Managing MAGI

[alaska55]

How many are going to try to manage your MAGI to get a subsidy. Can you really justified gaming the system. I see people on this site that are well off and some downright wealthy talking about it.

 

[frayne]

Haven't given it any thought at all but if my insurance carrier would drop me or increase my premiums by a large amount I might consider it. I don't look at it as gaming the system any more than taking advantage of say, every tax deduction you are able to take. This is a government program and I didn't make the rules.

 

[REWahoo]

I don't look at it as gaming the system any more than taking advantage of say, every tax deduction you are able to take. This is a government program and I didn't make the rules.

+1

Feel free to avoid every discount, rebate, deduction and legal opportunity to reduce your health insurance cost if you wish. Your money and your call.

 

[FIREd]

For years, we've been paying lots of taxes while receiving very little. So no, I would not feel bad managing my MAGI to get a subsidy after retirement. The way I see it, we prepaid for it...

 

[pb4uski]

How many are going to try to manage your MAGI to get a subsidy. Can you really justified gaming the system. I see people on this site that are well off and some downright wealthy talking about it.

I haven't decided yet. So for now, I am not applying for the subsidy in advance as a reduction of my monthly health insurance premiums. It makes the purchasing process simpler since the system is so screwed up and gives me the flexibility to decide later in 2014. If I do manage my O-MAGI to get a subsidy, I'll get it as a higher tax refund when I file my 2014 tax return in early 2015.

I do not view it as gaming the system in any way whatsoever. If I manage my O-MAGI to get the subsidy it is no different than managing other tax matters to minimize taxes and like FIREd, I paid a lot in taxes over the years and got little in return so I have no guilt at all. If I end up benefiting then I'm one of the unintended consequences of Obamacare.

 

[NW-Bound]

I still have not tried to create an account at healthcare.gov to even know what premium I will pay, or what subsidy I can get.

In fact, it seems like the premium may be so much higher than what I am paying now, I will need a subsidy to pay the same amount.

 

[ziggy29]

When this law was passed, I had no idea it would be something that was actually to my significant benefit. Then I was laid off and it became a "retirement-saver", so to speak. When I feel guilty about it, I remind myself it's helping me stay retired so someone who needs the job more can have it.

Do I think people in my situation really need the goodies I should be able to get (and even more so with Indian status)? No, not really. But I spent 30 years in the working world putting in a LOT more than I ever took out, and I never complained much because I figured at some point, there would be something that felt unfair to others but worked to my benefit. This is such a thing.

In reality, this isn't that much different than managing income to stay below specific tax brackets, or to be eligible for contributing to an IRA, or any number of other things. Managing income based on AGI thresholds for taxes and benefits isn't new at all.

As I heard someone say elsewhere, human nature is to identify NOT with the Prodigal Son who blew his fortune and was welcomed back with open arms, but to the brother who worked hard, stayed with his dad and wondered why he wasn't being celebrated. Yet if we think about it, we've probably not *always* been the brother. We just remember it a lot more when we are, tending not to think about benefits we get that exceed what we personally paid for them.

 

[brewer12345]

Let me know when we get to a single payor system. Until then, I will navigate the rapids as best I can.

 

[Alan]

Let me know when we get to a single payor system. Until then, I will navigate the rapids as best I can.

+1

I have retiree insurance from my former employer (for now) but I would not hesitate to legally manage MAGI to get tax benefits, just like any other tax credit or deduction that is available.

 

[ziggy29]

+1

I have retiree insurance from my former employer (for now) but I would not hesitate to legally manage MAGI to get tax benefits, just like any other tax credit or deduction that is available.

I'd also add that if one thinks a law is unfair (and I don't want to get into the politics of that here), the answer is not to bash the people who "unfairly" benefit from it, but to petition to get the law modified in a way that feels more fair (knowing, of course, that "fair" is in the eyes of the beholder).

 

[Kimo]

I don't know if it like this in all States, but here in Hawaii I went to the local HealthCare website and imputed all my information and it came back to me telling me I could not purchase insurance and instead will be sending me my Quest insurance cards. There is no cost and I decided to call my Dr. and he takes Quest patients.

I called Quest to be sure everything was correct because I didn't want someone coming after me in the future.

They told me a few interesting things. I have a substantial amount of after tax money in a Vanguard annuity and the monthly payment is not included in my income because it is held in a mutual fund clone of Wellington as opposed to being held by an insurance company. They asked me if I made a check out to an insurance company and when I said no, that is when they declined to include that income.

My rental income is used as a net so after depreciation that doesn't count either.

They don't even ask how much you are worth (assets) so at this point I can't really see a reason to not use it.....

 

[Animorph]

I'm managing my AGI/taxable income/AMT taxes to Roth convert as much as possible at the lowest tax rates. I haven't modeled the ACA subsidies yet to see if it would pay to dip lower and pick them up. I will be staying under $250k AGI to avoid the 3.8% Medicare tax.

 

[Z3Dreamer]

I could write a book to the OP about being "justified gaming the system" and ethics vs law. I will only tell you that I was against the PPACA, every step of the way, but when the Supreme Court upheld it, it became the law of the land. I began studying it with the goal of complying. I found many situations that seemed unfair. The largest inequity being the "family glitch." I became passive and told myself that with all laws there will be winners and losers. I have been the loser of many of the laws passed in the last 50 years. I do not think I will go into the exchanges for the next few years or maybe even ever, but if I do, I will not lose one second of sleep.

 

[47]

For an average family (family of four), in a high cost of living metro area the 400% FPL threshold is a knife-edge. A few dollars this way and that way will easily make a difference of over $8,000 in after tax amount.

In my personal case, it is $7,200 for a family of three and a ROUNDING ERROR in MAGI is enough to trip it.

