’m sold.

Learn the Nuts and Bolts

I put everything I use to manage my money in a book. My Financial Toolbox guides you to a clear course of action. Read Reviews

The post Create Custom Skills in AI for Repeat Tasks appeared first on The Finance Buff.

Yes, you read that right. It’s time to sell when the fixed rate goes up.

Reasons to Sell I Bonds

First, the higher fixed rate only applies to new I Bonds bought on or after November 1, 2026. The fixed rate on your existing I Bonds is fixed for life. Your existing I Bonds will continue to earn the low fixed rate set on the original purchase date.

Second, a higher fixed rate for new I Bonds means that TIPS yields are high. Observers have noticed that the I Bonds fixed rate is usually set at 65% of the average 5-year TIPS yield in the previous six months. The current 5-year TIPS yield is about 2.5%. All I Bonds purchased since May 2003 (23 years ago!) have a fixed rate of 1.4% or lower. Both I Bonds and TIPS are adjusted for inflation. Why settle for 1.4% when you can have 2.5%?

Third, you can only hold I Bonds in TreasuryDirect unless you have paper bonds. TreasuryDirect doesn’t have adequate staffing for customer service. Anything not readily handled by the automated system requires waiting months. A reader sent some paper bonds to TreasuryDirect to cash out. It’s been seven months, and it’s still not done. She was told it would take at least ten months. No private financial institution can get away with a timeline like that. If I Bonds are only a small part of your investments, you’ll have one fewer account to manage after you sell I Bonds.

Objections

Let me address some potential objections.

I Bonds are more flexible. You can sell at any time without losing principal!

Exactly, and now it’s time to use their flexibility to earn a higher yield in TIPS. If not now, when? Flexibility you don’t exercise loses its value.

TIPS have interest rate risk. You may lose principal if you sell before maturity.

Only looking at losing principal doesn’t give you the full picture. You lose 3 months’ interest when you sell I Bonds within 5 years. You lose 1% or more each year in foregone interest. These are losses you don’t see.

If you sell a 5-year TIPS after three years, you’ve already earned an extra 3%. After you add the 3-month interest penalty from selling I Bonds, the principal loss must exceed 4% to make you worse off, which is unlikely when you have only two years left until maturity.

Moreover, who says you must have a loss if you sell before maturity? You can also have a gain if interest rates go down. If you don’t think you’ll hold for five years, buy one that matches your expected holding period. You still come out ahead with TIPS that mature in two or three years.

Individual TIPS are confusing. I don’t understand the terminology (auction, secondary market, coupon, index ratio, …).

That’s OK. I wrote a book on TIPS, but I use a TIPS mutual fund in my personal portfolio. It’s just as easy to buy a TIPS mutual fund or ETF as to buy any other bond mutual fund or ETF.

Learn how to build a TIPS ladder if that appeals to you, but a TIPS ladder isn’t the only way to invest in TIPS. If you want payouts on a known schedule, you can also buy a set of Term TIPS ETFs. A 2028 TIPS ETF holds TIPS that mature in 2028. It will liquidate and pay out in 2028. A 2031 TIPS ETF holds TIPS that mature in 2031. It will liquidate and pay out in 2031. And so on.

I Bonds are tax-deferred. TIPS are taxable every year.

TIPS are taxable every year only if you hold them in a taxable account. You can buy TIPS in an IRA. Tax-deferred only delays taxes. You’ll pay taxes on I Bonds interest eventually anyway. At current rates, the reduction in interest income (1% or more) represents 20% of deferred interest (about 5%). Tax deferral has some value, but it’s not worth 20%.

I’ll have to pay taxes on all the accrued interest if I sell I Bonds.

See? Tax deferral has become a trap. The longer you hold I Bonds, the deeper you’re trapped. Now you have to figure out how to come out of the trap. You won’t have this problem with TIPS. See “How Much Room for Taxes” below for how to unwind.

I’ll lose three months’ worth of interest if I sell I Bonds within five years.

The size of the interest penalty depends on inflation and the fixed rate on your I Bonds (see the section below for a lookup tool). At the current inflation rate, you make up for the interest penalty in one year or less.

Suppose you bought I Bonds in November 2023 when the fixed rate was 1.3%. The current inflation adjustment is about 3.5% annualized. The 3-month interest penalty is (1.3% + 3.5%) / 12 x 3 = 1.2%. Switching from I Bonds with a 1.3% fixed rate to TIPS that pay 2.5% will make up for the interest penalty in one year. 2.5% – 1.3% = 1.2%. The breakeven will be shorter if your fixed rate is lower.

If your I Bonds are less than one year from their 5-year mark, wait until they cross that line. Otherwise, you’re better off switching.

Look Up Fixed Rate

If you agree it’s time to sell, review your current holdings first. Log in to your TreasuryDirect account. Click on Current Holdings in the top menu. Select “Series I Savings Bonds.”

Note the Issue Date of each bond. Bonds issued within the last 12 months can’t be sold yet. Of the rest, those with the lowest fixed rate are your first candidates to sell. However, TreasuryDirect doesn’t display the fixed rate for your holdings. You can use the lookup tool below to see the fixed rate based on the Issue Date.

How Much Room for Taxes

The difference between Amount and Current Value is the accrued interest.

Selling these two bonds will trigger $1,718.80 in interest income for each bond, or $3,437.60 for both. The interest will be taxed for federal income tax but exempt from state income tax.

If you worry that the interest income may push you into a higher tax bracket, you can use my tax calculator to see your current marginal tax rate and how much room you have in that same rate. You can sell some in 2026 and some in 2027 if you have limited room for taxes. TreasuryDirect allows selling a partial amount from a holding.

Logistics

You’ll need an ID.me account to access TreasuryDirect after October 28, 2026. Make sure the linked bank account is still active (ManageDirect -> “Update my Bank Information”). You don’t want the money to go to the wrong place.

The best time to sell (“redeem”) is at the beginning of a month, right after the 1st, when TreasuryDirect credits interest for the previous month. You can’t schedule your redemption in advance.

You can sell/redeem one bond at a time from Current Holdings, or you can sell/redeem multiple bonds from ManageDirect -> “Redeem securities.”

TreasuryDirect won’t withhold any tax by default. You can set up voluntary tax withholding if you prefer to have them withhold a percentage. See Voluntary Tax Withholding on Selling I Bonds at TreasuryDirect. Either way, remember to log in again next January to get your 1099 form.

