Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Is it right?
Old 12-29-2010, 05:16 PM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,411
Is it right?

Considering ER soon at age 56. In the initial years after ER will be drawing on taxable savings and investments and letting 401K and IRAs ride until later. Tax deferred accounts are most of my fixed income portfolio and my taxable accounts are mostly equities.

As a result, my "income" will be mostly dividends in the first few years after ER. Interestingly, it seems my income will be low enough that I may get some property tax relief and possibly partially subsidized medical insurance under programs designed for the "poor".

Would it be right to "take advantage" of these programs as long as I legitimately qualify? I'm torn in that I realize that I am not the intended recipient the programs were designed towards which seem to ignore net worth and focus on income. On the other hand, I've paid plenty in taxes over the years so perhaps I should participate guilt-free.

Have other ER run into this "problem"?

Thoughts?
__________________

__________________
pb4uski is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Yes, enjoy what you qualify for
Old 12-29-2010, 06:10 PM   #2
Recycles dryer sheets
 
Join Date: Dec 2006
Posts: 162
Yes, enjoy what you qualify for

While I am not ER yet, I would not let this bother me. While you have assets, it is only because you did not squander them over the years. It is not easy to build net worth, and having paid taxes over the years, if your net income is not that high, you should participate in what you qualify for.
__________________

__________________
firewhen is offline   Reply With Quote
Old 12-29-2010, 06:13 PM   #3
Thinks s/he gets paid by the post
teejayevans's Avatar
 
Join Date: Sep 2006
Posts: 1,220
There are states where there is a waiting list for subsidized health insurance, now if you take someones place who badly needs it... well, I couldn't do it.
TJ
__________________
teejayevans is offline   Reply With Quote
Old 12-29-2010, 06:55 PM   #4
Recycles dryer sheets
 
Join Date: Jan 2008
Posts: 220
You might want to study as to if it would be to your benefit to withdraw some IRA money and pay tax on it while your income is low.When you have SS and pensions ect kick in later you may have a great big tax bill. I'm 58 and that is what I am doing.
__________________
Dave J is offline   Reply With Quote
Old 12-29-2010, 07:47 PM   #5
Thinks s/he gets paid by the post
kyounge1956's Avatar
 
Join Date: Sep 2008
Posts: 2,171
Quote:
Originally Posted by pb4uski View Post
Considering ER soon at age 56. In the initial years after ER will be drawing on taxable savings and investments and letting 401K and IRAs ride until later. Tax deferred accounts are most of my fixed income portfolio and my taxable accounts are mostly equities.

As a result, my "income" will be mostly dividends in the first few years after ER. Interestingly, it seems my income will be low enough that I may get some property tax relief and possibly partially subsidized medical insurance under programs designed for the "poor".

Would it be right to "take advantage" of these programs as long as I legitimately qualify? I'm torn in that I realize that I am not the intended recipient the programs were designed towards which seem to ignore net worth and focus on income. On the other hand, I've paid plenty in taxes over the years so perhaps I should participate guilt-free.

Have other ER run into this "problem"?

Thoughts?
My thought is, if you have any doubts about whether it's proper to take the subsidy, don't take it. You can't buy a clear conscience for any amount of money.
__________________
kyounge1956 is offline   Reply With Quote
Old 12-29-2010, 07:55 PM   #6
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,078
Quote:
Originally Posted by teejayevans View Post
there are states where there is a waiting list for subsidized health insurance, now if you take someones place who badly needs it... Well, i couldn't do it.
Tj
+1

Quote:
Originally Posted by kyounge1956 View Post
my thought is, if you have any doubts about whether it's proper to take the subsidy, don't take it. You can't buy a clear conscience for any amount of money.
+1

Sounds like you already know the answer to your question but just want some confirmation.
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 12-29-2010, 08:27 PM   #7
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,846
Quote:
Originally Posted by Dave J View Post
You might want to study as to if it would be to your benefit to withdraw some IRA money and pay tax on it while your income is low.When you have SS and pensions ect kick in later you may have a great big tax bill. I'm 58 and that is what I am doing.
I am doing this too, in my case taking larger monthly payments from my TSP right now than I will take after claiming social security. As I age I will have SS and required minimum distributions from the TSP (plus my current pension), and all of this will add to taxes.