You must be absolutely out of your mind not to manage your AGI.

 

[pb4uski]

+1 I think a lot of families close to the 400% FPL cliff will trip over it due to a little unanticipated OT, raise or whatever and will have a big tax bill in early 2015 to return subsidies and they will be madder than wet hens and I don't blame them.

 

[daylatedollarshort]

I don't feel guilty any more about taking subsidies any more than I would feel guilty about paying less in taxes by deducting my mortgage interest or 401K contributions on my tax returns. Even with the tax deductions we have had available, we have paid much more in taxes for decades than most other U.S. households.

By not working two full time salary jobs we are freeing up two professional level positions for people who might have young families to support and need the work. How many people here were still working full time jobs just to keep health insurance? Having affordable health insurance for people who want to ER and semi-ER will leave open more regular jobs for people who need the income.

 

[brewer12345]

How many people here were still working full time jobs just to keep health insurance? Having affordable health insurance for people who want to ER and semi-ER will leave open more regular jobs for people who need the income.

Actually, I wonder how many people pass over entrepreneurial opportunities because they have to keep the benefits that come with the day job. I bet there are a lot of people who will be unshackled now.

 

[M Paquette]

Actually, I wonder how many people pass over entrepreneurial opportunities because they have to keep the benefits that come with the day job. I bet there are a lot of people who will be unshackled now.

LOTS! This was a killer in the tech industry, where it was pretty easy for a single person to 'go without' while launching a new startup, but a married person thought long and hard about jumping for that startup, even if they could afford the insurance. ("Honey, I'm pregnant!" Loss mitigation specialist takes claim, counts backwards, and SHAZAM! Pregnancy is declared a pre-existing condition. Ask me how I know...)

 

[brewer12345]

LOTS! This was a killer in the tech industry, where it was pretty easy for a single person to 'go without' while launching a new startup, but a married person thought long and hard about jumping for that startup, even if they could afford the insurance. ("Honey, I'm pregnant!" Loss mitigation specialist takes claim, counts backwards, and SHAZAM! Pregnancy is declared a pre-existing condition. Ask me how I know...)

Imagine the economic productivity loosing all those frustrated entrepreneurs upon the world will engender...

I don't know what I will do in ESR/ER, but if something entrepreneurial takes my fancy I will jump on it. Whatever I do would be more valuable to the economy than my current occupation (I assure you...).

 

[ziggy29]

I have to agree with those who have mentioned that all the cliffs in ACA make "MAGI management" more or less a financial imperative. Our income tax system is graduated, for example, so that even if you trip into a higher tax bracket, you can't lose more than a dollar by earning an extra dollar. In that case, you are NEVER better off financially by leaving a dollar of potential income on the table to avoid the income tax consequences.

ACA, for better or for worse, doesn't work that way. An extra dollar of income can cost you hundreds -- yes, sometimes even thousands -- of dollars in lost subsidies, higher deductibles and extra cost-sharing. If you think your income is close to a "cliff" it seems like financial malpractice to NOT stay on top of it and try to stay on the "right side" of the cliff so you don't fall over it.

Actually, I wonder how many people pass over entrepreneurial opportunities because they have to keep the benefits that come with the day job. I bet there are a lot of people who will be unshackled now.

This, to me, has long been one of the main reasons why I think health care should be decoupled from employers and full-time employment. Sure, we may disagree about how to do that, but I do think a lot of potential entrepreneurial spirit has been handcuffed for decades by the fear of losing employer-provided health insurance.

 

[MichaelB]

Imagine the economic productivity loosing all those frustrated entrepreneurs upon the world will engender...

I don't know what I will do in ESR/ER, but if something entrepreneurial takes my fancy I will jump on it. Whatever I do would be more valuable to the economy than my current occupation (I assure you...).

I imagine that most businesses need an HR healthcare specialist on board. How productive is that, especially those in the 25-500 employee range that compete internationally with businesses that don't have that overhead?

As to the original question, hopefully everyone eligible will take advantage of this, along with all other lawful opportunities.

 

[daylatedollarshort]

With managing our MAGI for the next few years, we are hoping to get financial aid for college (assets in FAFSA exempt asset classes), health care subsidies and maybe even pay zero income taxes.

All those combined with cutting unnecessary expenses with DH at home, no more job and commute expenses, and taking our pensions early, we are close to breaking even, income-wise as to when DH was working. He is kind of sorry we didn't crunch the numbers years ago, though working longer did add to his pension income and 2014 will be the first year for the health insurance subsidies.

 

[Theseus]

By not working two full time salary jobs we are freeing up two professional level positions for people who might have young families to support and need the work. How many people here were still working full time jobs just to keep health insurance? Having affordable health insurance for people who want to ER and semi-ER will leave open more regular jobs for people who need the income.

+1 DW and I are looking very seriously at living below 400% FPL beginning 2014, and being ER at that income level looks doable. In turn, we would be opening up > 800% FPL of good jobs. Folks in the job market will appreciate that, I believe. And our potential subsidy years are limited, so in the end I think of it as a win-win.

 

[donheff]

I'm on Medicare with a Federal Health benefits Program backup but, if I was younger and buying health insurance on the open market I would manage the hell out of MAGI. " 'Look Yossarian, suppose, I mean just suppose everyone thought the same way you do'. 'Then I'd be a damn fool to think any different'. "

 

[skyline]

I mentioned this in an earlier thread, but it's probably worth noting that there are several 'cliffs', depending on what state you live in.

above 400% MAGI - lose all subsidies
above 266% MAGI (in my state) - lose subsidies for children
above % MAGI (depending on state) - lose subsidies for single mothers/children
below 134% MAGI (in my state) - lose all subsidies

Considering that dividends are not entire predictable, you'll find that gaming this system is much harder than it looks!