Learn the Nuts and Bolts

I put everything I use to manage my money in a book. My Financial Toolbox guides you to a clear course of action. Read Reviews

The post I Bonds Fixed Rate Is Going Up, Time to Sell appeared first on The Finance Buff.

Convert to Roth

Besides collecting the one-time $1,000 from the government for babies born in 2025 through 2028 and the $250 from Michael and Susan Dell for some older kids living in certain zip codes, some people say a good use of a Trump account is to contribute every year until the child is 18, convert it to a Roth IRA in early adulthood, and enjoy 40+ years of tax-free growth.

It’s usually compared with a taxable account, which can’t be converted to a Roth IRA. However, as we will see in this post, money in a taxable account can still go into Roth accounts. The older the child is when you start, the sooner that will happen.

Ben Henry-Moreland at Kitces.com raised a few issues with converting a Trump Account to a Roth IRA in his article, Why Taxable Custodial Accounts Are Better Than OBBBA “Trump Accounts” For Kids’ Savings. Those include:

• Kiddie tax applies before the child provides more than half of his or her own support;
• 10% penalty on the conversion tax if it’s paid from the account being converted;
• Getting bumped into a higher tax bracket when the full balance is converted in one year.

Let’s be generous to the Trump account and assume the child converts after graduating college at 22, pays the tax from after-tax salary, and spreads the conversion over a few years.

UTMA

If you contribute the same amount to a UTMA account and invest tax-efficiently, the child will have a similar balance at age 22, especially if you start after the child is already at least 5 years old. The UTMA account just doesn’t earn enough dividends to pay much tax until it grows well above $100,000.

Taxable Account in Your Name

It doesn’t have to be a UTMA either. Some parents prefer to use a regular taxable account mentally earmarked for the child but legally under the parent’s name. They accept paying taxes on dividends as a cost of retaining full control of the account. They will gift appreciated shares to the child only when they see he or she will handle the gift responsibly.

Ben Henry-Moreland mentioned in passing that money in a taxable account can go into a Roth account:

A taxable account owner could choose to use funds from a taxable account to make Roth contributions, but those contributions would be subject to the annual contribution limit ($7,500 in 2026) …

I will expand on it and point out another path: Roth 401(k). Roth contributions aren’t limited to the $7,500 Roth IRA limit. The contribution limit in a Roth 401(k) is $24,500 in 2026 (soon to be $25,500 in 2027).

Unused Roth Contribution Room

How many 22-year-olds in their first job out of college max out both a Roth 401(k) and a Roth IRA? According to Vanguard’s latest How America Saves report, only 2% of participants under age 25 in its 401(k)-type plans contributed the maximum in 2025.

Most people in their first full-time jobs only contribute enough to earn the employer match. On a typical $60k salary, contributing 6% is $3,600. It leaves $24,500 + $7,500 – $3,600 = $28,400 of Roth contribution space unused.

We’re not even talking about employer plans that allow additional non-Roth after-tax contributions that can be converted to Roth (“mega backdoor Roth“). Or employers that have both a Roth 403(b) plan and a Roth 457 plan. The unused Roth contribution room is larger still if the child lands an employer like that.

If parents choose to keep the taxable account under their names, their annual gift tax exclusion is $19,000 x 2 = $38,000 per child in 2026, well above the $28,400 in unused Roth contribution space. They could also file a gift tax return, with no tax due, and gift a higher amount if the child’s unused Roth contribution space is higher than their gift tax exclusion. Gifting appreciated shares gives the child the parents’ cost basis and holding period. The child can sell gifted shares right away at their own long-term capital gains rate.

Years to Roth Accounts

Assuming that parents contribute the maximum $5,000 every year until the child is 18, and the account earns an inflation-adjusted 7% return, here are the ending balances at age 22 and how fast it can go when the child contributes an additional $28k per year to Roth accounts and uses the money in the taxable account to make up for the lower paychecks (all in today’s dollars):

If you start contributing $5,000 when the child is 8, the taxable account grows to $97k in today’s dollars when the child is 22. It takes only 4 years to pour the money into Roth accounts. That isn’t much longer than spreading the Roth conversion of a Trump Account over a few years. Selling from the taxable account incurs lower taxes because capital gains are taxed at a lower rate.

The older the child is when you start, the smaller the taxable account balance will be, and the sooner it can flow into Roth accounts. Taxes will be lower to move the taxable account balance into Roth accounts than to convert a Trump Account.

If you’re thinking of contributing the maximum to a Trump Account and converting it to Roth, it’s a better move to contribute the same amount to a UTMA or a regular taxable account in your name, especially when the child is already a few years old. Use the money to fill unused Roth contribution room in the child’s early adulthood. The tax on dividends along the way, plus capital gains tax when the shares are sold, is still less than the ordinary income tax on a Roth conversion. Once the money is in Roth accounts, it’s all the same tax-free growth and worth millions when the child retires.

The same idea also works if your child or grandchild is already over 18. Offer a match in their early career: gift appreciated shares to make up for whatever they put into Roth accounts beyond the employer match. Your money effectively ends up in their Roth accounts.

Learn the Nuts and Bolts

I put everything I use to manage my money in a book. My Financial Toolbox guides you to a clear course of action. Read Reviews

The post Converting a Trump Account to Roth Isn’t as Powerful as It Sounds appeared first on The Finance Buff.

Retirement account contribution limits are adjusted for inflation each year. Most contribution limits and income limits are projected to go up in 2027.

Before the IRS publishes the official adjustments for the next year in late October or early November, I calculate them using the same method the IRS uses, as stipulated by law, based on the published inflation numbers. I’ve maintained a 100% accuracy record ever since I started doing these calculations.

2026 2027 401k/403b/457/TSP Elective Deferral Limit

The 401k/403b/457/TSP contribution limit is $24,500 in 2026. It will go up by $1,000 to $25,500 in 2027.

If you are age 50 or over by December 31, the catch-up contribution limit is $8,000 in 2026. It will go up by $500 to $8,500 in 2027.

If your age is 60 through 63 by December 31, you have a higher catch-up limit of $11,250 in 2026. It will increase by $500 to $11,750 in 2027.

If your prior year’s wages from the employer were over a certain amount, your catch-up contribution must go into a Roth subaccount in the plan. If your 2025 wages from the same employer were over $150,000, your catch-up contribution in 2026 must go into a Roth subaccount in the plan. If your 2026 wages from the same employer were over $155,000, your catch-up contribution in 2027 must go into a Roth subaccount in the plan.

