ACA and early retirement?

[daylatedollarshort]

Quote:

Originally Posted by AllDone All of those folks working a regular job with ordinary income who get their insurance through their employer are paying for it in pre-tax dollars and effectively getting a subsidy too. That some (but not all!) people in the individual market get a subsidy too seems only unfair for those of us who get no subsidy at all. If you can get a subsidy, take it. At least those of us who don't qualify are finally guaranteed access to insurance which is a big blessing in itself.

+1. We are still paying more out of pocket for health insurance than when it was employer subsidized.

Plus we paid very high income annual income taxes for several decades, and not working now frees up two full time professional jobs for others who might otherwise be unemployed and not by choice.

The Congressional Budget Office director has stated that the ACA will reduce unemployment rate because it will reduce the number of people only working full time jobs in order to qualify for health insurance -

CBO: Obamacare reduces unemployment.

[Fermion]

11 years of being unable to contribute directly to a Roth, deduct tuition, and a few other things, I will gladly take a little taxpayer subsidy when we ER and feel no guilt.

[InParadise]

Quote:

Originally Posted by dtbach I agree with you. If you can get a subsidy, take it. I take as much as I can get from the Govt. Tried to get food stamps once but they actually means tested it! Darn, and I had manipulated my cash flow to mostly cash for the year. Yup, if you can get it, take it. It's the American way. And talking about pre-tax dollars, there have been HSA's now for quite some time to equalize folks with those who get insurance from employers.

We have an HSA with our employer health plan. Guess that means we are double dipping, but I am not going to turn my back on a benefit that doesn't quite make sense to me. After all, I don't get a say in how my tax dollars are spent, and much of that spending makes no sense to me either.

I have no problem taking ACA subsidies when that comes. We have worked only for companies that offer retiree healthcare, and now that we are about to exit the work force, ACA comes along and makes it even more likely that our retiree healthcare will be pulled, similar to the way Medicare eliminated the superior retiree health care after 65. Time will tell whether ACA is going to be better for us than retiree healthcare, since ACA can't be yanked at any time at the company's whim, leaving you to scramble for expensive coverage that you probably won't qualify for given pre-existing conditions. We now think we won't have to budget the extra $20K/year we were budgeting to deal with possibly being stuck in a high risk insurance pool if our employer pulled retiree health care after we retired. That is a plus.

On top of that, we have two kids entering the work force, who will bear some of the burden of our generation's entitlements. The more we keep, the more we can pass on to them when we no longer need it, hopefully in the form of an inherited Roth IRA to help them with their retirement, or in helping out with tuition for their kids if they have them.

So is that the "American Way?" Doubt it, we planners are not all that common a breed, even here in the USA. It is however the Intelligent Way.

[mpeirce]

> I have no problem taking ACA subsidies

We each have to make the determination ourselves.

I take all the "traditional" tax deductions and pay a CPA to find all that apply to us. I've also paid a couple of really large tax bills, so I'll never feel like I haven't paid my "fair share" to keep our illustrious government funded.

ACA subsidies, on the other hand, are a bridge to far. Too close to "welfare" for me. Like partaking in food stamps or medicaid. I once skipped unemployment benefits for a similar reason.

Now, if I was really down-and-out and was truly in need, I would welcome the safety net.

Others will see it differently and make their own choices.

[NoMoreJob]

Quote:

Originally Posted by mpeirce > I have no problem taking ACA subsidies We each have to make the determination ourselves. I take all the "traditional" tax deductions and pay a CPA to find all that apply to us. I've also paid a couple of really large tax bills, so I'll never feel like I haven't paid my "fair share" to keep our illustrious government funded. ACA subsidies, on the other hand, are a bridge to far. Too close to "welfare" for me. Like partaking in food stamps or medicaid. I once skipped unemployment benefits for a similar reason. Now, if I was really down-and-out and was truly in need, I would welcome the safety net. Others will see it differently and make there own choices.

Many felt exactly the same way until they realized that their premiums would double (plus or minus a bit) without the subsidy. For some the Affordable Care Act is only affordable once the subsidy is included.

[explanade]

What is the cutoff income figure again, something like $60k?

