ACA Cliff vs $435,000 Withdrawal Now

[Texas Proud]

In one of your earlier posts you said you needed an additional $80K ish to pay the bills....


So, are you spending $160K plus a year?


That would be hard to make up unless you have a lot of ROTH sitting around...


Another mistake you are making is thinking that the insurance costs and credit will be the same for 5 years... it will not...


Mine had gone from $4K the first year to almost $20K for this year... not sure about next year since the site will not let me make a choice since DD is supposed to be on CHIPS from what they say...

[pb4uski]

Quote:

Originally Posted by FZBob I'm puzzled also, and I would not be shocked if I'm making some kind of stupid mistake, although I have some friends who are on it and say this is the case... Here is the official website with the calculator - https://www.healthforcalifornia.com/ I went to "get free quote now", entered a family of 3 with birthdays of '58, '60, and 2000, and entered incomes of $81,781 and $81,782. Zip Code 95127. I'm looking at the Bronze EPO plan (Anthem). In either case, saving ~12K per year or ~20K per year is worth some effort...

I used healthsherpa and the numbers that you are getting seem to make sense...my results vary a bit.

Subsidy:

Second lowest cost silver plan = $2,523/mo (Kaiser silver 70 HMO

Max family income: $83,120 (at $83,121 subsidy is nil)
Family contribution: 9.86% or $683/mo

Subsidy: $1,840/mo

Plan OP will use: $1,811/mo

OP cost: $0 (subsidy exceeds premium)

Annual savings: $21,732

[RunningBum]

Quote:

Originally Posted by Texas Proud In one of your earlier posts you said you needed an additional $80K ish to pay the bills.... So, are you spending $160K plus a year? That would be hard to make up unless you have a lot of ROTH sitting around... Another mistake you are making is thinking that the insurance costs and credit will be the same for 5 years... it will not... Mine had gone from $4K the first year to almost $20K for this year... not sure about next year since the site will not let me make a choice since DD is supposed to be on CHIPS from what they say...

Most people have found that as rates rise, subsidies rise as well. Actual price paid after subsidy does not change all that much.

[pb4uski]

I think what we may be seeing in these numbers is the impact of the 2017 decision to curtail paying for cost sharing reductions that caused an increase in silver plan premiums and in turn caused and increase in subsidies so may bronze plans become fully subsidized even up to 399% FPL.

https://www.kff.org/health-reform/is...tion-payments/

[ncbill]

Borrowing via a HELOC to make up the difference sounds like the cheapest option.

Especially if that $160,000/year includes paying out-of-pocket for the kid's college which could instead be borrowed via "student" (really parent co-signed) loans if there's not enough equity to meet that need via a HELOC.

[sengsational]

Quote:

Originally Posted by pb4uski I can't understand how someone just a tick under 4x FPL woudl pay essentially nothing.

That's actually very common in the last few years as the price of SLCSP's have gone up relative to bronze plans. I've been in that position...the subsidy is greater than the cost of my HDHP HSA bronze plan, so 3.99X FPL still pays for the entire bronze plan, $0 cost to me.

Quote:

Originally Posted by FZBob I was saving these funds for a rainy day, as they have sentimental value. My Dad set them up with $100 and a lecture when I got my first real job. (I just did the same for my son...) I have never taken anything out. Of course, he also said "Don't Be Stupid", and it sounds like it might be the right time to use them...

Oh, absolutely! If you have after-tax money, spend it freely between now and age 65.



I'm not going to be of much use with the nuances of capital gains, but you can do that one year at a time. Just get out this year's tax software (before December ends) and pretend you sold various amounts of the after-tax capital gains stuff. Fiddle around to maximize without going over the cliff. I'd leave a safe margin, since the consequences of going over are huge. One thing about selling after-tax assets that have capital gains...those should come first because, as you mentioned, the non-gain portion doesn't edge you closer to the cliff, whereas pulling from 401k, every dollar edges you toward the cliff.


Then in December 2019, repeat the process, and keep repeating until you get to be 65. With the 2018 results from the tax software, you should be able to estimate whether your after tax balance plus annual infusions will carry you through to 65, and how much Roth or HELOC or whatever will be required.

[FZBob]

Update - Where I'm at right now.

When I started the thread, my plan and expectation was that I would spend about $22,744 per year for ACA. (Plus out of pocket ~7K). I was aware of the cliff, but it seemed too good to be true that I could take advantage of it. I gave it a 15% probability...

The good news - I'm not hearing of any legal or procedural showstoppers yet. I'm now up to 50% confidence of success!

My (Optimistic) plan now.

1. Spend the next few days re-tuning detailed spreadsheets.

2. Take $400K mutual funds (non 401K/IRA), sell it and buy back in next week (ish). Pay Capital Gains & State tax of ~66K in 2018 tax year. This leaves $233K free and clear. This should be enough to keep us below the cliff for the next 7 years, until both my wife and myself are on Medicare and my son makes it out of dental school (fingers crossed!). I'm setting $75K for the cliff instead of $81k, as a bit of buffer, and there should be $30K left over at the end. If I miss out on the last year or two of savings for my wife, it's not a big deal...

3. Turn off dividend re-investing on all my accounts. Spend dividends first...

4. Expect that there is a 50% chance this all goes away, and I have to pay. I would have put this higher, but the govt. is going to be so gridlocked investigating each other for the next 10 years that they probably won't get much done. Maybe a good thing...

5. Check on ACA California kids at College rules...

Most importantly - the sun just came out after a rainy week, so I'm off for a Mountain Bike Ride!

[sengsational]

That's a great plan in that it allows you to utilize the PTC, but I'm not sure I'd go exactly like that. If you have several years, there's no hurry to get enough spending cash right for all years until 65 right away. I'd need to fiddle with tax software to know, but you might consider selling enough for one year's worth of spending, and filling up to under the cliff with Roth conversions. But you're over 90% of the way there by getting the tax credit...the Roth conversion and subsequent presumed reduced RMD impact is small potatoes in comparison.