Employer match or profit-sharing contributions aren’t included in these limits. If you work for multiple employers in the same year, or if your employer offers multiple plans, you have one single employee contribution limit for 401k, 403b, and the federal government’s Thrift Savings Plan (TSP) across all plans.

The 457 plan limit is separate from the 401k/403b/TSP limit. You can contribute the maximum to both a 401k/403b/TSP plan and a 457 plan.

2026 2027 Annual Additions Limit

The limit on total contributions from both the employer and the employee to all defined contribution plans by the same employer is $72,000 in 2026. It will increase to $75,000 in 2027.

The age-50-or-over catch-up contribution is separate from this limit. If you work for multiple employers in the same year, you have a separate annual additions limit for each unrelated employer.

2026 2027 SEP-IRA Contribution Limit

If you have self-employment income, you can contribute a percentage of your self-employment income to a SEP-IRA. The SEP-IRA contribution limit is always the same as the annual additions limit for a 401k plan. It’s $72,000 in 2026, and it will increase to $75,000 in 2027.

Because the SEP-IRA doesn’t allow employee contributions, unless your self-employment income is well above $200,000, you have a higher contribution limit if you use a solo 401k. See Solo 401k When You Have Self-Employment Income.

2026 2027 Annual Compensation Limit

The maximum annual compensation that can be considered for making contributions to a retirement plan is always 5x the annual additions limit. Therefore, the annual compensation limit is $360,000 in 2026. It will increase to $375,000 in 2027.

2026 2027 Highly Compensated Employee Threshold

If your employer limits your contribution because you’re a Highly Compensated Employee (HCE), the minimum compensation to be counted as an HCE is $160,000 in 2026. It will rise to $170,000 in 2027.

2026 2027 SIMPLE 401k and SIMPLE IRA Contribution Limit

Some smaller employers offer a SIMPLE 401k or a SIMPLE IRA plan instead of a regular 401k plan. SIMPLE 401k and SIMPLE IRA plans have a lower contribution limit than standard 401k plans. The contribution limit for SIMPLE 401k and SIMPLE IRA plans is $17,000 in 2026. It will go up to $17,500 in 2027.

Employers with fewer than 25 employees and larger employers that contribute more to the plan have a higher contribution limit. The regular contribution limit to their SIMPLE plans is $18,100 in 2026. It will go up to $19,100 in 2027.

If you are 50 or over by December 31, the catch-up contribution limit in a SIMPLE 401k or SIMPLE IRA plan is $4,000 in 2026 ($3,850 at smaller employers) for ages 50-59 and 64 and over, and $5,250 for ages 60 through 63. These numbers will stay the same in 2027.

Employer contributions to a SIMPLE 401k or SIMPLE IRA plan aren’t included in these limits.

2026 2027 Traditional and Roth IRA Contribution Limit

You need taxable compensation (“earned income”) to contribute to a Traditional or Roth IRA, but there’s no age limit. The Traditional IRA or Roth IRA contribution limit is $7,500 in 2026. It will stay the same at $7,500 in 2027.

If you are age 50 or over by December 31, the catch-up limit is $1,100 in 2026. It will stay the same at $1,100 in 2027.

The IRA contribution limit is shared between the Traditional IRA and the Roth IRA. If you contribute the maximum to a Roth IRA, you can’t contribute the same maximum again to a Traditional IRA, and vice versa.

The IRA contribution limit and the 401k/403b/TSP or SIMPLE contribution limit are separate. You can contribute the respective maximum to both a 401k/403b/TSP/SIMPLE plan and a Traditional IRA or Roth IRA.

2026 2027 Deductible IRA Income Limit

The income limit for taking a full deduction for your contribution to a Traditional IRA while participating in a workplace retirement plan in 2026 is $81,000 for single filers and $129,000 for a married couple filing jointly. The deduction completely phases out when your income goes above $91,000 for singles and $149,000 for married filing jointly.

The full-deduction income limits will go up in 2027 to $83,000 for single filers and to $133,000 for a married couple filing jointly. The deduction will completely phase out when your income goes above $93,000 for singles and $153,000 for married filing jointly.

When you’re not covered in a workplace retirement plan but your spouse is, the income limit for taking a full deduction for your contribution to a Traditional IRA is $242,000 in 2026. The deduction completely phases out when your joint income goes above $252,000.

The full-deduction income limit will go up to $250,000 in 2027. The deduction completely phases out when your joint income goes above $260,000.

There’s no income limit if neither you nor your spouse is covered by a workplace retirement plan.

When you exceed the income limit for taking a deduction for contributing to a Traditional IRA, consider contributing to a Roth IRA instead.

2026 2027 Roth IRA Income Limit

The income limit for contributing the maximum to a Roth IRA depends on your filing status. The income limit in 2026 is $153,000 for singles and $242,000 for married filing jointly. These limits will go up to $158,000 for singles and $250,000 for married filing jointly in 2027.

You can’t contribute anything directly to a Roth IRA when your income goes above $168,000 in 2026 for singles and $252,000 for married filing jointly. These income limits will go up to $173,000 for singles and $260,000 for married filing jointly in 2026.

Your contribution eligibility is prorated in the income phase-out range. When you exceed the income limit for contributing to a Roth IRA, consider doing the backdoor Roth. See Backdoor Roth: A Complete How-To.

2026 2027 Healthcare FSA Contribution Limit

The Healthcare FSA contribution limit is $3,400 per person in 2026. It will go up to $3,500 in 2027.

Some employers allow carrying over some unused amount to the following year. The maximum amount that can be carried over to the following year is set to 20% of the contribution limit in the current tax year. As a result, the carryover limit is $680 per person in 2026. It will go up to $700 in 2027.

2026 2027 HSA Contribution Limit

You need to have a High Deductible Health Plan with no other coverage to contribute to a Health Savings Account (HSA). Not all high-deductible health insurance is HSA-eligible, except that all ACA Bronze or catastrophic plans automatically qualify.

Medicare or your spouse having a general-purpose healthcare FSA counts as having other coverage, which makes you ineligible to contribute to an HSA.

You don’t need taxable compensation (“earned income”) to contribute to an HSA.

The HSA contribution limit in 2026 is $4,400 for single coverage and $8,750 for family coverage. These limits will go up in 2027 to $4,500 for single coverage and $9,000 for family coverage. The new limits were announced in the spring. See HSA Contribution Limits.

Those who are 55 or older by December 31 can contribute an additional $1,000. If you are married and both of you are 55 or older by December 31, each of you can contribute the additional $1,000, but the contributions must go into separate HSAs in each person’s name.

