Obamacare - more incentive to early retire?

[M Paquette]

But that's not all. Also starting in 2013, all or part of the net investment income, including long-term capital gains and dividends, collected by higher-income folks can get socked with an additional 3.8% "Medicare contribution tax." Therefore, the maximum federal rate on long-term gains for 2013 and beyond will actually be 23.8% (versus the current 15%) and the maximum rate on dividends will be a whopping 43.4% (versus the current 15%). Yikes!"

Oh, don't throw me in that there briar patch!

I'd love to be paying that extra 3.8% tax. Holy cr*p, Batman! $250,000 a year in just taxable account dividend income? Please hurt me some more... Anyone remember the top dividend tax rate from a decade ago? Two decades ago? Three? Yet somehow most of us retired folks managed to save for retirement.

Marginal top bracket rates have less of an effect than some would like us to believe. Budgeting and living below ones means are powerful tools.

 

[REWahoo]

Oh, don't throw me in that there briar patch!

I'd love to be paying that extra 3.8% tax. Holy cr*p, Batman! $250,000 a year in just taxable account dividend income? Please hurt me some more...

+1

 

[MichaelB]

Oh, don't throw me in that there briar patch!

I'd love to be paying that extra 3.8% tax. Holy cr*p, Batman! $250,000 a year in just taxable account dividend income? Please hurt me some more... Anyone remember the top dividend tax rate from a decade ago? Two decades ago? Three? Yet somehow most of us retired folks managed to save for retirement.

Marginal top bracket rates have less of an effect than some would like us to believe. Budgeting and living below ones means are powerful tools.

+1

You guys got it all wrong. It's not surcharge medicare tax on $250K of investment income, it's on the additional investment income above $250K. The first $250k pays regular rates.

I'm not sure we could get by ... but I'd sure like a shot at it.

 

[samclem]

ACA just adds the 3.8% tax to investment income that is over the $250k limit. No question high-income families will get hit, but most will not see this tax. Just don't sell everything at once.

Oh, don't throw me in that there briar patch!

I'd love to be paying that extra 3.8% tax. Holy cr*p, Batman! $250,000 a year in just taxable account dividend income?

You guys got it all wrong. It's not surcharge medicare tax on $250K of investment income, it's on the additional investment income above $250K. The first $250k pays regular rates.

I'm not sure we could get by ... but I'd sure like a shot at it.

Many who call for open season on the "filthy rich" might be surprised at how flexible that definition will turn out to be. You can bet the loads of retirees depending on little more than SS see ER's on this board as filthy rich and deserving of some confiscatory taxation--for the sake of fairness. Quit the rat-race early to spend your life as you want=fine. Stay in the traces for another couple decades=you're a fat goose worthy of the knife.

So,to the OP's point: Yes, the new legislation makes it more attractive to bail out early. Better to join the grasping pack than to be their dinner.

 

[marko]

I guess fairness has an income limit. You can bet the loads of retirees depending on little more than SS see ER's on this board as filthy rich and deserving of some confiscatory taxation--for the sake of fairness. Many who call for open season on the "filthy rich" might be surprised at how flexible that definition will turn out to be. Quit the rat-race early to spend your life as you want=fine. Stay in the traces for another couple decades=you're a fat goose worthy of the knife.

So,to the OP's point: Yes, the new legislation makes it more attractive to bail out early. Better to join the grasping pack than to be their dinner.

As my accountant recently told me: "the trick is to look like one of them while being one of us"

 

[Buckeye]

I think most folks here are using the Kaiser website Health Reform Subsidy Calculator - Kaiser Health Reform which does limit the review to a 'family of four'.

A quick look at the 'single user' shows a similar break until about $46K of taxable income.

DH will be 65 in 2014 so I'm looking at single adult info. Has anyone read whether my income is considered to half our total income if none of it is earned income? I couldn't find any info.

 

[MichaelB]

All right folks, let's all take a step back. Mea culpa for my off topic post, but let's stay away from the rich vs everyone else stuff and just talk about PPACA and how it affects us.

 

[Bankerwithabrain]

I guess I actually should have made the thread about changes in taxes in general.

Regardless of whether the tax increase is directly related to the new healthcare or not, it will definitely play a major role in FIRE planning.

I think it could make sense to sell any long term winners by the end of this year to avoid paying at a higher tax rate.

 

[MichaelB]

I guess I actually should have made the thread about changes in taxes in general.

