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

[Htown Harry]

I'm planning to be on obamacare In future. We will be family of 5 until my daughter finishes her college in 2022 and then family of 4 until 2030...that means i will keep MAGI below 110K initially and then 92K after 2022. Kids up to 26 can stay on parents plan provided they're in college and hoping my kids get into medical college which takes 8 yrs to complete.

There may be provisions related to household size and the subsidy thresholds with other implications, but it is not a requirement for the adult child under 26 to live at home or to be a student in order to continue as an enrollee on a parent's employer-based family HI. This went into effect in early 2012, I believe.

My DD, 23, is in the sweet spot. She graduated from college just a few months before my employer's annual plan enrollment allowed adult children to remain on their parents' plan until 26. (Before that, she was eligible to stay on the plan only as long as she was a full time student.) When she turns 26 in 2015, Obamacare should be well-established with most of the first-year craziness over with.

 

[Germonico]

dm, I've been thinking the same thing regarding filing status of married filing separately since DW's employer pays for her premiums (as a teaching assistant). I on the otherhand may have to go to the exchanges for my coverage. Doesnt seem right that total income will be used on the cost side of the equation but there will be nothing recieved on the value side (for her anyway). Note also our combined income is very close to the Obamacare Cliff point mentioned in other threads. Just one more unknown to worry about in the coming months.

 

[dm]

I wonder how many will benefit from a pay cut if they are still working? I sure would be watching my overtime if I was close to the cliff.

Sadly it looks like we will be just over. I wonder if I can get the wifes pension reduced a few thousand.

 

[pb4uski]

I wonder how many will benefit from a pay cut if they are still working? I sure would be watching my overtime if I was close to the cliff.

Sadly it looks like we will be just over. I wonder if I can get the wifes pension reduced a few thousand.

Can you defer more income in a 401k?

or HSA? (I'm not totally sure whether a HSA works)

 

[scrinch]

We have enough after-tax money that we can use during the pre-medicare years to keep below the $60k AGI target for ACA subsidy. I've got to think that they are not going to leave the all-or-nothing subsidy cutoff for long, though. I think that the subsidy AGI limit will be made more gradational within a year or two of the program's implementation.

 

[Tom52]

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.

 

[UtahSkier]

What about those who withdraw enough for 3 years of expenses?

So one year with big income and then the next two years, nothing.

Can it be that easy to determine your income so that you get the subsidy?

That's my plan for both liquidating securities in the taxable account and removing funds from the tax advantaged accounts

Already have practice with this for lumping deductions.

 

[chrisaukcam]

Most definitely will take advantage of obamacare. Both my wife and I have health risks where it would be expensive to get healthcare on our own. But since uncle sam is willing to subsidize healthcare then it makes it affordable to retire early where otherwise I would have to wait until 65 and medicare...

 

[kmt1972]

See

Obamacare makes it really easy for millionaires to retire early?

I assume a lot of us will be doing this.

 

[jollystomper]

If I retire in 2014 I'll get a pension of approximately 66K-68K. Interest, dividends, and capital gains from taxable accounts may add another $6K. That keeps us under the $76K MAGI cutoff point. We have over $300K in cash that we would then draw on to make up the difference for our planned $100K year expenses (which will be less with a lower insurance premium). That will likely get us the subsidy in most years before Medicare eligibility.

 

[marko]

Can you defer more income in a 401k?

or HSA? (I'm not totally sure whether a HSA works)

PB, I think (pretty sure) that 401K deductions do NOT count in MAGI calcs. It is your gross income. Be nice if it were.

 

[pb4uski]

PB, I think (pretty sure) that 401K deductions do NOT count in MAGI calcs. It is your gross income. Be nice if it were.

401k contributions do reduce MAGI as it is used for Roth IRA eligibility. While they might make it different for Obamacare purposes, I think it is likely that it will be the same.

Also see What is Modified Adjusted Gross Income (MAGI)?

I think Michael is on top of this - any thoughts Michael?

 

[DayDreaming]

401k contributions do reduce MAGI as it is used for Roth IRA eligibility. While they might make it different for Obamacare purposes, I think it is likely that it will be the same.

Also see What is Modified Adjusted Gross Income (MAGI)?

Interesting - that document says "As a final note, it’s important to keep in mind that funds being converted from a traditional IRA to a Roth IRA do not count against your MAGI even though they may be taxable." - that sounds contrary to advice I was getting in another thread: http://www.early-retirement.org/forums/f28/aca-magi-and-roth-conversions-65781.html

Edit: Then I noticed in the comments on that article, someone points out this article which says Roth conversions do count. Oy.

