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A hidden benefit of ACA, more angles :-)
Old 10-29-2013, 05:13 PM   #1
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A hidden benefit of ACA, more angles :-)

I've been retired 13 years and I've been reading early retirement forums almost that long. So I've gotten good handle on all the financial aspects of retirement, SWR, Asset allocation, 72(t), roth conversions, paying off mortgage yada yada. Sometimes I'm inspired to add my $.02 to a discussion other times "ya been there done that got the T-shirt." In short, I've become bored with the financial aspect of early retirements

So to me one of the hidden benefits of ACA is added a bunch of new factors to consider when planning your retirement financial strategy. Almost makes it a new ball game for most middle income early retirees. Now I realize that making a complex subject like planning for retirement, even more complicated would be considered a bug not a feature by most normal people. So I was just wondering with all of the analytical INTJ/engineers on the board anybody else find maximizing ACA subsidies/tax planing an intellectually interesting exercise?
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Old 10-29-2013, 05:37 PM   #2
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My take on added complexity of the rules is that the smartest people will probably pay less. Not that I'm all that smart, just smart enough to hang around the folks on this site! I found it somewhat distasteful, but a buddy of mine used to say "tax the stupid", which is really the same thing as those who take the time and effort to maximize the rules to their advantage. I treat it like the game it is!
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Old 10-29-2013, 05:41 PM   #3
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INTJ here. Given that the healthcare.gov Web site still has some problems as reported by posters here, I have not tried to open an account yet, but know that I will need to look at this "optimization" problem at some point.

I am still stuck on this stock market thinggy. Is it just plain vanilla exuberance or irrational exuberance? Correct deciphering of the sentiment of the masses means a LOT more money to me than the ACA subsidy.
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Old 10-29-2013, 06:22 PM   #4
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I find it interesting and I'm not eligible. I think people like the partcipants on this forum will maximize benefits and avoid pitfalls but others - those with low income and/or pre-existing conditions in particular - will benefit as well. We will all benefit by having an accessible HI marketplace outside our workplaces.
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Old 10-29-2013, 06:35 PM   #5
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.....So I was just wondering with all of the analytical INTJ/engineers on the board anybody else find maximizing ACA subsidies/tax planing an intellectually interesting exercise?
INTJ but accountant rather than engineer - and to answer your question - yes, I find it interesting - especially when I add in state income taxes and state property tax relief which has a different cliff of its own. My solution so far is to calculate the net of all four (federal and state income taxes, Obamacare subsidies, state property tax relief) for the income I expect with no capital gains or Roth conversions and then with additional cap gains or Roth conversions in $10k increments until I reach the top of the 15% tax bracket and look at the incremental cost in relation to the incremental income.
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Old 10-29-2013, 08:02 PM   #6
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So I was just wondering with all of the analytical INTJ/engineers on the board anybody else find maximizing ACA subsidies/tax planing an intellectually interesting exercise?
Yes, it is way cool. We have been modeling with our tax program for months already to figure out the way to maximize financial aid, health care subsidies and minimize taxes. It has lessened the financial impact of DH not having a megacorp paycheck any more.
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Old 10-29-2013, 09:39 PM   #7
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No, I don't find it an intellectually interesting exercise, because these kinds of things are generally based on totally illogical rules and written in legalese, and I have a tough time dealing with that. Just frustrating that I may need to invest time in this.

Waiting to see if MegaCorp drops my retiree HI - if so, I will need to get a lot more involved in it.

-ERD50
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Old 10-29-2013, 10:58 PM   #8
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No, I don't find it an intellectually interesting exercise, because these kinds of things are generally based on totally illogical rules and written in legalese, and I have a tough time dealing with that. Just frustrating that I may need to invest time in this...
+1

Our tax codes are so complicated, and people who pass the law keep piling on more complications. The obvious example is the various "cliffs" in ACA subsidy schedules that are not intentional, but side effects from overlook. However, they demonstrate some of the more absurd aspects of our laws, when law makers pass things that they do not fully understand themselves.