P.S. - - another advantage to this is that you won't have to decide on the ethical issues that you mentioned. I agree with those who say you might feel pretty guilty about taking advantage of these opportunities.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is offline   Reply With Quote
Old 12-29-2010, 09:02 PM   #8
Thinks s/he gets paid by the post
FIRE'd@51's Avatar
 
Join Date: Aug 2006
Posts: 2,315
If you legitimately qualify, I would see no problem with taking the subsidy. Folks who receive health insurance (retirees or otherwise) from their employers receive the benefit in pre-tax $, while those who purchase insurance themselves do so with after tax $. I don't see the former group sending in taxes on their health insurance premiums in tha name of fairness. Rather, IMO, it is a gross inequity in the tax system, which should be changed. Likewise, if the healthcare law was written in such a way that a person with a lot of assets but a low income qualifies for the subsidy, I would say it was a badly written law which should be changed.

With regard to property taxes, in my state property tax relief depends on assets as well as income.
__________________
I'd rather be governed by the first one hundred names in the telephone book than the Harvard faculty - William F. Buckley
FIRE'd@51 is offline   Reply With Quote
Old 12-29-2010, 09:15 PM   #9
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,616
Quote:
Originally Posted by pb4uski View Post
Interestingly, it seems my income will be low enough that I may get some property tax relief and possibly partially subsidized medical insurance under programs designed for the "poor".
Would it be right to "take advantage" of these programs as long as I legitimately qualify?
Maybe instead those low tax brackets could be used to take advantage of the 2010 Roth conversion stretch... within the next 36 hours...
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Old 12-30-2010, 06:51 PM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,411
Thanks to all for the input. The decisions are a while away, but I was just surprised/shocked that I might qualify - had never crossed my mind. The benefit isn't chump change - about $10k a year between both programs I suspect, hence the dilemma. I'm actually a bit mad that the programs are designed in a way that someone in my situation (HNW, low income) would qualify.

Quote:
Originally Posted by Dave J View Post
You might want to study as to if it would be to your benefit to withdraw some IRA money and pay tax on it while your income is low.When you have SS and pensions ect kick in later you may have a great big tax bill. I'm 58 and that is what I am doing.
Interesting idea, but doesn't one need to be 59 1/2 to avoid penalties for early withdrawal (unless you do the lifetime withdrawal thing)? Certainly will be a possibility from 59 1/2 onwards until pensions and SS kick in and increase my income and I can control when each of those start.

Quote:
Originally Posted by Nords View Post
Maybe instead those low tax brackets could be used to take advantage of the 2010 Roth conversion stretch... within the next 36 hours...
Something I forgot about and would solve the ethical dilemma, especially if I went to the top of the 15% bracket. Won't work for 2010 though since I am still working and in a relatively high marginal tax bracket.
__________________
pb4uski is offline   Reply With Quote
Old 12-30-2010, 09:09 PM   #11
Recycles dryer sheets
 
Join Date: Jan 2008
Posts: 220
Quote:
Originally Posted by pb4uski View Post

Interesting idea, but doesn't one need to be 59 1/2 to avoid penalties for early withdrawal (unless you do the lifetime withdrawal thing)? Certainly will be a possibility from 59 1/2 onwards until pensions and SS kick in and increase my income and I can control when each of those start.


