Getting an ACA Subsidy

[bingybear]

you know, the subsidy can't be for everyone. I'm not on ACA yet (working thru cobra), but I wonder if they planned on everyone getting a subsidy. The ER may be a small enough demographic to not mess up the subsidy picture or it may be in the mix. As others have mentioned, I wonder if the Roth conversion may be a better long term strategy as it effect not only taxes, but medicare premiums as many are means tested.

There was a post noting the subsidy was only $4 I think. How does this happen with the subsidy cliff? Is the cliff eliminated for the young?

 

[MBSC]

you know, the subsidy can't be for everyone. I'm not on ACA yet (working thru cobra), but I wonder if they planned on everyone getting a subsidy. The ER may be a small enough demographic to not mess up the subsidy picture or it may be in the mix. As others have mentioned, I wonder if the Roth conversion may be a better long term strategy as it effect not only taxes, but medicare premiums as many are means tested.

There was a post noting the subsidy was only $4 I think. How does this happen with the subsidy cliff? Is the cliff eliminated for the young?

Not everyone in ER is getting a subsidy. You only have to go through the exchange if you qualify for a subsidy, otherwise you can purchase a plan directly from the insurer, their agent, or a third party like e-healthinsurance.com. In general, the subsidy cliff impacts those age ~54-64 because their premium is high. The younger folks have a glide path to zero subsidy before the 400% FPL cutoff.

 

[Sojourner]

I have been carefully reading these recent threads about ACA subsidies and have been wondering if someone in my situation may simply never be in a good position to take advantage of them. The "problem" is that most of my investments are in after-tax accounts, and those investments are generating enough dividends and capital gains each year to put me over the 250% FPL threshold. This is a good problem to have, I know, so I'm not complaining. I'm just wondering if this means I should forget about ACA subsidies, or might there be strategies I'm not aware of that could lower my MAGI. Other than switching to investments that don't generate so much div and CG income, is there anything that I could do, within reason, to reduce my MAGI?

 

[RunningBum]

400% is the max for subsidies, 250% or less also includes the cost sharing (includes things like lower deductible). There's not too much you can do to reduce MAGI other than what you say about switching investments (which, in itself, may generate capital gains which add to MAGI). You could harvest capital losses if you have any. If you're right on the border you could look at tricks like taking a penalty for early CD withdrawal. Maybe an early IRA withdrawal penalty would work too? Not sure if that is above or below MAGI. If you're much off, I'd forget about it. If Roth conversions put you over, you could overload conversions one year and skip them another to get the subsidies some years.


I'm over also. Not quite close enough to change my investments, and too far for the tweaks that could help.

 

[Hermit]

I have been carefully reading these recent threads about ACA subsidies and have been wondering if someone in my situation may simply never be in a good position to take advantage of them. The "problem" is that most of my investments are in after-tax accounts, and those investments are generating enough dividends and capital gains each year to put me over the 250% FPL threshold. This is a good problem to have, I know, so I'm not complaining. I'm just wondering if this means I should forget about ACA subsidies, or might there be strategies I'm not aware of that could lower my MAGI. Other than switching to investments that don't generate so much div and CG income, is there anything that I could do, within reason, to reduce my MAGI?

My RE was at 63, so I have income streams from pension and SS on the late DW's account coming in. I will never see the 15% tax bracket let alone ACA subsidies. When I hit 70 and move to my SS and start RMDs, I will be lucky to be in the 25% tax bracket. Like you said, it's a nice problem to have.

 

[Mulligan]

My RE was at 63, so I have income streams from pension and SS on the late DW's account coming in. I will never see the 15% tax bracket let alone ACA subsidies. When I hit 70 and move to my SS and start RMDs, I will be lucky to be in the 25% tax bracket. Like you said, it's a nice problem to have.

Im in same boat. Hell will freeze over before I could get a subsidy. Catching up on this thread and reading some past posts cause me to ponder this thought. Why do most of us here (and I am one of the worst offenders) always blast and complain about insurance prices when clearly they are not the fault. Anyone who looks at a bill before insurance adjustments sees what medical facilities want to pawn off as a retail price. If anything they are one of the few organizations who attempt to drive pricing down for us.
Is it because most of us do not use healthcare much and just see an escalating monthly premium fly out of our wallet each month so where the money goes, the rant follows?
I noticed the day SCOTUS ruled it was the hospitals stocks that exploded up.