2026 Saver’s Credit Income Limit

You may be eligible to receive a Retirement Savings Contributions Credit (aka “Saver’s Credit”) of up to $2,000 per person when you contribute to a retirement account or an ABLE account.

The income limits for receiving the credit in 2026 for married filing jointly are $48,500 (50% credit), $52,500 (20% credit), and $80,500 (10% credit). The income limits for singles are half of the limits for married filing jointly. The 2026 limits are $24,250 (50% credit), $26,250 (20% credit), and $40,250 (10% credit).

SECURE 2.0 Act and the 2025 Trump tax law reduced the scope of the Saver’s Credit. It will apply only when you contribute to an ABLE account starting in 2027. Contributions to retirement accounts will no longer qualify for the Saver’s Credit after 2026.

2027 Saver’s Match Income Limit

Contributions to a retirement account may qualify you for a Saver’s Match in 2027 when you have modest income. The Saver’s Match replaces the Saver’s Credit for retirement account contributions, but the income limits are lower.

All Together

Source: IRS Notice 2025-67, author’s calculations.

2026 2027 Tax Brackets and Standard Deduction

I also calculated the 2027 income tax brackets, standard deduction, capital gains tax brackets, and the gift tax exclusion limit. Please read 2026 2027 Tax Brackets, Standard Deduction, Capital Gains, QCD.

Learn the Nuts and Bolts

I put everything I use to manage my money in a book. My Financial Toolbox guides you to a clear course of action. Read Reviews

The post 2026 2027 401k 403b 457 IRA FSA HSA Contribution Limits appeared first on The Finance Buff.

At best, we will have three monthly CPI data points by mid-December out of the 12 needed to calculate the IRMAA brackets. I can only fill the missing nine data points with estimates. I’m not an economist. I’m not trying to predict future inflation based on economic indicators. I fill the empty slots with only mathematical extrapolation.

I use two sets of numbers: a lower set with 0% inflation for conservative projections and another set with some inflation for likely projections. A reader asked how close my past projections were to the actual brackets published the following year.

That’s a good question, but honestly, I haven’t tracked them until now. I went back and recalculated my projections using the same methodology but with only data available at the time.

I’m listing the numbers for only married filing jointly to keep it simple. The single brackets are exactly half of these numbers, except for the 3.2x bracket. The 3.2x brackets were fixed during these years.

* I haven’t seen the official 2027 numbers. All necessary data points are published, but it’s still unclear how the government will handle the missing CPI number for October 2025 when they didn’t collect price data during a shutdown. The actual column for 2027 uses my latest projections.

We had positive inflation in all previous five years. The 0% inflation projections were lower than the actuals, by design. The “some inflation” projections (currently using 3%) either matched or were slightly below the actual brackets. If you had used the higher set of projections, you’d be OK, but you were cutting it close unless you added a buffer below those numbers yourself.

Most people use the 0% inflation projections to be more conservative. I show the higher projections only to indicate how much headroom you potentially have, which is usually small ($2,000 or $4,000 for married filing jointly, $1,000 or $2,000 for singles).

I would go with the lower 0% inflation projections because the risk/reward tradeoff is lopsided. It’s not worth wringing out the last drop. See Use Pascal’s Wager When You’re Not Sure About Tax Rules for my general principle in dealing with uncertainty.

Learn the Nuts and Bolts

I put everything I use to manage my money in a book. My Financial Toolbox guides you to a clear course of action. Read Reviews

The post How Close Were the IRMAA Income Bracket Projections? appeared first on The Finance Buff.

What Is ID.me

ID.me is a private digital identity provider. It has obtained certifications required by some government agencies. In essence, ID.me ties an email address to a real person by matching an image of the person to a photo ID. Without the image, you can create a login and say who you are, but only submitting a driver’s license doesn’t prove who’s submitting it. ID.me requires seeing you via a selfie or a video call.

ID.me has landed contracts with the IRS, Social Security, VA, and now TreasuryDirect. After you log in with ID.me, ID.me tells the agency positively who just logged in.

How It Works with TreasuryDirect

I already have an ID.me account because the IRS requires it to use its IP PIN system (see Stop Tax Return Fraud: Sign Up for the IRS IP PIN Program). I tried my login at TreasuryDirect.

After I logged in through ID.me, it asked for my permission to share these pieces of information it has on me with TreasuryDirect. I wasn’t too concerned with sharing because I had already given these separately to TreasuryDirect when I opened the TreasuryDirect account.

ID.me sent me back to TreasuryDirect. TreasuryDirect asked for permission to retain the information sent over by ID.me. You won’t be able to use the TreasuryDirect website if you don’t give permission.

TreasuryDirect uses the Social Security Number sent by ID.me to search for accounts associated with it. Normal account access continues after you choose an account. You may not see this screen if you have only one account under your Social Security Number.

Log Out of ID.me

Logging out of TreasuryDirect does not automatically log you out of ID.me. As a best practice, I went to the ID.me website manually and clicked on the “Sign in” button on the top right. This brought me back into ID.me without any further authentication. Then I logged out of ID.me.

The ID.me session will probably time out eventually anyway, but I prefer not to keep it active for any longer than necessary.

Privacy Concerns

I already have an ID.me account because I was forced by the IRS to create one. It worked smoothly for me at TreasuryDirect.

However, if you don’t have an ID.me account yet, you may be concerned about giving your ID documents and selfie to a private company. It’s a serious concern, but TreasuryDirect is forcing your hand. You won’t be able to access your TreasuryDirect account after October 28, 2026 if you don’t create an ID.me account.

TreasuryDirect says this in its ID.me transition FAQs:

Will I be required to use ID.me to access my TreasuryDirect account online after October 28, 2026?

Yes. After October 28, 2026, ID.me will be the only method to log in to your TreasuryDirect account. You will have the option to use your traditional TreasuryDirect login between September 13, 2026, and October 28, 2026.

If you do not sign up and/or connect your TreasuryDirect account(s) to ID.me by October 28, 2026, you can easily restore online access at any time by completing the ID.me setup process and linking your TreasuryDirect account(s).

Without an ID.me Wallet, you will still be able to manage your account by submitting paper forms. However, you will not be able to:

• Sign in to TreasuryDirect online.
• Make new purchases.
• Set up new reinvestments of marketable securities. (Existing reinvestments already in place will continue.)
• View or download your tax forms online.