 

[pb4uski]

In the definition below, it is AGI + foreign earned income excluded under section 911 + tax-exempt interest.

c. Modified Adjusted Gross Income

Under the proposed regulations, modified adjusted gross income is adjusted gross income increased by amounts excluded from gross income under section 911 and tax-exempt interest a taxpayer receives or accrues during the taxable year. The 3% Withholding Repeal and Job Creation Act, Public Law 112–56 (125 Stat. 711 (2011)), which was enacted after the proposed regulations were published, amended the definition of modified adjusted gross income to include Social Security benefits (as defined in section 86(d)) not included in gross income under section 86. The final regulations reflect this amendment.

 

[MichaelB]

See

Obamacare makes it really easy for millionaires to retire early?

I assume a lot of us will be doing this.

Would you mind providing a summary of the link or posting a snippet. That way members don't have to open it to see what it contains.

 

[MichaelB]

In the definition below, it is AGI + foreign earned income excluded under section 911 + tax-exempt interest.

You got it. No chance of excluding any type of IRA withdrawal or conversion. Zero. They also add back any part of SS income that was excluded from AGI.

 

[pb4uski]

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

If so, then IIRC all those numbers are easily determinable once you have completed your 1040 so it should be an easy computation. Make sense?

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?

 

[Live And Learn]

Assuming there will be no difference in the quality of care received by people who are subsidized (and it looks like there won't be), then yes, I will do my best to keep my income below the threshold.

+1
ACA is my "plan B". I am currently covered by DH's insurance. DH will work another 8 years. Assuming that I can get the same level of care / doctors that I am getting under DH's current plan I may look to keep my MAGI low enough to get a subsidy for the 7 years between when DH retires and when I become eligible for Medicare.

Having said all that - for planning purposes I've assumed I am going to need to pay full cost for healthcare.

 

[teejayevans]

My understanding is if you have access for employer insurance you won't qualify. Also remember the numbers are for a Silver plan, Gold plans will be more $ so even it's cheaper you may be better off with individual insurance if you are healthy
TJ

 

[MichaelB]

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

If so, then IIRC all those numbers are easily determinable once you have completed your 1040 so it should be an easy computation. Make sense?

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?

That's what it looks like to me. 1040 line 37 plus the add backs.

 

[rbmrtn]

There seems to be different definitions of MAGI depending on what it is applied to. There was an IRS bulletin on the ACA

Internal Revenue Bulletin - June 4, 2012 - REG-119632-11

It defines MAGI as

MAGI is defined under section 36B as the taxpayer’s adjusted gross income defined under section 62, increased by three components: (1) any amount excluded from gross income under section 911, (2) any amount of interest received or accrued by the taxpayer during the taxable year that is exempt from tax, and (3) the amount of social security benefits of the taxpayer excluded from gross income under section 86 for the tax year.

 

[gerrym51]

My understanding is if you have access for employer insurance you won't qualify. Also remember the numbers are for a Silver plan, Gold plans will be more $ so even it's cheaper you may be better off with individual insurance if you are healthy
TJ

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

 

[pb4uski]

There seems to be different definitions of MAGI depending on what it is applied to. There was an IRS bulletin on the ACA

Internal Revenue Bulletin - June 4, 2012 - REG-119632-11

It defines MAGI as

MAGI is defined under section 36B as the taxpayer’s adjusted gross income defined under section 62, increased by three components: (1) any amount excluded from gross income under section 911, (2) any amount of interest received or accrued by the taxpayer during the taxable year that is exempt from tax, and (3) the amount of social security benefits of the taxpayer excluded from gross income under section 86 for the tax year.

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

I agree with you that the definition of MAGI for Roth eligibility is different. I'll call that R-MAGI from here on.

 

[golfnut]

My understanding is if you have access for employer insurance you won't qualify. Also remember the numbers are for a Silver plan, Gold plans will be more $ so even it's cheaper you may be better off with individual insurance if you are healthy
TJ

I (along with my family) are covered via my former employer's retiree plan. Although it is subsidized, it is expensive. Does this mean I cannot take advantage of the exchanges/subsidies?

Golfnut

 

[jj]

I (along with my family) are covered via my former employer's retiree plan. Although it is subsidized, it is expensive. Does this mean I cannot take advantage of the exchanges/subsidies?

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