Bankerwithabrain, you are free to start another thread to discuss taxes if you wish, but let's please keep this thread on topic, which is how the PPACA fits with early retirement. This topic is timely and many members are interested, and bringing in taxes will change the subject.

 

[nun]

Living in MA with Romneycare I've watched the ACA debate with a little distance. There are two big problems with the MA system: cost and the difficulty in paying the premiums if you are over the $35k (single person) threshold to get the subsidized Commonwealth Care. Still 98% of MA residents have healthcare and 74% like Romneycare.

For me it definitely makes ER easier as I know that I can buy a 2k/5k policy for just under $400 a month. Not cheap, but it's knowable and I get it by simply applying on the state's website where I can compare prices and levels of coverage. I also know that I cannot be denied coverage.

 

[donheff]

Still 98% of MA residents have healthcare and 74% like Romneycare.

Those numbers speak loudly to our national concerns since Romneycare is the model for Obamacare. You rarely get 74% of Americans liking anything. And of the 26% who don't like it probably half think we should have a tax based single payer system and would thus be unlikely to want to dump Romneycare without their preferred alternative guaranteed.

 

[marko]

Nun: I'm guessing, but I suspect that the ACA will raise the MA $35K threshold to the national $45K (?) subsidy at some point.

 

[pb4uski]

One thing I noticed playing around with the Health Reform Subsidy Calculator - Kaiser Health Reform calculator.

The health insurance premiums are substantially more than what I am paying for my high deductible health plan today. I'm currently paying $552 for me and DW or $278 each. I input my current age and the projected unsubsidized health insurance premium ranges from $588 to $882 a month for a single person. My current maximum out-of-pocket cost is $5,950 and the maximum out-of-pocket costs for the silver plan quoted by the calculator is $6,250.

It seems that ignoring the subsidy that health insurance would be significantly higher than what I am paying now. I realize that I am somewhat comparing apples-to-oranges but are others getting similar impressions? And the amount of the increase is staggering!

 

[marko]

I noticed that as well. Would that imply a subsidy that is even more beneficial against a lower premium? Or is it a percentage?

But...please tell me where you can get HC for two @ $552 a month. Here in MA, the cheapest I can find is about $1000. Even after the ACA subsidy, my premium is about $600 a month.

 

[REWahoo]

It seems that ignoring the subsidy that health insurance would be significantly higher than what I am paying now. I realize that I am somewhat comparing apples-to-oranges but are others getting similar impressions? And the amount of the increase is staggering!

I haven't played around with the calculator but what you are describing is exactly what I would expect. You probably have an individual policy underwritten using your individual health history and probably have a relatively clean bill of health. As I understand it, the premiums in the calculator are estimates of what the insurance companies will charge when they can no longer exclude those with pre-existing conditions. Even when including a greater number of young and presumably healthy individuals, I would expect costs to go up just as the calculator shows.

 

[ERD50]

Do I understand that High Deductible policies do not qualify under ALPACA (or whatever those initials are)?

If MegaCorp kicks me off of our retirement plan, I'd want to go for a high-deductible policy, just like I do for my car, house, etc. If they don't qualify, that's a problem for me.

Or could I go High-deductible, and pay the 'fine'? That might be cheaper in the long run.

-ERD50

 

[pb4uski]

....As I understand it, the premiums in the calculator are estimates of what the insurance companies will charge when they can no longer exclude those with pre-existing conditions. Even when including a greater number of young and presumably healthy individuals, I would expect costs to go up just as the calculator shows.

Makes sense, but if I was still working and not eligible for the subsidy I would be pretty unhappy as my living expenses would have skyrocketed (assuming the amount of the employer subsidy remained the same).

Even my COBRA which would have been the full cost and did not exclude prexisting conditions was only ~$850/month for a couple (albeit our employee population was probably younger and healthier than the general public).

 

[Mulligan]

I noticed that as well. Would that imply a subsidy that is even more beneficial against a lower premium? Or is it a percentage?

But...please tell me where you can get HC for two @ $552 a month. Here in MA, the cheapest I can find is about $1000. Even after the ACA subsidy, my premium is about $600 a month.

My MO Anthem BCBS had this on their website concerning the question of whether this will change cost of premiums.
No. The Supreme Court ruling has no immediate impact on your benefits or on the premium you pay.