If you need a copy of your Form 1099 for the current tax year, you can request one by mail after the forms become available in January of the following year by contacting TreasuryDirect Customer Support at 844-284-2676 (toll-free).

You won’t be able to make new purchases. You can sell your existing holdings only by submitting paper forms. TreasuryDirect says on its home page that those requests “may take ten months or longer to process.”

Change.org Petition

Waiting ten months or longer to sell existing holdings isn’t a real choice. Some users started a petition at Change.org about this issue. You can sign the petition if you don’t like being forced to create an ID.me account. The petition has received 204 signatures as I’m writing this.

Creating an ID.me Account

I’m not optimistic that TreasuryDirect will listen to the user protests and change course. If you decide to relent, you can create an ID.me account by going to the ID.me website and clicking on the “Sign in” button on the top right.

Be prepared to submit a government-issued photo ID, such as a driver’s license or a passport, and your Social Security card. As I remember it from when I created my account some time ago, ID.me sent me a link to take a selfie. Or you can join a video call with a verifier, who will match your face with your photo ID. The process wasn’t too difficult.

Securing ID.me Account

It’s crucial to secure your ID.me account because it’s linked to your Social Security Number. If someone logs in to ID.me as you, they will be able to access the IRS, Social Security, and TreasuryDirect as you.

ID.me offers several multi-factor authentication (MFA) methods. I would only consider the three strongest methods.

Using a hardware security key on a computer requires buying at least two security keys (one primary, one backup), which cost $29 each. You can use the same two security keys to secure your email accounts and Vanguard account. See PSA: Secure Your Email Account to Prevent Wire Fraud and Security Hardware for Vanguard, Fidelity, and Schwab Accounts.

The NFC Mobile Security Key method requires both the hardware security keys and the ID.me Authenticator app on a mobile phone. It isn’t more secure than using a hardware security key on a computer. The ID.me Authenticator app is one more thing to manage, and you probably don’t want it on a phone that you take everywhere anyway.

A passkey is a software version of a hardware security key. It’s stored in a passkey manager application. If you’re already familiar with using passkeys and a passkey manager app, it’s as secure as using a hardware security key, and you don’t have to buy hardware keys. Many other websites support passkeys now. It’s good to learn how to use passkeys anyway.

I use hardware security keys with ID.me because I already bought them. Otherwise, I would use a passkey stored in a passkey manager app.

Abandon TreasuryDirect

If you don’t want ID.me, you have until October 28, 2026 to do anything at TreasuryDirect using your existing login. Otherwise, you will have to use paper forms and wait 10 months or longer.

If you have marketable securities (Treasury Bills, Notes, Bonds, and TIPS), you can’t sell them before maturity. If they will mature soon, you can turn off automatic reinvestment and wait for the payouts every six months and at maturity. Make sure your linked bank account is correct and keep the bank account in good order until you receive every payment from TreasuryDirect. Print or save your current holdings to a PDF, and create calendar reminders for all expected interest and principal payouts.

If the Treasury Notes, Bonds, and TIPS in your TreasuryDirect account won’t mature for some years, you can start the transfer process to move them to a brokerage account such as Fidelity, Charles Schwab, or Vanguard. The transfer may take a year to complete, but at least it will happen before your holdings mature.

You can buy new Treasuries in a brokerage account with no fee. See How To Buy Treasury Bills & Notes Without Fee at Online Brokers.

If you have savings bonds, you can redeem them as long as they’re more than 12 months old since the issue date. Redeeming savings bonds triggers taxes on the accrued interest. You can save the page that displays the interest to a PDF, or you can ask TreasuryDirect to mail you the 1099 forms by calling customer service next year. Be prepared for long hold times if many users choose to call.

If you have savings bonds not yet 12 months old, you can start the paper Form 5512 now. The bonds will be over 12 months old by the time they get to it.

Wait for Login.gov

Social Security online accounts offer a choice between ID.me and Login.gov. Login.gov is a similar service run by the GSA, which is a government agency, not a private company. Login.gov is also used by Homeland Security for the Global Entry and TSA Pre programs.

There’s an initiative to make Login.gov available for all public-facing websites run by the federal government within two years. TreasuryDirect must have received the memo, but it still only offers ID.me at this time.

If you don’t want ID.me but you don’t want to redeem everything and abandon TreasuryDirect just yet, waiting for Login.gov is another option. You will lose access to your account between October 28, 2026 and whenever Login.gov becomes available. It can take a year or two.

***

You have three bad choices: (a) Give sensitive information to a private company picked by the government agency; (b) Sell everything and pay taxes; and (c) Lose access to your account for an unknown length of time. I really don’t like this, but I don’t think they will change.

Learn the Nuts and Bolts

I put everything I use to manage my money in a book. My Financial Toolbox guides you to a clear course of action. Read Reviews

The post Using ID.me Login with TreasuryDirect appeared first on The Finance Buff.

A reader suggested that I release my tax calculator for retirees under a separate title because it has outgrown its original purpose.

I initially made a calculator only for the taxable portion of Social Security benefits. Many questions from readers made me realize that they were also looking for the resulting taxes from their Social Security benefits and other income. I added the tax calculation and expanded the scope over time. It’s now a full-fledged tax calculator for retirees.

Why Another Tax Calculator

There are many tax calculators online already. However, most of them only look backward, not forward. The 2027 tax brackets will be known by September 2026, but most online tax calculators don’t update to 2027 until well into 2027. Because I track tax brackets even before the IRS officially publishes them, my tax calculator covers the next year sooner than any other, giving you an early start on planning.

TurboTax desktop software has a What-If Worksheet for planning (I wrote about it in Tax Planning with TurboTax What-If Worksheet). It works to some degree, but it’s missing some important pieces. Notably, it doesn’t include the ACA premium tax credit for early retirees. Nor does it include the effect on IRMAA for retirees on Medicare. The popular Dinkytown 1040 Tax Calculator and its licensed clones on AARP and other websites don’t calculate the ACA premium tax credit or the effect on IRMAA either.

Other tax software programs, such as FreeTaxUSA, don’t even do 2026 until November, when they release the 2026 version. The early releases are often still incomplete at that time. In general, tax software is intended for filing, not for planning.

AI is quite good these days, but as you see in Which AI Calculates Taxes Correctly?, a tax calculator is faster and more accurate than AI if you know which one to use.

Some niche tax calculators update early and are more complete. Case Study Spreadsheet and Excel1040 are two good ones I know. I wrote about Case Study Spreadsheet in Roth Conversion with Social Security and Medicare IRMAA. Both Case Study Spreadsheet and Excel1040 require more upfront setup, though. The calculator I made is less comprehensive but is easier to get the result quickly and accurately.

