ACA when one has no income and is living off of after tax cash reserves

[pb4uski]

I understand that and agree.

I was just looking for clarity on Fermion's post as to whether he is taking about taxable or tax-deferred accounts.

 

[Fermion]

I understand that and agree.

I was just looking for clarity on Fermion's post as to whether he is taking about taxable or tax-deferred accounts.

I was thinking a little of both. Doing some rollovers from IRA to roth to fill in the 10% tax bracket, taking some capital gains by selling shares of a index, perhaps with a 50% cost basis, and then of course whatever dividends and interest you might have.

With a 60/40 stock/bond $1,500,000 portfolio you might have $10,000 to $15,000 of dividends in your taxable portion (assuming you mostly keep bonds in the tax deferred or Roth)

Say you had $10,000 in dividends and needed $25,000 more to live on. You sell $15,000 of SPY, cash in a CD for $10,000. If your cost basis is $7500 in the SPY stock then you have a taxable income of $17,500. It might make sense to do some IRA to Roth conversions because for a couple the standard deduction is around $12,000 plus the exemptions of $8000 = $20,000.

Before ACA you might have converted up to a MAGI of $40,000 or more because of low or zero taxes on cap gains and dividends, but now ACA is a lot more important than taxes.

 

[pb4uski]

Same thing is happening to me but for a couple. Before Obamacare my plan was to take LTCG and/or tIRA>Roth conversions to the top of the 15% tax bracket so O-MAGI would be ~$100k.

However, to qualify for the subsidies I need to throttle back to ~$62k.

Luckily, I have been using my taxable investments to generate 0% LTCG and reinvesting in the same securities (no prohibition on wash sales that result in gains rather than losses) so my basis is ~85% of market so I can easily withdraw what I need and stay under 400% FPL.

 

[teejayevans]

Same here, plan is:
minimize MAGI till 65, stay well under 400%
once on medicare @65 pull $ out of IRAs up to 15% tax bracket limit,
do this for 5 years then @70, SS kicks in, as well as RMDs
TJ

 

[pb4uski]

Bingo! Ditto.

 

[sheehs1]

Unless you are under some legal obligation to support your GF, you might get a nasty notice from the IRS if you declare her as you dependent.

IRS is fairly specific about "head of household" status. Girlfriends living there do not count towards this filing status.

 

[Sesq]

All great points, plus it gets even more interesting for households with kids in college.

Low taxable income + assets in FAFSA exempt asset classes (retirement accounts, house, small business) = health insurance premium subsidies + low out of pocket max on health care costs + financial aid for college + zero income taxes + unsubsidized premiums as a business expense, which lowers MAGI

One day, that could be me! Makes me think hard about those 529 contributions today . . . Unfortunately I am ten years plus out. The rules will be very mature by then.

 

[Lisa99]

does anyone know if the owner of the i-ORP tool plans to add in the impact of ACA's 400% threshold to it's decision tree on whether and how much to convert to Roth IRA?

 

[gbstack]

What is the penalty if you sign up for exchange based insurance and you miss the minimum income requirement?

 

[Onward]

What is the penalty if you sign up for exchange based insurance and you miss the minimum income requirement?

I am wondering the same thing.

 

[rbmrtn]

What is the penalty if you sign up for exchange based insurance and you miss the minimum income requirement?

There is no minimum to buy insurance on the exchange. The MAGI is for determining subsidy qualification. It will be reconciled on your tax return.

https://www.healthcare.gov/glossary/premium-tax-credit/

 

[gbstack]

There is no minimum to buy insurance on the exchange. The MAGI is for determining subsidy qualification. It will be reconciled on your tax return.

https://www.healthcare.gov/glossary/premium-tax-credit/

I thought you had to have a minimum income to qualify for one of the exchanged based insurance plans and if your income was below the minimum you would be looking at Medicaid.

What would happen if you said your 2014 income would meet the minimum to qualify for exchanged base insurance and you missed that minimum requirement?

 

[pb4uski]

Have you looked to see what is on the Kaiser website? Or I seem to recall another thread on that topic.

 

[rbmrtn]

I think I misread your post, yes there is a minimum to stay out of medicaid. It depends if your state is expanding medicaid or not. Here's another link

https://www.healthcare.gov/what-if-my-state-is-not-expanding-medicaid/

 

[daylatedollarshort]

One day, that could be me! Makes me think hard about those 529 contributions today . . . Unfortunately I am ten years plus out. The rules will be very mature by then.

I think there will always be ways to study tax and other regulations and use them to your advantage. You just might have different rules to follow in ten years.

It is hard to know the best route to plan for college ten years in advance. In California, there is a now a middle class scholarship. Families with incomes under 100K pay just $3.3K for tuition per year for the state colleges starting next fall and $7.3K a year for the public universities.

Add in merit or financial aid (low taxable income and assets in exempt asset classes to qualify), plus college income tax credits, and the annual out of pocket costs for an in state student could be fairly minimal.

 

[jflynn4]

Did a lot of researching this past weekend to figure out the most advantageous way to handle finances going forward. It's going to almost like working again, it seems.


Going to have to have sufficient funds in a non taxable account to not only keep myself under the threshold for subsidies (taking income from taxable accounts) but am going to have to predict what additional funds may be necessary for such as home repairs and cars.

Regardless, though, unless Florida rates are significantly worse than I've been seeing elsewhere, even without subsidy, I'm going to be looking at a reduction of almost $700 per month off what I'm paying today for a high deductible (high cost) plan.

Have not been in favor, personally, of the new health care law .... But I've resigned myself to figuring out how best to work the new "tax" system to my best advantage.

Just glad I'm out of the income producing work force as I suspect that rates for many younger workers is going to have to skyrocket to offset the costs that'll be incurred for people like me.