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Old 02-27-2014, 10:00 AM   #21
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Planning to ER in about 5 years (I'll be 55 and wife 51) and wondering what early retirees are doing for health insurance prior to Medicare at 65 and how that impacts their withdrawals and taxes. Seems many here have some form of employer provided health insurance in retirement....won't be the case for us or, I suspect, many up and coming early retirees. Thus, reliance on the ACA or insurance purchased in the open market. With the way the ACA subsidies are working, there is no subsidy above about $62K MAGI for a couple. 0% taxes is a worthy goal, but Medicaid is not necessarily desireable. And I expect RMDs at 70 would easily put us into 25% Fed tax bracket, thus need to convert/withdraw IRA money earlier in an attempt to stay within 15% Fed tax bracket (currently extends to about $93K AGI for a couple). The lower cap for ACA subsidies is clearly a consideration. Would be interested in hearing how are others with no employer-provided health insurance in ER are working through this?
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Old 02-27-2014, 10:46 AM   #22
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So what are the average tax rates some early retirees are seeing?

Any significant fluctuations from year to year?
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Old 02-27-2014, 03:49 PM   #23
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Originally Posted by MileKing View Post
Planning to ER in about 5 years (I'll be 55 and wife 51) and wondering what early retirees are doing for health insurance prior to Medicare at 65 and how that impacts their withdrawals and taxes. ... Would be interested in hearing how are others with no employer-provided health insurance in ER are working through this?
No employer provided anything here (health insurance or pension).

It's just another expense in our budget. I'm 52 (DW is 60, DS is 19) and have purchased high deductible health insurance on the individual market in Ohio. Our expenses have been roughly (premium + out of pocket):

2012: $4800
2013: $5400
2014: $5600 estimated (we keep our pre-ACA insurance through 11/2014)

After ACA we expect this to more than double depending on what changes are made to the law going forward.

We are in Roth conversion mode. So in November we sit down with our CPA and look at our actual income to decide how much conversion is optimal.
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Old 02-27-2014, 04:12 PM   #24
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I'm really scratching my head on this year. I have been having an accountant do it for many years and sort of lost touch with the intricacies of how it all works. This was first tax year with no real earned income other than pension. Fed tax works out to about 9% on a little north of six figures of taxable.

One thing struck me when talked to accountant; there's a lot of gray in what gets filed based on accountant's experience and knowledge. What he figures is way beyond my experience as an engineer where while you may have to make assumptions, you generally look for the absolute correct answer. More or less. Let's just say he's worth way more than the $300 he charges. Printed out over 35 pages of stuff from his transmittal and for life of me can't understand where some of it comes from.

Now, about the 7% NC takes. Maybe I'll think about returning to FL!
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Old 02-27-2014, 04:47 PM   #25
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No employer provided anything here (health insurance or pension).

It's just another expense in our budget. I'm 52 (DW is 60, DS is 19) and have purchased high deductible health insurance on the individual market in Ohio. Our expenses have been roughly (premium + out of pocket):

2012: $4800
2013: $5400
2014: $5600 estimated (we keep our pre-ACA insurance through 11/2014)

After ACA we expect this to more than double depending on what changes are made to the law going forward.

We are in Roth conversion mode. So in November we sit down with our CPA and look at our actual income to decide how much conversion is optimal.
Those are some real low hc premiums. We (me 58, dw 55 and ds) pay 950 per month of which 150 if for dental. Our coverage is thru my former employers' retirement hc plan which is subsidized.
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Old 02-27-2014, 05:11 PM   #26
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Those are some real low hc premiums. We (me 58, dw 55 and ds) pay 950 per month of which 150 if for dental.
They are real. Right off my expense spreadsheet (rounded). The deductible is $11,000, which is why we pay OOP for most things. So it could be much more if something bad happens. Oddly, the deductible for the ACA plan is even higher.

Dental is extra. Twice a year cleaning for the three of us is about $700. I replaced a filling two years ago, that was about $500.
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Old 02-27-2014, 05:37 PM   #27
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Even folks with lots and lots of income probably pay an effective income tax rate of under 10%. Retirees probably should be able to work it so that they don't pay any income taxes at all until their annual spending goes above $100,000.

So if you are paying any income taxes, you should be asking yourself, "How come I am paying income taxes and nobody else is?"
I don't get it. Single, standard deduction, $50K pension income. TaxCaster says 12% taxes and in 25% bracket. Not looking at any state taxes. Unless you are paying a bucket of money for health insurance, it would be hard to get above the standard deduction if you are single and have everything paid for.
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Old 02-27-2014, 06:22 PM   #28
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I don't get it. Single, standard deduction, $50K pension income. TaxCaster says 12% taxes and in 25% bracket. Not looking at any state taxes. Unless you are paying a bucket of money for health insurance, it would be hard to get above the standard deduction if you are single and have everything paid for.
True, but many ERs are essentially living off taxable savings from ER to when they take SS. So income is principally qualified dividends and LTCG, both of which are 0% if you stay within the 15% tax bracket.

I was 0% in my first year of ER and 5% in the second because I decided to prioritize Roth conversions over 0% LTCGs. Those are federal only, and state adds another 3% or so.

If you have significant pension income and/or SS, then your tax rate may be lower than when you were working, but it would be hard to get below 10%.
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Old 02-27-2014, 06:24 PM   #29
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....One thing struck me when talked to accountant; there's a lot of gray in what gets filed based on accountant's experience and knowledge. ...
What do you have in mind? My return is pretty black and white fill-in the blanks.
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Old 02-27-2014, 06:30 PM   #30
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Planning to ER in about 5 years (I'll be 55 and wife 51) and wondering what early retirees are doing for health insurance prior to Medicare at 65...
I created a LLC so I could buy a "small group" policy through the local Chamber of Commerce. BCBS HDHI HSA-eligible coverage for two was ~$550/month in 2011 and ~$630/month in 2012. While the 2012 plan has been extended for the first 3 months of 2013 it goes away effective April 1.

Will be ~$680/month for the rest of 2013 but I'm trying to get qualified for a catastrophic plan that only costs ~$425/month.
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