Why Retirees

I specifically made this tax calculator only for retirees.

Retirees’ taxes are simpler. They don’t have deductions and credits related to children and education, such as the Child Tax Credit, Child and Dependent Care Credit, American Opportunity Credit, or the Student Loan Interest Deduction. A general-purpose tax calculator meant for everyone forces retirees to wade through many irrelevant inputs. I believe in Less Is More. A more streamlined calculator is better than a cluttered one.

Meanwhile, retirees have a greater need for a tax calculator to set up withholding and estimated tax payments. They also have more control over the sources of their income. Taxable income can come from IRA withdrawals, capital gains, or Roth conversions. A tax calculator is helpful to compare different approaches.

Tax Planning A/B Comparisons

Besides getting a bottom-line number to set tax withholding and estimated tax payments, a good way to use this tax calculator is to compare different scenarios. Enter your income composition one way and save the results as a baseline Scenario A. Alter some inputs and save the results again as Scenario B. Open the saved Scenario A and Scenario B side-by-side and compare. You can save an unlimited number of scenarios:

• What if I withdraw more from the IRA instead of realizing capital gains?
• What if I increase Roth conversions?
• What if I sell from taxable investments?
• What if I receive less interest?
• What if I work a little?
• What if I die and my surviving spouse files as a single next year?

Whatever comes to mind, you can see how it affects your federal income tax.

What’s Included

This calculator covers pretty much everything relevant to retirees:

• Social Security benefits
• Muni bond interest
• Qualified dividends and long-term capital gains
• Rentals, interest, non-qualified dividends, short-term capital gains, capital loss
• Incidental self-employment
• Wages, pension, IRA distributions, Roth conversions
• Qualified Business Income deduction
• Net Investment Income Tax
• Above-the-line deductions
• Standard Deduction
• Cash donations made directly to charities
• Senior Deduction
• Auto loan interest deduction
• Itemized deductions
  • Non-cash donations and donations to Donor-Advised Funds
  • State and local taxes (SALT) paid
  • Medical expenses
  • Mortgage interest
• ACA Premium Tax Credit
• Medicare IRMAA

I picked these for their relevance to retirees. Everything included is updated to the 2025 Trump tax law (One Big Beautiful Bill Act). The less-used itemized deductions and ACA tax credit are collapsed by default. You can easily skip those if you don’t have them, but you can still dive in when you do.

What’s Not Included

Besides things not relevant to retirees, this calculator doesn’t calculate these items:

• Self-employment income plus wages exceeding the Social Security wage base
• Self-employment retirement contributions and health insurance deduction
• Alternative Minimum Tax (AMT)
• Foreign Tax Credit

This calculator covers incidental self-employment income, but it doesn’t cover more complicated scenarios, such as when you have both self-employment income and W-2 wages, the sum of the two exceeds the Social Security wage base ($184,500 in 2026), and limits your self-employment tax. Nor does it cover making retirement contributions based on self-employment income to SEP-IRAs, SIMPLE IRAs, or solo 401(k) plans, or taking a self-employment health insurance deduction.

AMT and Foreign Tax Credit are also more complicated, and many retirees don’t have them. Collecting inputs to calculate them would make the calculator more cluttered.

I’m considering creating a separate, longer version of this tax calculator to include these more complicated items.

In addition, the calculator only calculates the federal income tax. It doesn’t calculate state and local taxes.

Calculator

The calculator does 2025, 2026, and 2027. You can double-check the 2025 results against your filed 2025 tax return. When you see that the calculator is correct for 2025, you’ll have confidence that it’s also correct for 2026 and 2027. The 2027 calculations use my projected numbers in 2027 Tax Brackets, Standard Deduction, Capital Gains, QCD.

This calculator works better on a desktop computer or a newer tablet. All calculations are performed locally in your browser. Nothing is transmitted to any server.

Notes

Here are some notes for how the calculator expects to see various numbers.

Social Security

Enter the total gross Social Security benefits for the calendar year (not monthly) before any Medicare premium deductions. If you’re married filing jointly, include the total gross Social Security benefits for the calendar year from both spouses. If you start or stop benefits in the middle of a year, enter the total benefits expected for that year.

Dividends

Dividends can be qualified or non-qualified. As reported on Form 1040, ordinary dividends are the total of both qualified and non-qualified dividends. The calculator needs to break out qualified and non-qualified dividends separately.

Suppose you have $1,000 in total dividends (“ordinary dividends” on Form 1040 and Forms 1099-DIV), of which $800 is qualified dividends and $50 is 199A dividends. The $800 in qualified dividends goes into the “Qualified dividends and long-term capital gains” field. The difference between ordinary dividends and qualified dividends is non-qualified dividends, which is $200. Include only $200 in the next field, “Other investment income.” 199A dividends from REITs are included as a part of non-qualified dividends. $50 goes into the “199A dividends” field.

Capital Loss

Capital loss should be used to offset capital gains first. If there’s still capital loss left after offsetting all capital gains, use up to $3,000 to offset items in the “Other investment income” field.

Rentals

Rental income goes into the “Other investment income” field. It should be the net rental income after all expenses and depreciation. This calculator doesn’t cover the case of a net loss after expenses and depreciation.

Tax Withholding

If you have tax withheld from wages, IRA distributions, Roth conversions, or any other source, use the gross income before tax withholding. Tax withholding is a prepayment against your total tax for the year. It affects the residual amount you’ll pay at tax filing time, but it doesn’t affect your total tax number itself.

QCDs

Qualified Charitable Distributions (QCDs) go directly from your IRA to charities. They don’t count as your income. Nor do you receive a tax deduction for QCDs. Exclude any QCDs in the calculator. Only include IRA distributions that aren’t QCDs.

ACA Second Lowest Cost Silver Plan

If you’re on ACA health insurance, the government uses the full price of the Second Lowest Cost Silver Plan (SLCSP) to calculate the Premium Tax Credit you’re eligible for.

One way to get that number is to go back to your state’s marketplace (or healthcare.gov if your state doesn’t have a separate one). They usually have a “browse plans” option that doesn’t require logging in. Enter your zip code, household size, your age(s) as of 12/31 last year, and a very high income, like $300,000. That will give you full-price plans. Filter for Silver plans only and sort by premium from lowest to highest. Take the second lowest number. The calculator needs that number to calculate the subsidy.

