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Old 01-04-2015, 12:46 PM   #21
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Thanks everyone for your replies...I'll do a deep dive on some analysis to find an optimal solution now that I know I'm understanding things correctly.

I left out some facts only to simplify things...

I'm 53 and DW is 57. We are both still employed. I'm a self-employed home inspector working part time...I gross about $55k/year but get zero benefits. DW is a corporate finance exec and makes nearly double what I do...so we're obviously over the limit today but it doesn't matter because we get health care through her employer at very good rates.

However, we both want to get out of the rat race....I'm partly there already as I only work 3.5 days/week. DW plans to get out sometime in Q3 or Q4 of 2015...we are noodling on exact timing.

At the time she leaves, we'll need to buy health insurance...and we'll want to get it in place before she separates from her company. This is why I'm going through all this now...trying to plan the transition.

I will continue working PT for another 2-3 years...but my income will go down as I plan to work less and less each year.

Fortunately we still have lots of flexibility. If we see this will be too expensive from a premium standpoint, DW could just work a few months longer...it makes a big difference given her salary. Or, I could remain working PT for 4-5 years if needed. Or, DW could get a lower-stress position at one of the few companies that offers healthcare to PT employees.

Top 11 Companies Offering Health Care Benefits and Other Perks to Part-Time Workers - ABC News

I am grateful that we are in a position that we can even consider this at our ages....lots of planning and deferred gratification are going to be worth it! We have 6 vacations planned for 2015!!! (some of them only weekend jaunts)
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Old 01-04-2015, 12:59 PM   #22
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Get a divorce, for financial reasons.

If one of you are lower income, that one may qualify for a 100% subsidy. The other would pay the same as now. Plus, there are a bunch of other programs out there to help, none of which are asset based. One can work, the other retire and be a low income person. Or one take all the gains, the other only enough for subsidies and low tax brackets.

You may be able have one take advantage of Earned Income Tax Credit, lower property taxes or refunds, free bus fare, etc.

It may or not make sense in your situation, but likely would result in a lower cost of living.
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Old 01-04-2015, 02:52 PM   #23
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However, we both want to get out of the rat race....I'm partly there already as I only work 3.5 days/week. DW plans to get out sometime in Q3 or Q4 of 2015...we are noodling on exact timing.

At the time she leaves, we'll need to buy health insurance...and we'll want to get it in place before she separates from her company. This is why I'm going through all this now...trying to plan the transition.
By then perhaps the court cases will have been ruled on and we will know if subsidies even survive.
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Old 01-04-2015, 03:15 PM   #24
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Dave, work the numbers. We are both 53 with assets divided 1%/44%/55% roth/IRA/taxable... We think we can work it so that we many be able to roll a little IRA->Roth and still be up on the cliff if we watch it. I think our spending may be a bit lower than yours.
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Old 01-04-2015, 03:30 PM   #25
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FinanceDave -

I have an inherited IRA that has RMDs. It's funding some of the retirement between now and when I turn 59.5... so it all counts as income, when withdrawn, from an ACA standpoint.

I took the tax hit this past year to a) pay off my mortgage, b) pre-position money for planned spending in the next few years. My RMDs are less than what I plan on actually spending - but I now have money in taxable accounts to use without impacting ACA MAGI in 2015-2017.... This way I can still do some of the big ticket one time items (new roof/solar panels & big vacation) and not worry about the subsidy cliff.

For health insurance I used COBRA between when I retired in June and Jan 1st. Now I'm on plans through covered CA.
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Old 01-04-2015, 04:03 PM   #26
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We spend a lot of time figuring out how to stay under the ACA and, for college, the Cal Grant cliff, which is even lower. Combined they are worth quite a bit, equivalent to getting a modestly priced new car for free each year, especially considering that if we worked more to make up the difference we'd have to make even more to account for FICA, federal and state income taxes and extra job or business expenses. Because we have dependents our cliff amount is higher so it does give us more headroom to work with.
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Old 01-04-2015, 04:04 PM   #27
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Yep. That's how it's set up. Even one buck over the limit and you're out ten grand or so. This past year's higher than expected Cap Gains might send quite a few members here scrambling.
I am not going to get subsidy this year.... but that is one of the things that I was looking at... move from funds with larger distributions to ones with smaller distributions...

However, I would have to sell at a big gain and it would not work anyhow...
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Old 01-04-2015, 04:10 PM   #28
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Originally Posted by pb4uski View Post
Looks like the repayment caps don't apply if one is over 400% FPL.

See Table 2 in http://www.cbpp.org/files/QA-on-Premium-Credits.pdf

I am not reading it like you are.... I am reading that they have to pay back the full amount.... Also, from the article...

People who receive advance payments of the
credit will have to “reconcile” the amount that
they received based on their estimated income
with the amount that is determined based on
their actual income as reported on their tax
return. This means that people whose income
for the year is higher than they previously
estimated could have to pay back some or even
all of the advance payments they received. On
the other hand, people whose income ends up
lower than estimated could get a refund when
they file their taxes.
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Old 01-04-2015, 07:56 PM   #29
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I am not reading it like you are.... I am reading that they have to pay back the full amount.... Also, from the article...

