FIRE comfortably at 42?

[marko]

Quote:

Originally Posted by Fermion $35,000 to $40,000 taken partially from already taxed money in your investments will let you grab a lot of those government benefits (subsidized healthcare, tax credits, etc.).

Now you're talking my language!!

I suspect a lot of folks will be doing same to snag those O'care subsidies.

[Mulligan]

Quote:

Originally Posted by Fermion $35,000 to $40,000 taken partially from already taxed money in your investments will let you grab a lot of those government benefits (subsidized healthcare, tax credits, etc.). It may be that $40,000, of which at least $20,000 is taken from already taxed money, is equivalent to a job income of $55,000 to $65,000. Remember, you don't pay SS, medicare, or even much state or federal tax with dividend and capital gains of only $20,000/yr for a married couple.

Your second paragraph is spot on for me. My part time job and pension income currently equal almost the same gross income as my final year working full time. But due to no pension contribution withholding, no SS or Medicare taken from pension, and a pension tax credit, my net take home monthly income is almost 30% higher than when I was working full time with the same income.

[FUEGO]

Quote:

Originally Posted by marko Now you're talking my language!! I suspect a lot of folks will be doing same to snag those O'care subsidies.

We certainly plan on taking advantage of the obamacare subsidies (assuming the continue to exist in substantially unchanged form). But the bigger benefit of the obamacare subsidies for our household is that we don't have to budget a huge outsized reserve fund to pay potentially steep future increases in health insurance premiums. Prior to obamacare, I had budgeted about 25% of our spending for health insurance premiums.

[growing_older]

Quote:

But the bigger benefit of the obamacare subsidies for our household is that we don't have to budget a huge outsized reserve fund to pay potentially steep future increases in health insurance premiums.

I'm not sure I understand this reasoning. If you are getting subsidized insurance, then perhaps you can be insulated from future increases, but if your income in above the subsidy cutoff, wouldn't you be just as vulnerable to future premium increases?

[FUEGO]

Quote:

Originally Posted by growing_older I'm not sure I understand this reasoning. If you are getting subsidized insurance, then perhaps you can be insulated from future increases, but if your income in above the subsidy cutoff, wouldn't you be just as vulnerable to future premium increases?

Let me explain my reasoning using 2 scenarios. The first scenario is with obamacare in place, and with our income sufficiently low that we qualify for substantial subsidies, thereby making our cost of health insurance premiums $2000 per year. We can budget $2000 per year, maybe with a larger than inflation multiplier on that expense projected into the future.

The second scenario is with no obamacare in place and our health insurance needs being left completely to the vagaries of the individual health insurance market with no guarantee issue and no subsidies. We might be able to get a bare bones family High Deductible plan for $4000 per year (based on ehealthinsurance.com quick quote for our family of 5 with both adults in their 30's).

Assuming we meet all their underwriting requirements, we can't just budget $4000 per year. We would be hit with steep annual increases if things continue like they have historically, and as we move up the age brackets, that premium would increase even more (although eventually the kids would drop off the plan, so rates might drop a little in our 50's or at least partially offset the age bracket increases). So we would have to budget significantly more than $4000 per year to account for very steep premium increases over the years. And budget even more to cover part of the deductible we would have to pay on a High Deductible plan (obamacare insurance pool plans won't have steep deductibles like HDHPs, and there are max payment criteria based on income under obamacare as well).

Under obamacare, we might budget $2000 per year with a 5% inflation factor, whereas without obamacare we might budget $8000-10000 per year with a 5+% inflation factor.