Another way is to use the KFF subsidy calculator. Again, enter your state and zip code, household size, your age(s) as of 12/31 last year, and a very high income, like $300,000. The KFF calculator shows you a price for a Silver plan. That’s the full price of the second-lowest cost Silver plan.

Bug Reports and Feature Requests

If clicking on Calculate doesn’t produce any output, please try it in Incognito Mode. Sometimes your browser keeps an older version of the calculator, which creates conflicts with a later update. Incognito Mode solves that problem.

Please include the full output in the comments if the calculator gives you unexpected results. Please use the contact form if you aren’t comfortable posting numbers in public comments.

Please leave a comment if you have a suggestion for improvement. I apologize in advance for not wanting to make the inputs more granular in this version of the calculator. Making a streamlined calculator for retirees is a guiding objective. I want this calculator to be easy to use for 99% of retirees. I’m thinking of creating a separate, longer version of this calculator to cover things that apply to only a small percentage of retirees. The additional inputs and granularities can go into the longer version.

Learn the Nuts and Bolts

I put everything I use to manage my money in a book. My Financial Toolbox guides you to a clear course of action. Read Reviews

The post 2026 2027 Federal Income Tax Calculator for Retirees appeared first on The Finance Buff.

This makes it difficult to transfer money to another person’s account because people don’t want to reveal their bank account number, fearing you might take their money. As a result, person-to-person transfers are typically done through third-party services such as Venmo, Zelle, PayPal, or Cash App. Both parties must use the same service. You can’t do it if you have Venmo and they have Zelle. Either you must also sign up for Zelle, or they must also sign up for Venmo.

Each third-party service has its limitations. They work for smaller transfers, but they often don’t work for larger ones. Bank of America limits Zelle transfers to $3,500 per day. If you want to transfer $5,000, you’d have to split it into two days. Many banks have even lower Zelle transfer limits than Bank of America.

Trusted Parties

Some people don’t mind sharing their bank account information with you when they know and trust you. Say you’re giving annual gifts to your adult children, or you’re paying a mom-and-pop landlord monthly. They’re willing to give you their bank account for you to deposit into. Even then, it’s not that easy to transfer money to their account.

Many banks only allow linking to accounts that you own. They require verification to confirm that you have control over the target account. It’s done traditionally by micro-deposits. Lately, many banks have moved to using instant verification services such as Plaid or Mastercard Data Connect (formerly Finicity). This requires logging into online banking at the target bank. Banks see who owns the target account in this process. They won’t allow the link when names don’t match.

Intra-Bank Transfers

Some banks support transfers between customers within the same bank. Many credit unions also have this feature. They call it member-to-member transfers. Suppose your child is attending college out of state. If both of you have accounts at the same bank or credit union, you can transfer to your child’s account internally.

It’s feasible to make this arrangement with a child. It’s difficult to do with your sister or a landlord unless you happen to use the same bank.

Bill Pay or Mail a Check

You can use Bill Pay to pay an individual. The Bill Pay provider will mail a paper check. Or you can mail a check yourself. Both are subject to delivery delays and potential loss or theft. That’s not a good way.

Wire Transfers

You can also send a wire transfer, but many banks charge a fee for wires. Even if you get free wires from your bank, many banks also charge a fee for receiving a wire. Making your family member or the landlord pay a $15 fee to receive money from you isn’t that great.

Push-Only ACH

Fortunately, some banks allow linking to another person’s bank account. They don’t require ownership verification for this type of link when they disallow withdrawing money from the target account. For instance, when you link an external account to Bank of America, it asks you whether you want the account to be “only transfers to” or “for transfers to and from.”

Selecting “for transfers to and from” requires ownership verification through Plaid. Selecting “only transfers to” doesn’t. If you use Bank of America, see the detailed walkthrough in How to Link an Account to Bank of America for ACH Push.

Fidelity

I use Fidelity for my banking (see 2 Ways to Use Fidelity as a Bank Account). I can link another person’s bank account to my Fidelity account. Like Bank of America, Fidelity asks whether the account is owned by me or by someone else.

Linking a bank account you own creates a bidirectional link: you can push money to that account or pull money from it. It requires ownership verification. Linking a bank account owned by someone else creates a push-only link: you can transfer money to that account, but you can’t withdraw from it. It doesn’t require ownership verification.

Fidelity will go through a banking industry process called “prenote” to confirm that the target account is valid. A prenote requires waiting at least 3 business days before sending the first transfer. Give it about a week of setup time before you need to transfer money. Once the link is fully set up, the transfer arrives on the same business day if you request it early enough in the morning, or on the next business day if you miss the cutoff. It’s almost as fast as a wire transfer, and it’s free to receive.

You can transfer up to $100,000 per day by EFT/ACH from a Fidelity account. It’s not possible to transfer that much by Venmo or Zelle.

Fidelity’s online interface only supports ad hoc transfers to another person’s account. You can’t schedule transfers for a future date or set up recurring transfers to another person, whereas you can set up scheduled or recurring transfers to your own accounts. If you need to set up scheduled or recurring transfers to another person, call customer service to see if they can set it up on their side.

***

Venmo or Zelle works well for buying things listed on Craigslist or Facebook Marketplace, or paying a gardener or a house cleaner. They don’t work as well for transferring larger amounts to a trusted party. Having an account that supports ACH to another person’s account makes it work in that scenario. The receiving side doesn’t require any special setup. They only need to give you their routing number and account number. It’s free on both sides.

If your bank also supports ACH transfers to another person’s account, please include its name in the comments so other readers know where to go besides Fidelity and Bank of America.

Learn the Nuts and Bolts

I put everything I use to manage my money in a book. My Financial Toolbox guides you to a clear course of action. Read Reviews

The post Transfer Money to Another Person with Push-Only ACH/EFT appeared first on The Finance Buff.

My immediate reaction was that calculating taxes isn’t the best use of AI, because it falls under “verifiable facts” and “latest development” categories. The retirement plan contribution limits, tax brackets, the maximum deduction amounts, etc., are all verifiable facts. The IRS sets them every year, and they are what they are. Just go to the IRS website for the latest numbers, or Google. If you ask AI, it had better get the latest numbers online anyway, because AI’s training lags.

On the other hand, tax rules are complicated. After you have all the latest numbers from the IRS, you still need to apply the complex rules — what counts and what doesn’t, and which rates apply to which income. Online tax calculators usually don’t cover the current year until late in the year, and they can be either too simple or too complicated. It would be nice to have AI calculate taxes specifically for the types of income and deductions we have: not too simple with only limited inputs, and not too complicated with everything under the sun.