I take the view this means not until 2014. After seeing the numbers quoted by various people, I wonder if I am in for a shock in a few years. A healthy 60 year old can get a $5500 deductible in my county for under $150, and I get it for $72 as an almost 48 year old. I have a feeling I may get a big kick in the wallet. I will assume the worst and be happy if it isn't. I really hope the HSA's survive the final regulations and changes.

 

[M Paquette]

One thing I noticed playing around with the Health Reform Subsidy Calculator - Kaiser Health Reform calculator.

The health insurance premiums are substantially more than what I am paying for my high deductible health plan today. I'm currently paying $552 for me and DW or $278 each.

The Kaiser Family Foundation calculator is using an estimated nationwide average rate for a fairly comprehensive plan ("Silver"). That has a lower max out of pocket than what most folks here pay, among other things, so the monthly payment is higher. As I recall, the subsidy is set to be 70%,of the second highest rate Silver plan for a state, and then scaled to adjusted gross income from 135 to 400 percent of the poverty level.

The online calculator numbers should be taken as a very rough estimate. The actual numbers will vary from stat to state.

 

[nun]

Nun: I'm guessing, but I suspect that the ACA will raise the MA $35K threshold to the national $45K (?) subsidy at some point.

I don't know. The situation in MA is that you get a sliding scale of subsidy for Commonwealth Care up to 3x the official poverty level, so thats $33.5k for a single person. If you earn just over that, paying the premiums could be difficult. I assume under ACA MA would cut back on Commonwealth Care and use expanded Medicaid for people with 133% of the poverty level and below.

 

[ziggy29]

I don't know. The situation in MA is that you get a sliding scale of subsidy for Commonwealth Care up to 3x the official poverty level, so thats $33.5k for a single person. If you earn just over that, paying the premiums could be difficult. I assume under ACA MA would cut back on Commonwealth Care and use expanded Medicaid for people with 133% of the poverty level and below.

Another question for MA residents is: How is the state subsidy going to be reconciled with the federal law's subsidy? I'm pretty sure "double dipping" won't be allowed. Is the state working on addressing this? I'd assume this means the state would eliminate its subsidy (or at least reduce it by the amount of the federal subsidy if the state subsidy is larger), but I haven't heard anything concrete there.

 

[nun]

Another question for MA residents is: How is the state subsidy going to be reconciled with the federal law's subsidy? I'm pretty sure "double dipping" won't be allowed. Is the state working on addressing this? I'd assume this means the state would eliminate its subsidy (or at least reduce it by the amount of the federal subsidy if the state subsidy is larger), but I haven't heard anything concrete there.

I imagine that if there's federal money available MA will take it and reduce it's subsidies accordingly. MA has moved on from the availability issues to the cost problem. There is a bill going through the legislature now that proposes to limit any premium increases to the level of state economic growth. What that will mean for the amount and standard of care is to be seen

The MA Connector is the model for the exchanges and it's interesting to hear the familiar terms like Bronze, Silver and Gold plans

 

[FUEGO]

The MA Connector is the model for the exchanges and it's interesting to hear the familiar terms like Bronze, Silver and Gold plans

Good to hear (from your previous posts) the plan offerings and selection are fairly straight forward and the interface is easy to use. Hopefully the federal/state Exchanges will follow suit when they are developed.

 

[ziggy29]

Good to hear (from your previous posts) the plan offerings and selection are fairly straight forward and the interface is easy to use. Hopefully the federal/state Exchanges will follow suit when they are developed.

I don't live in Massachusetts but I have been to that site to check out some examples of quotes and coverage levels. I think I used a zip code from Worcester or something like that just so I could get the quotes. If that represents a ballpark estimate of what the costs would be (keeping in mind that MA is a somewhat high-cost state), at least I have a rough idea of what we could be looking at if we had to budget our own health insurance.

 

[nun]

I don't live in Massachusetts but I have been to that site to check out some examples of quotes and coverage levels. I think I used a zip code from Worcester or something like that just so I could get the quotes. If that represents a ballpark estimate of what the costs would be (keeping in mind that MA is a somewhat high-cost state), at least I have a rough idea of what we could be looking at if we had to budget our own health insurance.

Yeah, it's nice to have the plans all in one place and compare costs. There are big cost differences between plans with the same level of coverage because of the different networks and hospitals you have access to without special referrals etc. For example I can get a silver plan for either $450 with Neighborhood or $750 with Blue Cross because Blue Cross lets me go to Mass General for everything and Mass General is really expensive.

Mass costs are higher than most states, but so is everything else.