People who receive advance payments of the
credit will have to “reconcile” the amount that
they received based on their estimated income
with the amount that is determined based on
their actual income as reported on their tax
return. This means that people whose income
for the year is higher than they previously
estimated could have to pay back some or even
all of the advance payments they received. On
the other hand, people whose income ends up
lower than estimated could get a refund when
they file their taxes.
I'm perplexed as to how you think we are reading it differently. I'm reading it as if your income is over 400% FPL that you have to pay back the entire advance premiums credits that you received (on other words a nasty surprise) but if your income is below 400% FPL that there are caps on the amount you have to pay back.

Or in other words, repayment caps do NOT apply if your income is over 400% FPL (so you have to pay back the full amount of advance premium credits that you received).
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Old 01-04-2015, 08:02 PM   #30
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I'm perplexed as to how you think we are reading it differently. I'm reading it as if your income is over 400% FPL that you have to pay back the entire advance premiums credits that you received (on other words a nasty surprise) but if your income is below 400% FPL that there are caps on the amount you have to pay back.

Or in other words, repayment caps do NOT apply if your income is over 400% FPL (so you have to pay back the full amount of advance premium credits that you received).
But assuming no vast increase in income what is the difference in subsidy between 350% and 401% for example.
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Old 01-04-2015, 08:13 PM   #31
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But assuming no vast increase in income what is the difference in subsidy between 350% and 401% for example.
Highly depends on your age. At 40 or so, the cliff at 400% is negligible but at 55 it's thousands.
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Old 01-04-2015, 08:24 PM   #32
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But assuming no vast increase in income what is the difference in subsidy between 350% and 401% for example.
In my zip code for a single person, the difference in 2015 between 401% and 350% would be $1,068. So as I understand it if you received a subsidy based on an estimate of 350 FPL and ended up going over it would cost you $1,068.

While that doesn't seem too bad it is much worse for a family of four. For the same scenario for a family of four, they would owe $11,880 if their estimated income was $83,520 but their actual income was $95,450. If your family income was in that range how would you like to get an unexpected $12k tax bill?

Even if you missed by only $5k ($90,450 estimate and actually earn 5.5% more or $95,450) you would owe $11,220. That seems really harsh to me.
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Old 01-04-2015, 09:30 PM   #33
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.........For the same scenario for a family of four, they would owe $11,880 if their estimated income was $83,520 but their actual income was $95,450. If your family income was in that range how would you like to get an unexpected $12k tax bill?

Even if you missed by only $5k ($90,450 estimate and actually earn 5.5% more or $95,450) you would owe $11,220. That seems really harsh to me.
Agreed. And, due to ignorance or individual circumstance, many predict that this will not be a rare occurrence for 2014 tax year (2105 filing season).
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Old 01-04-2015, 10:35 PM   #34
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And then the fireworks will begin and the politicians will be ducking for cover.
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Old 01-05-2015, 10:15 AM   #35
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But assuming no vast increase in income what is the difference in subsidy between 350% and 401% for example.
The difference in subsidy and any resulting cliff is dependent on age, family size, and if premiums are community rated within the state. This article does a good job of explaining these factors using actual examples.

Link: ACA Subsidy Cliff May Incentivize Some To Earn Less
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Old 01-05-2015, 10:30 AM   #36
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And then the fireworks will begin and the politicians will be ducking for cover.
I disagree. It will be politicians pointing fingers. All of your problems are being caused by the other guys.
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Old 01-05-2015, 10:42 AM   #37
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After selling our home we will have a fairly huge chunk of tax free cash which will allow us to pick and choose about whatever income level we desire over the next decade (using IRA to Roth to generated MAGI income to qualify for a subsidy plan). Another benefit to ditching the home and renting or just traveling like we will be.
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Old 01-05-2015, 12:54 PM   #38
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I'm perplexed as to how you think we are reading it differently. I'm reading it as if your income is over 400% FPL that you have to pay back the entire advance premiums credits that you received (on other words a nasty surprise) but if your income is below 400% FPL that there are caps on the amount you have to pay back.

Or in other words, repayment caps do NOT apply if your income is over 400% FPL (so you have to pay back the full amount of advance premium credits that you received).

OK... my bad on reading your post.....

I bet the caps are based somehow close to what they would have to pay in anyhow... but since this is gvmt it could be way off....
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Old 01-05-2015, 01:16 PM   #39
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The media, as usual aren't helping. I've read several articles regarding the tax surprise some may face if they earn more than they estimated when applying for an ACA subsidy. But then they paint a somewhat rosier picture by saying that the tax hit is capped for those who remain eligible for a subsidy. Not a single word about what can happen if one goes over 400% of FPL.

Regarding the fallout, my take is that one party is hoping that the fallout isn't too bad and can be swept under the carpet, and the other is hoping for a lot of fallout so they can say "we told you so", and then maybe they'll even "come to the rescue" and "fix" things. (Here I deleted a sentence that could get this thread Porkied). As others have stated, the relevant thing for ERs is that we have no way of knowing how things might change (or not) going forward.
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Old 01-05-2015, 01:22 PM   #40
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After selling our home we will have a fairly huge chunk of tax free cash which will allow us to pick and choose about whatever income level we desire over the next decade (using IRA to Roth to generated MAGI income to qualify for a subsidy plan). Another benefit to ditching the home and renting or just traveling like we will be.
Good idea. We might do a HELOC and then pay if off when we are 65 if we need more after tax funds to stay under the cliff.
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