I'm not FIRE'd but the cap gains distributions and dividends on my taxable accounts are around that.

So when I take withdraws on top of that, I shouldn't expect to qualify for any subsidies?

Or maybe just withdraw the cap gains and dividends and stop DRIP after I FIRE?

[MichaelB]

Quote:

Originally Posted by explanade What is the cutoff income figure again, something like $60k? I'm not FIRE'd but the cap gains distributions and dividends on my taxable accounts are around that. So when I take withdraws on top of that, I shouldn't expect to qualify for any subsidies? Or maybe just withdraw the cap gains and dividends and stop DRIP after I FIRE?

Premium assistance is available for families with MAGI less than 400% of the federal poverty level ASPE

Quote:

2013 POVERTY GUIDELINES FOR THE 48 CONTIGUOUS STATES AND THE DISTRICT OF COLUMBIA Persons in family/household 1 $11,490 2 15,510 3 19,530 4 23,550 5 27,570 6 31,590 7 35,610

[NoMoreJob]

Complete Federal Poverty Level (FPL) charts here....
Federal Poverty Level 2013 - 2014

As MichaelB posted, subsidy is available up to 400% FPL.

And ACA MAGI calculations available here...
http://laborcenter.berkeley.edu/heal..._summary13.pdf

[Hamlet]

Yeah, this is a hard thing to quantify. My wife got laid off, and we took the unemployment insurance. I had some qualms about that, because we are very secure financially, but when we were making that decision we had no idea how long she would be unemployed. If she had been unable to find another job (or I had lost mine), we could have potentially ended up in a situation down the road when we regretted not taking the unemployment money. The crisis passed swiftly with no real effect on our finances, so now I feel like we have a debt to society that I should find a way to pay back in the future.

Likewise, most retirees are never 100% sure that they won't run a little short of money down the road, so I wouldn't expect most people to forgo the ACA subsidies, even if they feel ridiculous to be gettting a subsidy with $2 million in the bank.

I've always planned to give a large portion of my estate to charity if I have excess money left when I pass. I'm hoping to pay my debts forward, as it will.

Quote:

Originally Posted by mpeirce > I have no problem taking ACA subsidies We each have to make the determination ourselves. I take all the "traditional" tax deductions and pay a CPA to find all that apply to us. I've also paid a couple of really large tax bills, so I'll never feel like I haven't paid my "fair share" to keep our illustrious government funded. ACA subsidies, on the other hand, are a bridge to far. Too close to "welfare" for me. Like partaking in food stamps or medicaid. I once skipped unemployment benefits for a similar reason. Now, if I was really down-and-out and was truly in need, I would welcome the safety net. Others will see it differently and make there own choices.

[daylatedollarshort]

I don't feel any more guilty getting ACA subsidies than I would taking a tax deduction for mortgage interest or a retirement account. The U.S. has the highest health care costs in the world and even with the ACA the co-pays and deductibles are still sizeable. I see no reason to forego my ACA subsidy. It is not like there is a set pool of money and what I don't spend goes directly to help the poor. Maybe it just leaves less money for tobacco subsidy programs.

[explanade]

Quote:

Originally Posted by Hamlet even if they feel ridiculous to be gettting a subsidy with $2 million in the bank.

Yeah but couldn't that $2 million generate more in cap gains distributions and dividends annually than the limit of the ACA subsidies?

[InParadise]

Quote:

Originally Posted by explanade Yeah but couldn't that $2 million generate more in cap gains distributions and dividends annually than the limit of the ACA subsidies?

Maybe. But if it is in a Roth, it doesn't count.

[AllDone]

Quote:

Originally Posted by Hamlet Yeah, this is a hard thing to quantify. My wife got laid off, and we took the unemployment insurance. I had some qualms about that, because we are very secure financially, but when we were making that decision we had no idea how long she would be unemployed. If she had been unable to find another job (or I had lost mine), we could have potentially ended up in a situation down the road when we regretted not taking the unemployment money.

