Poll: Who's going to try to get ACA subsidies by staying under the threshold?

[MichaelB]

That definition is the same as what we are saying.

O-MAGI = Tax return AGI + any excluded foreign earned income + tax-exempt interest + any excluded SS

+1

Good re-name of the magi.

 

[golfnut]

Same here... our family HI premiums are almost $24k pa, (mom, dad, 4 kids). If we gave up this very expensive non- subsidized health insurance could we use the exchanges and garner a subsidy?

jj

$24K in premiums alone! Ouch! We pay approx. 1/2 that much for mom, dad and 1 kid.

 

[jj]

$24K in premiums alone! Ouch! We pay approx. 1/2 that much for mom, dad and 1 kid.

That is the price for retiree, spouse and however many kids you have. While we still have 4 kids on the policy we consider it not too outrageous. The premium has gone up quite considerably in the past few years. We itemize for our federal taxes and therefore our taxes are reduced. As the 7.5% limit for medical expenses increases to 10% this year (under 65) it becomes progressively more expensive. This is, unfortunately, the situation we are in to keep a basic BCBS HMO policy.

jj

 

[kmt1972]

I think I pointed this out before, but see

CBO Confirms: Subsidies Could Shrink Under ObamaCare

namely
"Under a cost-control inserted during reconciliation, a greater share of premium payments would steadily shift to individuals and families after 2018 if exchange subsidies top 0.5% of GDP — as CBO projects they will."

which in turn means

"..., CBO said subsidies would not merely fail to keep up with inflation but would shrink in nominal terms for single policyholders between 350% and 400% of the poverty level once cost curbs are triggered.
Based on the economic inputs in CBO’s example — 6% premium cost growth, 3% income growth and 2% inflation — subsidies also would shrink starting in 2019 for mid-career singles with income as low as 300% of the poverty level and mid-career families at 375% of the poverty level, Capital Hill’s analysis reveals."

So with my family of 3, my bogey is not $78K but $73K which is 375% of the FPL. But for singles this lowers the bogey even lower. I suspect that even 375% threshold is too low because I doubt CBO is taking into account of people like me that on the surface will not qualify for subsidies/tax credits but will in fact claim them.

 

[pb4uski]

Get back to me in 2017 or so on that one.

I'm more concerned about what to do for 2014 and 2015 at this point.

 

[gerrym51]

Get back to me in 2017 or so on that one.

I'm more concerned about what to do for 2014 and 2015 at this point.

me to .i'm 62 and this year is what it is.

2014 and 15 is my concern

 

[ER Eddie]

See

Obamacare makes it really easy for millionaires to retire early?

I assume a lot of us will be doing this.

The end of the article makes it sound like it might be only a temporary thing...

Will this last?

Probably not. If this loophole in the Affordable Care Act was a multi-million dollar windfall for some big corporation, our Congresscritters who are bought and paid for by Big Business would likely let it stand. But since it benefits largely middle-class retirees, expect it to be "fixed" in some way.

I was considering dropping my retiree health insurance to qualify for this, but if Congress might remove the subsidies in a couple of years (for the not-poor), that's too risky. I can't get my retiree health insurance back once I drop it. I am going to sit on the sidelines and watch how this develops over the next couple of years.

 

[pb4uski]

....I was considering dropping my retiree health insurance to qualify for this, but if Congress might remove the subsidies in a couple of years (for the not-poor), that's too risky. I can't get my retiree health insurance back once I drop it. I am going to sit on the sidelines and watch how this develops over the next couple of years.

That sounds like a wise course to me. In the meantime while you are waiting for the dust to settle you won't be constrained in Roth conversions or capital gains like those of us who plan to get subsidies.

 

[kmt1972]

me to .i'm 62 and this year is what it is.

2014 and 15 is my concern

Totally understand. I am 41 ergo you see my concerns are different. Thanks for taking one for the team and trying to get this system to work for you. What you will have to go through next couple of years will be helpful for me to figure out what I will be up against in a few years.

 

[John Galt III]

If I retire at the end of 2013, DW will be nearing 60 and I will be 61, We will have no health insurance and no pensions. In fact, our only "income" would consist of approx $12,000 to $14,000 in 1099DIV and INT.

We set aside a CD ladder for the gap years until we reach Medcare at 65 and SS at 66. Once we know the details of ACA we will increase our "income" by converting TIRA funds to Roth IRA. I believe the idea is to roll over enough to, at a minimum, get us above the Medicaid level, but low enough to maximize any available ACA subsidy.

In our case I don't think it is a matter of a reduced buget. We will live the same basic lifestyle we do now drawing primarily from our savings.

Oh, and by the way, I have no problem what so ever taking full legal advantage of any health care subsidies that are available to me. I might save some bucks on HI but I will be paying more income taxes later because I won't be maximizing tax free TIRA to Roth IRA conversions. The government gets their cut one way or another.

I'm in the same boat. I will only have about $10,000 annual income in 2014, from pension and interest (if still not working) and I will have to add about $5,xxx income to get enough income to qualify for subsidies. In my state they do not plan to "expand" medicaid for Obamacare, so I would still be under the existing state rules and would not qualify for medicaid due to my assets, even with my low income of $10,000 and therefore will have to add the $5,xxx to get up to the minimum income required for Ocare, and the subsidies.