Sent from my iPad using Tapatalk

 

[rbmrtn]

Is it because most of us do not use healthcare much and just see an escalating monthly premium fly out of our wallet each month so where the money goes, the rant follows?

Yea, I rarely ever visit a Dr. I think the problem is more systematic. I never cared about any of it when working for megacorp because it was "free". You have a product that has unlimited demand, no cost for most with employer provided healthcare, and the employer gets to write it off . It's an ever escalating spiral, but it's been going on for decades. But I'd hate to have cancer or need some heart operation without health insurance. what options do you have ?

 

[NW-Bound]

For years, I used very little health care, except to see my doctor to get prescribed hay fever medication, back when there were not as many types over the counter.

Starting in the late 40s, I would go get an annual check up, but only once every 2 years. Then, in 2012 I was hit with an illness that cost the insurance a low 6-figure. They gave me some shots that cost $3K each. I hope that will not repeat for a while. In 2011, my son came down with an unusual liver infection that cost $40K due to hospitalization.

People here in this forum are mostly in the 50s or older. We are entering that "golden age", when we start to make insurance companies pay back the premium that we submitted over the years. Maybe even more. The people who die early are the cheapest. My late father cost Medicare several hundred K's before his death.

Mea culpa...

 

[DonL]

I hope those on the thread complaining about making so much money that they never will qualify for a subsidy really don't expect people to feel bad about them. They obviously don't need a subsidy.

The question was how people people with no or too low income, those in need, could get one.

 

[MichaelB]

Is it because most of us do not use healthcare much and just see an escalating monthly premium fly out of our wallet each month so where the money goes, the rant follows?

Most health insurance for people <65 is employer provided, employees do not see the total cost, just their share, and probably most have come to believe that is the "real total cost". Add to that the policies that were available to individuals pre-ACA, where underwriting limited participants to the lowest cost group.

The studies show that the total cost has been rising sharply since the 80's, and also that the prices for ACA policies are at the same level that employers are paying. Most people are only now becoming aware - for the first time - of the real cost of our healthcare.

 

[RunningBum]

I hope those on the thread complaining about making so much money that they never will qualify for a subsidy really don't expect people to feel bad about them. They obviously don't need a subsidy.

The question was how people people with no or too low income, those in need, could get one.

I thought this thread was started so you could figure out how to get a subsidy after choosing to stop work so you could go sailing. Is that someone really in need?

 

[Mulligan]

I hope those on the thread complaining about making so much money that they never will qualify for a subsidy really don't expect people to feel bad about them. They obviously don't need a subsidy.

The question was how people people with no or too low income, those in need, could get one.

Hmm, better toss in "managing income" to acquire subsidy also into the question as it has been peppered about also. Whether that gets any sympathy I guess is in the eye of the reader. Though like me they may also not be posting to gather any sympathy, just stating facts for their situation.


Sent from my iPad using Tapatalk

 

[DonL]

I would say living on a smallish savings and no income is a different class of "retirement" than being to live on investment income.

But thanks for helpful topic info



Sent from my iPhone using Early Retirement Forum

 

[jim584672]

ER has many types from "frugals" to "I can't live on 3 million". Can't we all just get along?

DonL, with no income, why not just move to a state that takes care of low incomers?

 

[bingybear]

I would say living on a smallish savings and no income is a different class of "retirement" than being to live on investment income.

But thanks for helpful topic info

smallish savings is not real descriptive, are we talking 5 or 10k? Even at that level, this would kick you off medicaid. As suggested above, you will need to manage your income so you can get ACA insurance.
While I may not be able to live on my earnings from my taxable accounts, I have to live on the earnings plus some withdraw from my taxable accounts. Otherwise I need to tap IRAs as I converted my 401k.
However, since you sound like you are leaving employment at 55 or later, you may be able to tap your 401k without penalty. But I suspect that is not really of interest. I suspect that is not of interest to you. I suspect you expect your smallish savings to last you 6 to 14 years. I'm not sure why part of this might not be invested or in high yield savings account making about 1% worst case. Thus some income, but not enough to live on. In the scheme of things for general population of retirees, this is likely not small.

manage your income so you can qualify for ACA.