You pay into insurance for a reason. There's no shame in receiving something back from that insurance whether it's health insurance, disability insurance, unemployment insurance or homeowner's insurance. I paid into health insurance without receiving anything back for thirty some years. That I'm now getting some treatment at an insurance company's expense doesn't bother me even a tiny bit. That's the way insurance works. I'm happy that no one ever collected on my life and accidental dismemberment insurance.

Ditto this business about subsidies. There is just no difference between a subsidy that comes from the government indirectly through your employer and one that comes from the government directly because you are self-employed (or whatever -- and I am oh, so happily whatever). You really have to tie yourself into a logical pretzel to make the case that they are subsidies of different levels of acceptability. HSAs provide the same type of subsidy, but only to high-income people. They're equally acceptable IMHO.

[NoMoreJob]

Quote:

Originally Posted by explanade Yeah but couldn't that $2 million generate more in cap gains distributions and dividends annually than the limit of the ACA subsidies?

Not for a married couple in a tax efficient fund such as Total Stock Market. That fund would throw off zero cap gains and about 1.7% or $34,000 in dividends.

[ziggy29]

Quote:

Originally Posted by Hamlet Yeah, this is a hard thing to quantify. My wife got laid off, and we took the unemployment insurance. I had some qualms about that, because we are very secure financially, but when we were making that decision we had no idea how long she would be unemployed.

When I was laid off last April I realized I had been paying into to unemployment insurance (directly and/or indirectly) for nearly 30 years without collecting a cent, so I didn't feel much remorse over collecting UI for 26 weeks last year.

As long as you've spent your life playing by the rules even when it wasn't directly benefiting you, if your circumstances (or the rules) change in a way that allows you to use those rules to your advantage, I see no "foul" in that.

[explanade]

Quote:

Originally Posted by NoMoreJob Complete Federal Poverty Level (FPL) charts here.... Federal Poverty Level 2013 - 2014 As MichaelB posted, subsidy is available up to 400% FPL. And ACA MAGI calculations available here... http://laborcenter.berkeley.edu/heal..._summary13.pdf

OK, looking at last year's tax returns, even without earned income, my AGI would be higher than 400% FPL, so no subsidy even when I RE.

Maybe a few years of withdrawals would lower the dividends and cap gains distributions below the figure.

But someone said earlier in the thread that the MAGI determines not only subsidy eligibility but the premiums as well?

Does that mean they're pricing premiums differently depending on your MAGI? I thought the premiums were all the same, it was just a question of whether you got enough subsides to make it affordable if you needed assistance.

[rbmrtn]

Quote:

Originally Posted by explanade OK, looking at last year's tax returns, even without earned income, my AGI would be higher than 400% FPL, so no subsidy even when I RE. Maybe a few years of withdrawals would lower the dividends and cap gains distributions below the figure. But someone said earlier in the thread that the MAGI determines not only subsidy eligibility but the premiums as well? Does that mean they're pricing premiums differently depending on your MAGI? I thought the premiums were all the same, it was just a question of whether you got enough subsides to make it affordable if you needed assistance.

MAGI does not set the premium. Premiums are set by the insurer. Smoking, age and location can impact the premiums.

From the FAQ on healthcare.gov

https://www.healthcare.gov/what-fact...plan-premiums/

[heeyy_joe]

I don't make the rules, I just play by them. Good financial planning has many rewards.

[MooreBonds]

Quote:

Originally Posted by explanade But someone said earlier in the thread that the MAGI determines not only subsidy eligibility but the premiums as well? Does that mean they're pricing premiums differently depending on your MAGI? I thought the premiums were all the same, it was just a question of whether you got enough subsides to make it affordable if you needed assistance.

I don't know what thread you were referring to, but perhaps it's a case of the same result, but different meaning.

In order to qualify for a subsidy, your income must be below 400% FPL. And when your income falls below 400% FPL, the amount of the subsidy is based on your income. Someone with MAGI of 150% FPL receives a bigger subsidy than someone with MAGI of 300% FPL.

So while the monthly premium that the insurer charges for whatever plan you are looking at is the same regardless of your MAGI, the "net premium" (after taking into account your subsidy) is dependent upon your MAGI, to the extent that your MAGI determines the amount of your subsidy.