 

[gerrym51]

gotta be careful of this though

Millions Could Get Surprise Tax Bills Under ‘Obamacare’ If They Don’t Accurately Project Their Income « CBS DC

 

[teejayevans]

this is a misconception i keep reading. the subsidy is NOT for a silver plan. it is the plans that are coverd for subsidys have the Dollar value of the silver plan.
it is NOT the silver plan perse

But the cost is based on the Silver plan, ie subsidy remains the same but the gold plan will cost more.
TJ

 

[ziggy29]

Won't be a problem here now that I'm semi-FIREd, and 2014 is just in time. Unfortunately I understand we'll be based on 2012 salaries which are likely to be 2-3x what 2014's will be...

 

[gerrym51]

Won't be a problem here now that I'm semi-FIREd, and 2014 is just in time. Unfortunately I understand we'll be based on 2012 salaries which are likely to be 2-3x what 2014's will be...

actually 2014 income is 2014 income.you may have to pay more upfront will get tax credits back

 

[ziggy29]

actually 2014 income is 2014 income.you may have to pay more upfront will get tax credits back

Well, yes, whatever I "overpay" based on 2012 income comes back, but you still have to spend the money up front.

 

[gerrym51]

Well, yes, whatever I "overpay" based on 2012 income comes back, but you still have to spend the money up front.

you spoke about wifes insurance-you can only get tax credits for insurance bought from exchange

 

[Sittingduck]

Man, this is the most complicated thing ever. its like trying to build a piano where everyone in the shop is working from a different set of plans.

My semi-hand crafted retirement plan has been sent into a disassembulator. (recent medical issues, loss of retiree healthcare from Megacorp & having too much in a regular IRA vs taxable accounts)

The Brits & Canadians have to be enjoying this show ... yikes

 

[scrinch]

I'm in the same boat. I will only have about $10,000 annual income in 2014, from pension and interest (if still not working) and I will have to add about $5,xxx income to get enough income to qualify for subsidies. In my state they do not plan to "expand" medicaid for Obamacare, so I would still be under the existing state rules and would not qualify for medicaid due to my assets, even with my low income of $10,000 and therefore will have to add the $5,xxx to get up to the minimum income required for Ocare, and the subsidies.

So Medicaid (at least in some states) uses assets in part to determine eligibility, but Obamacare will only use current income? Is that right?

 

[John Galt III]

So Medicaid (at least in some states) uses assets in part to determine eligibility, but Obamacare will only use current income? Is that right?

Right. Ocare will only use MAGI (Modified Adjusted Gross Income), which has been defined here often. And Ocare will not cover folks (individuals) with MAGI below $15,xxx. Those folks (me) can apply for their state's medicaid program.

All the talk about states choosing or not choosing to "expand" their Medicaid programs for Ocare is about states removing the assets test for Medicaid, I believe.

note: Coffee hasn't kicked in yet. Someone clarify if I am unclear.

 

[marko]

Also, IIRC AGI is after deductible IRA contributions and HSA contributions, so if one's O-MAGI is a bit over 400% FPL you could make additional IRA or HSA contributions to reduce your O-MAGI below 400% FPL (assuming you are eligible). Right?

I dunno....I can't find it now, but I remember early on that in the case of O'Care, IRA contributions are included in the O-MAGI. It was some sort of exclusion from the normal definition of MAGI, specifically to thwart the scenario above.

Would love to be wrong on this one.

 

[FANOFJESUS]

I find the OP question kind of funny in a way it is much harder for me to get above the threshold rather than under it.

 

[ziggy29]

you spoke about wifes insurance-you can only get tax credits for insurance bought from exchange

But in 2014, we will be eligible for the exchange since that employer group insurance will cost much more than 9.5% of our 2014 income.

 

[rodi]

I find the OP question kind of funny in a way it is much harder for me to get above the threshold rather than under it.

In my case it's not quite that stark - but for a family of 4 - the income threshold is around $91k. Which is over our expected budget.

I have to agree that this shifts the pay off the mortgage thread - less income needed if you don't have to service a mortgage... so the cost of the mortgage might need to include the cost of losing the health care subsidies.

 

[ziggy29]

I have to agree that this shifts the pay off the mortgage thread - less income needed if you don't have to service a mortgage... so the cost of the mortgage might need to include the cost of losing the health care subsidies.

This is something I know I've mentioned here a few times in the past -- it looks like we're entering an era where financial planning means not only growing your nest egg, but also engineering your finances to live comfortably on less income. This would put more of an emphasis on getting out of debt and reducing your needed cash flow.

In the "brave new world" reducing your need for income will need to be considered along side growing your portfolio *and* arranging your portfolio in a way that minimizes larger RMDs.

 

[FUEGO]

We aren't really trying to get the ER income below the 400% FPL threshold because we have 5 in the household and the threshold is pretty high. We do, however, plan on receiving a very significant subsidy for health insurance due to ACA, and we will probably shape the taxable vs non-taxable income stream to maximize ACA subsidies (among other tax planning strategies).

I consider the loss of ACA subsidies as your income increases an effective increase in marginal tax rate. Even though we will have a MAGI barely above poverty, our effective marginal tax rate will be ~55% during ER.