The Quiz

I thought I would test how well AI calculates taxes. I came up with this quiz question:

Jill, single, age 63, has these incomes in 2026:

• $30,000 from Social Security
• $10,000 from interest and pre-tax IRA withdrawals
• $37,000 from qualified dividends and long-term capital gains
• $1,000 from muni bond interest

Jill contributes $4,400 to her HSA and donates $1,500 in cash directly to charities. What’s Jill’s federal income tax for the 2026 tax year?

I designed this question carefully to cover several calculations. Slightly less than 85% of Social Security is taxable in this case. AI has to know how to calculate the exact taxable amount, and not just make a straight 85% of Social Security taxable. The gross income consists of ordinary income, tax-exempt income, and investment income taxed at preferential rates. The ordinary income component goes across two tax brackets. So does the investment income. One deduction is above-the-line, and the other is below-the-line.

I added these instructions to encourage AI to get the latest tax numbers from the IRS:

It’s important to calculate it accurately. Please use tax amounts only for 2026 and only from official IRS sources.

Initial Results

First, I ran the test case through my tax calculator in Calculator: How Much of My Social Security Benefits Is Taxable?. It gave this result:

$25,410 of your Social Security benefits is taxable, which means 15% of your benefits is tax-free.

Your 2026 federal income tax is approximately $1,640.

This is calculated from a taxable income of $50,910 (AGI $68,010 – Standard Deduction $16,100 – Senior Deduction $0 – charitable contribution deduction $1,000).

Then I sent the quiz to all four major AI chatbots: ChatGPT, Claude, Gemini, and Grok. I only used the free version in each one, with the free Thinking, Pro, or Expert mode enabled. I compared the answers to the correct result from my tax calculator.

My quiz was too hard! All four major AI models failed to give the correct answer. The $1,500 cash donation threw them off. It falls squarely in the “latest development” category. The charity donation deduction for non-itemizers is new. The AI models all have “donations are deductible only when you itemize” imprinted in their training. Claude, Gemini, and Grok all would have given the correct answer if I hadn’t included the cash donation. ChatGPT was off on how much of Social Security is taxable.

When you see AI not giving you a deduction, you can raise a question and ask it to double-check. I followed up with this statement:

I heard that cash donations are deductible for people using the standard deduction, starting in 2026, up to a limit.

I only said “I heard,” which may or may not be true. AI still has to verify. I also added this request for ChatGPT:

Another AI model calculated a different amount for how much Social Security is taxable. Please double-check your calculation to see who’s right.

Round 2

All four AI chatbots double-checked and revised their answers.

Source	Answer
My tax calculator	$1,640
ChatGPT 5.4 Thinking Mini	$1,640
Claude Sonnet 4.6 Extended	$1,640
Gemini 3 Pro	$1,411
Grok 4.20 Expert	$1,411

ChatGPT and Claude got the correct answer. Gemini and Grok mistakenly treated the cash donation deduction as above-the-line and used it to reduce the Social Security taxable amount.

I asked Gemini and Grok to clarify whether the HSA contribution and the charity donation should or shouldn’t be included in calculating the Social Security taxable amount. Gemini didn’t realize its mistake. It said both should be included. Grok refused to go further because I reached the message limit for not having an account. [A reader with a Grok account did the same chat with Grok and told me that Grok also said both should be included.]

Here are the full chat transcripts. They make an interesting read.

https://chatgpt.com/share/69bf73fb-db44-8004-9905-b77b56fbb6ce

https://claude.ai/share/ef62408a-6502-4d70-82be-6ea46a4a4cc3

https://gemini.google.com/share/795bdad9f5ad

[No sharable link for Grok because I don’t have an account.]

Impressions

I don’t think we can draw definitive conclusions based on only one test. I call these impressions.

1. Whether AI can calculate taxes correctly depends on the complexity. Three out of the four major AI chatbots would’ve given the correct answer in one go if the question didn’t include the new and tricky charity donation deduction. The explicit request to retrieve the latest information from official IRS sources and turning on the Thinking/Pro/Expert mode probably helped in improving accuracy.

2. AI works better when you make it a conversation. Don’t stop and say it’s useless when you spot some errors in the initial answer. Help the tool help you. Both ChatGPT and Claude reached the correct answer in Round 2 after I asked them to double-check.

3. It takes little effort to send the same question to two or more AI models. You don’t need to know which AI is correct when you get different answers. You can tell one AI that another AI said something different. It’ll re-examine.

4. AI was wrong because human sources were wrong. Gemini and Grok treated the donation deduction as above-the-line because many human sources incorrectly called it above-the-line. If you Googled, you would encounter those incorrect sources too. ChatGPT and Claude used more reliable sources and correctly identified the difference between above-the-line and not requiring itemizing deductions.

5. An online tax calculator is faster and more accurate if you know which one to use. That’s a big “if.” Only saying “Don’t use AI because it’s often wrong” doesn’t say where you will find more reliable sources.

As much as I’d like to see everyone use my tax calculator, let’s face it: 99.99% of people don’t know that I exist. They have little chance of finding the few sources that do it accurately because Google doesn’t rank tax calculators by timeliness or thoroughness.

Here’s a small challenge for you:

Pretend you’re not familiar with tax calculations. Find another way to answer the quiz question. Don’t say “I have a spreadsheet,” or “I use the super-duper Case Study Spreadsheet or Excel1040.” 99.99% of people don’t have those. Please tell me in the comments section how you could do it otherwise.

Short of finding the good sources, the results from AI aren’t that bad (see #1).

6. AI’s general approach was correct even when it was wrong in some nuances. All four AI chatbots followed these correct steps:

• Calculate how much of Social Security is taxable
• Calculate AGI
• Calculate taxable income
• Separate ordinary income and preferential investment income, and know how they stack
• Apply different tax brackets

This general approach is “common knowledge of an insider.” You can learn the steps from AI if you’re not familiar with tax calculations. That’s more valuable than just having a final number. When I saw that ChatGPT didn’t include details of some interim steps, I asked it to show its work. ChatGPT explained the details faster and better than I could (read the transcript).

An online tax calculator gives you a number but doesn’t explain the steps. AI is a better tool in teaching you how to fish than giving you a fish.

Learn the Nuts and Bolts

I put everything I use to manage my money in a book. My Financial Toolbox guides you to a clear course of action. Read Reviews

The post Which AI Calculates Taxes Correctly? appeared first on The Finance Buff.