.
When you have little or no income, convert to a Roth.You can do it before 59 1/2 without penalty.
__________________
Dave J is offline   Reply With Quote
Old 12-30-2010, 09:47 PM   #12
Moderator
Alan's Avatar
 
Join Date: Jul 2005
Location: Eee Bah Gum
Posts: 21,085
Quote:
Originally Posted by FIRE'd@51 View Post
Folks who receive health insurance (retirees or otherwise) from their employers receive the benefit in pre-tax $, while those who purchase insurance themselves do so with after tax $. I don't see the former group sending in taxes on their health insurance premiums in tha name of fairness. Rather, IMO, it is a gross inequity in the tax system, which should be changed.
While working I was always surprised that our very generous Group Health Insurance was not taxed as a perk like a company car. We also got to pay the premiums with pre-tax dollars and had access to an FSA as well. As a retiree however, with retiree health insurance from my megacorp, I was disappointed to find that the premiums are now with after tax dollars, plus no FSA. No complaints, really, I'm very happy to have the Health insurance.

As to the OP, being asset rich and with very low income I would start Roth conversions or drawing down the tax deferred assets as suggested.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Now it's adventure before dementia
Alan is offline   Reply With Quote
Old 12-31-2010, 05:14 AM   #13
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2007
Posts: 5,072
You are likely to find that most of those programs will also factor in the assets you own... not just taxable income.

Right or wrong?? assuming it is not illegal (Fraud) is in the eye of the beholder.

I have no doubt taxpayers would say you would be shifting your tax burden onto them and would not appreciate it too much. Ask yourself the question... if you are paying your taxes and your neighbor is gaming the system, do you think it is right?


IMO - If that loophole is open... it will be found out and closed.


Make sure you know what you are doing... you would not want to wind up in legal trouble if it turned out that such a loophole did not exist and it was considered tax evasion or fraud.
__________________
chinaco is offline   Reply With Quote
Old 12-31-2010, 09:08 AM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2007
Posts: 7,526
I would say take advantage of these subsidies now if you legally can. You have paid for these programs over the years, and should your tax situation change in the future (such as when you are withdrawing from IRAs instead of selling taxable assets and taking Cap Gains), you will once again be paying for these subsidies.

Lots of folks will be facing this "dilemma" in 3 short years when the subsidized health insurance becomes available to most folks. Except the question will be phrased "should I forgo taking a legitimate tax deduction" that subsidizes my health insurance.
__________________
Retired in 2013 at age 33. Keeping busy reading, blogging, relaxing, gaming, and enjoying the outdoors with my wife and 3 kids (5, 11, and 12).
FUEGO is offline   Reply With Quote
Old 12-31-2010, 09:22 AM   #15
Thinks s/he gets paid by the post
FIRE'd@51's Avatar
 
Join Date: Aug 2006
Posts: 2,315
Quote:
Originally Posted by chinaco View Post
I have no doubt taxpayers would say you would be shifting your tax burden onto them and would not appreciate it too much. Ask yourself the question... if you are paying your taxes and your neighbor is gaming the system, do you think it is right?
Isn't this true for anyone who takes any Schedule A deduction who is in a higher tax bracket than the taxpayers to whom you are referring?
__________________
I'd rather be governed by the first one hundred names in the telephone book than the Harvard faculty - William F. Buckley
FIRE'd@51 is offline   Reply With Quote
Old 12-31-2010, 09:45 AM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2007
Posts: 5,072
Quote:
Originally Posted by FIRE'd@51 View Post
Isn't this true for anyone who takes any Schedule A deduction who is in a higher tax bracket than the taxpayers to whom you are referring?
I suppose one could choose to take any position they wanted and make an argument.

But the schedule A analogy would seem to be a stretch (unless I am misinterpreting the program described).


The point I was making was on two fronts:

  1. Moral Issue - Eye of the beholder. How do you feel about it? Make your own decision and be comfortable with it!
  2. Legal Issue - Make sure you are not misinterpreting it. The consequences could be dire!
Either way... if there is an easy way to game it, it will be found out and closed! Why? Because I seriously doubt that the program was established to let those of us that are well off game it!
__________________

__________________
chinaco is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


 

 
All times are GMT -6. The time now is 01:27 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.