 

[sengsational]

I have been carefully reading these recent threads about ACA subsidies and have been wondering if someone in my situation may simply never be in a good position to take advantage of them. The "problem" is that most of my investments are in after-tax accounts, and those investments are generating enough dividends and capital gains each year to put me over the 250% FPL threshold. This is a good problem to have, I know, so I'm not complaining. I'm just wondering if this means I should forget about ACA subsidies, or might there be strategies I'm not aware of that could lower my MAGI. Other than switching to investments that don't generate so much div and CG income, is there anything that I could do, within reason, to reduce my MAGI?

You are in a great situation, as far as I can tell. Just buy your HI on the exchange and leave everything else the same. Many of us here have more as pre tax money, which shows as income as you spend it, so that can put a damper on spending. You don't have that to deal with. Nor do you have a large wad of cash that "should" go through Roth conversions.

 

[bingybear]

ER has many types from "frugals" to "I can't live on 3 million". Can't we all just get along?

DonL, with no income, why not just move to a state that takes care of low incomers?

Many states if not all that "takes care of low incomers" most likely means test to a few k in savings. I would suspect between his savings and 401k he would not qualify. Many people approaching retirement have most of their savings in 401k/IRA type accounts. Some may add annuities, etc. At least my state requires financial statements including brokerage statements before qualifying for medicaid. No, I did not file for it, but had a friend who tried... and was rejected based on means, not taxable income.

 

[DonL]

manage your income so you can qualify for ACA.

well isn't that what I started the thread to cover

 

[jim584672]

Many states if not all that "takes care of low incomers" most likely means test to a few k in savings. I would suspect between his savings and 401k he would not qualify. Many people approaching retirement have most of their savings in 401k/IRA type accounts. Some may add annuities, etc. At least my state requires financial statements including brokerage statements before qualifying for medicaid. No, I did not file for it, but had a friend who tried... and was rejected based on means, not taxable income.

Medicaid expanded states have no asset/resource test, only a sole <138% income test. Put all the money in Berkshire Hathaway, no dividend, thus no income. Sell shares as needed to live. Get to age 65 and do Medicare.

 

[sengsational]

Unworkable for someone who would need to sell a lot of shares (capital gains). But the idea might work for someone who had a modest budget. Or maybe you buy several volitile equities that don't pay dividends and "hope" you have a loser to offeset your gains.

 

[GTFan]

It's entirely workable for folks that don't live in a high COL area and/or don't need to spend big bucks every year.

I am always amused by folks that state they need tons of $$$ a year to live comfortably and then post in these subsidy threads. Well sure, but this ain't your thread.

 

[NW-Bound]

My state is among the "bad states" that did not expand Medicaid to go with ACA. The state government said it would cost money that it did not have.

So, does it mean the poor residents of my state have no healthcare? Not true. There has always been a program for the indigent. It is different than ACA in that it requires means testing. My friend has a couple of nephews who had cancer, applied for the program, and were treated and cured. So, apparently the care level was good. You just have to be truly poor.

 

[jim584672]

"good" or "bad" is in the eye of the beholder.

The usual scheme for the poor is go to the ER. Get care, get bill, go bankrupt. Have hospital beg for uncompensated care reimbursement from the government. Taxpayers eventually pay or all the hospitals will go bankrupt. Pad the bills of those who can pay to make up for the losses.

Indigent care gets paid for by mostly local taxpayers and some Federal money. Expanded Medicaid is paid for at 100-90% by the Federal gov. So $$$ wise it makes no sense to reject the Federal money.

 

[sengsational]

It's entirely workable for folks that don't live in a high COL area and/or don't need to spend big bucks every year.

Absolutely! Thats what I call a "modest budget". Complaining by someone with larger than a modest budget isn't welcome, but I find tax planning kind of a fun puzzle, and this ACA thing is just an extension of the tax code IMHO. I welcome discussion about taking every legal advantage to reduce taxes.

 

[AllDone]

Most health insurance for people <65 is employer provided, employees do not see the total cost, just their share, and probably most have come to believe that is the "real total cost". Add to that the policies that were available to individuals pre-ACA, where underwriting limited participants to the lowest cost group.

The studies show that the total cost has been rising sharply since the 80's, and also that the prices for ACA policies are at the same level that employers are paying. Most people are only now becoming aware - for the first time - of the real cost of our healthcare.

A lot of people don't seem to understand that people who get insurance through an employer get a tax break on their insurance that is absolutely equivalent to a subsidy. In fact, more highly paid people often get a larger "subsidy" than the less well paid. There is no particular reason why someone who is self employed, not offered insurance through an employer, or retired is less deserving of a subsidy.