These laws tend to keep people occupied with "optimizing" their situation to make use of the clauses to their advantage. In the end, people all feel that they are getting ahead of the "other guys", and happy with what they get. But is it really? How do I know if the "other guys" do not have more laws on their side, such that they even benefit more than I do?

I prefer a simpler tax code, so that people do not have to play this game.
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Old 10-29-2013, 11:02 PM   #9
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I am just hoping they don't find a way to whack my Fed Health insurance. That would just get me to move back to the UK that much earlier....I know I have it good......and I will just keep ducking the s*** as long as it doesn't start sticking.....
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Old 10-29-2013, 11:38 PM   #10
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These laws tend to keep people occupied with "optimizing" their situation to make use of the clauses to their advantage. In the end, people all feel that they are getting ahead of the "other guys", and happy with what they get.
I just like saving money. Less money on taxes, college or health insurance means more money for travel or a retirement cushion.
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Old 10-30-2013, 12:37 AM   #11
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I like to save money too. Or rather, I do not want to pay more taxes than I have to.

But if everybody gets to save on taxes, yet the gummint's budget keeps growing, well, who's paying for it?
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Old 10-30-2013, 07:21 AM   #12
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Engineer here. While I find the financial side interesting, I wouldn't say that I welcome it. For those of us still w*rking, it adds a layer of complexity to the standard decision-making process for picking an ER date.

I'm feeling like I did back in college, when I passed calculus on the second try but still had a year of differential equations still to go.

My complicated list of considerations over the next five years:
  • Four years of college expenses beginning in 2014. DD #2 has applications out to schools that vary 3:1 (or more) in total cost. Financial aid will be zero as long as I'm working, could be significant if I quit.
  • A member of the household switching to Medicare in 2014
  • That same household member facing increasing medical and care expenses over time, perhaps to include long-term care not covered by HI or LTCI.
  • Assets skewed too heavily to tax-deferred accounts, creating wild gyrations in tax expenses under various earning and spending scenarios. (Conversely, this is a positive for college financial aid.)
  • A 2015 vesting date for a significant pension, paying 15% of current salary +/- in 6 years if I vest
  • DD#1, currently covered as family member at $0 incremental cost, turns 26 in 2015
  • Uncertainty on when I want to pull the plug on my j*b
  • Uncertainty on when I may need to pull the plug (or go part-time) for relative care.
  • Current expenses for daytime care assistance would go down if I quit
  • Fine print on my employer's rules for health insurance, part-time, FMLA and pension
No complaints, though. In fact, I'm very grateful that ACA now provides relative certainty in projecting a worst case health care expenses budget. That benefit alone makes the extra effort to run the ER spreadsheet very easy to take.
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Old 10-30-2013, 07:56 AM   #13
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.....In the end, people all feel that they are getting ahead of the "other guys", and happy with what they get. ...
I don't view optimization as a means of getting ahead, but rather as a means of making the best of my circumstances. I'm content with my station in life and really don't care about getting ahead. If it was about getting ahead, we wouldn't be willing to share our strategies.
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Old 10-30-2013, 10:37 AM   #14
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I prefer a simpler tax code, so that people do not have to play this game.
+1. Put me on record as someone who doesn't enjoy the little puzzles (tax code, ACA optimization, IRA/401(k)--> Roth money transfers, etc). At the end of the experience I know I saved money compared to doing the simplest, easiest, most obvious thing. But I also know I didn't wring out every last dime of savings, that there were intertwined dependencies I didn't see/couldn't know, and that I therefore will be paying more in taxes than I "should".
Taken together, this stuff is a tremendous waste of our time. If, as a society, we could put these efforts into something productive or at least enjoyable, we would all be better off.
Most fundamentally, I don't enjoy being "incented" with artificial and arbitrary sticks and carrots.
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Old 10-30-2013, 11:29 AM   #15
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I agree but the problem is that for any changes there will be winners and losers and vested interests that will lobby to retain their advantage.

For example, a simple change would be to get rid of all itemized deductions and just go with a standard deduction for everyone. Reduced recordkeeping and no disputes as to deductions. But advocates for the sick would complain that they need the medical expense deduction, home builders and realtors would lobby that it is critical that the mortgage interest and property tax deductions be retained, charities would insist that the sky would fall on them with out the contribution deductions, etc. and in the end nothing would happen.
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Old 10-30-2013, 11:32 AM   #16
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So I was just wondering with all of the analytical INTJ/engineers on the board anybody else find maximizing ACA subsidies/tax planing an intellectually interesting exercise?
I am an INTJ retired scientist/engineer on Medicare (so I don't have to deal with the ACA personally). I am so glad. For me it would be unbelievably aggravating and frustrating to have so many unknowns in my computations. It sounds very difficult to just register on healthcare.gov in order to find out what insurance plans are available, and then there is always the question of what subsidies would actually be approved, as opposed to what I am assuming should be approved.

It could be fun once all the variables are known, but otherwise such computations would be in the fantasy domain IMO.

Then again, I admit that I am READING these threads so there must be some inherent appeal.
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Old 10-30-2013, 11:42 AM   #17
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I agree but the problem is that for any changes there will be winners and losers and vested interests that will lobby to retain their advantage.

For example, a simple change would be to get rid of all itemized deductions and just go with a standard deduction for everyone.
One approach that seemed to be a way to work around this problem was to cap the value of the deductions at some amount (maybe a % of AGI, but probably instead a dollar amount). This got some discussion during the recent US presidential primaries. The candidate gets to say "we're not eliminating any of the present deductions" (which is true, technically), but at least their inherent value is capped. Unfortunately, it does little to reduce complexity unless it is part of a bigger plan to gradually drop that cap to the value of the standard deduction.

Another option was discussed to allow taxpayers to file under 1 of 2 schedules: One with all the deductions, another with virtually no itemized deductions (beyond the standard deduction) and lower overall rates. Again, no immediate reduction of complexity ("what, now I have to figure my taxes twice?"), but if taxpayers had to commit to one method or another for, say, 5 years, it at least reduce the angst of the non-game-players (and reduce "bunching" games).

The biggest problem would be prevention of a re-institution of the complexities int he future. After all, the tax code didn't start out like it is today, it got there one "favor" at a time. The "system" encourages it, and probably nothing short of a constitutional amendment would stop a re-growth of the regulatory thicket.
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Old 10-30-2013, 11:54 AM   #18
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But if everybody gets to save on taxes, yet the gummint's budget keeps growing, well, who's paying for it?
We all know the answer to this.....its all about the printing press.
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Old 10-30-2013, 12:17 PM   #19
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Old 10-30-2013, 02:43 PM   #20
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+1. Put me on record as someone who doesn't enjoy the little puzzles (tax code, ACA optimization, IRA/401(k)--> Roth money transfers, etc). At the end of the experience I know I saved money compared to doing the simplest, easiest, most obvious thing. But I also know I didn't wring out every last dime of savings, that there were intertwined dependencies I didn't see/couldn't know, and that I therefore will be paying more in taxes than I "should".
Taken together, this stuff is a tremendous waste of our time. If, as a society, we could put these efforts into something productive or at least enjoyable, we would all be better off.
Most fundamentally, I don't enjoy being "incented" with artificial and arbitrary sticks and carrots.
I completely agree that collectively that solving these puzzles is a huge waste of time. Perhaps even more tragically, both designing these systems like ACA and the tax code, and figuring out ways of exploiting the loophole attracts lot of smart people.

I introduced Nords to Hawaii Angels (a investment group that funds start ups). Nords, being a very bright guy, immediately said Clif they should rename it Hawaii Angles. He was right with a couple of exceptions the only companies that have been good investments were those that involved in financial engineering (In one case exploiting loopholes in the Japanese tax code), not real engineering.

Grossly generalizing I realize that they are two types of smart people. Those would like to make things for other smart people. These people go to work for the government, law firms, hospital billing departments, nuclear power , Microsoft, Enron and produce or exploit very complex systems and products which are incomprehensible to most people. However, the complexity is appealing to other smart people. Sadly I am in this group.

But the smartest people go to work for places like Google, and Apple, and Tesla and they make really sophisticated products, which are really easy to use. Now I have no clue how you get employees of companies like these to go into government, but I am pretty sure it would be a better world if they did.
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