Retire in your 30s and Get Subsidized Healthcare? I don't get it.

[underwrite]

I was reading the Root of Good blog recently. If I remember correctly, the blogger retired at 33 and now earns around $40k per year. He's getting heavily subsidized healthcare through Obamacare, ACA or whatever you'd like to call it.

We're paying taxes to pay the subsidy for a guy to retire at 33 and get cheap healthcare? I don't get it.

It wouldn't bother me as much if he'd paid 'into the system' for a number of years and then retired in his 50s or even late 40s and then got subsidized. To retire at 33, able bodied, and then avoid paying much of his healthcare costs? Yikes.

I know it's legal, but it really bothers me. Am I overreacting?

 

[Walt34]

I know it's legal, but it really bothers me. Am I overreacting?

I think so. For one, this guy (who is a member of this forum, BTW) is almost certainly an extremely small percentage of the population. How many people have the self-discipline to retire at 33? So the effect on everyone else's taxes is probably imperceptible.

I don't see what he's doing as any different than managing one's finances to minimize taxes, such as doing tIRA to Roth conversions between ages 59 1/2 and 70 years of age.

 

[NYEXPAT]

It's ok, I retired at the same age, moved overseas and do not use US Healthcare. He can have mine!

 

[JDARNELL]

People respond to incentives. He did a good job structuring his stuff so he could take advantage. Nothing more.

 

[daylatedollarshort]

Many corporations pay zero taxes, but root of good getting subsidized health care for his family bothers you?

 

[Lukeee]

Well he’s still making $40K...what’s that? 30th percentile for US household incomes ... probably contributing to FICA tax.....probably paying some income tax.

My take on ACA is the more people we can get to pay for insurance (subsidized or not) , the cheaper it will be for us overall.

Same for car insurance... if everyone had car insurance, I suspect my car insurance rate would be 25-50% cheaper.

 

[MichaelB]

I was reading the Root of Good blog recently. If I remember correctly, the blogger retired at 33 and now earns around $40k per year. He's getting heavily subsidized healthcare through Obamacare, ACA or whatever you'd like to call it.

We're paying taxes to pay the subsidy for a guy to retire at 33 and get cheap healthcare? I don't get it.

It wouldn't bother me as much if he'd paid 'into the system' for a number of years and then retired in his 50s or even late 40s and then got subsidized. To retire at 33, able bodied, and then avoid paying much of his healthcare costs? Yikes.

I know it's legal, but it really bothers me. Am I overreacting?

We're also paying taxes to subsidize healthcare for working people with employer provided health care insurance. In fact, the total subsidy for employer provided healthcare insurance is greater than the ACA subsidies.

 

[COZICAN]

There are multimillionaires on free ACA plans. Cash is not income so all they need is 21-60K in dividends to qualify. I'm getting ready to play the same game.

Coz

 

[USGrant1962]

Unfortunately, inconceivably, for better or worse, our brilliant Congress decided to tie health insurance (NOT health care) to the U.S. Federal Income Tax system. So here we are.

 

[joeea]

I know it's legal, but it really bothers me. Am I overreacting?

You may be overreacting.

Are you bothered by everyone who works within current rules and thus gets a tax break or subsidy?

Or is it just the ACA that gets to you?

 

[HI Bill]

I have serious ethical issues with those who are sitting on major assets, but managing income in such a way as to game the ACA system (getting free government handouts while the national debt continues to climb). The lawyers who wrote ACA didn't foresee this legal loophole, or they thought it was so small, few would use it. IMHO, time for means testing for the ACA! I'm sure this will annoy those who are using the loophole, but seriously, why should America pay health expenses for those who retire early so that they can hold on their $? Doesn't really matter, as it's unlikely to last IMHO.

 

[Aerides]

It is true that a number of people were able to leave the workforce early because of the ACA. In many cases, people left jobs that helped others gain employment. Many left for reasons such as:

- become a full time stay-at-home parent
- become a caregiver for their own aging parents or other family members with special needs
- start a small home business that provided small income but improved their home life
- work part time
- volunteer
- leave high stress full time work to take lower paid jobs some with no benefits
- and yes (me, lots on this board) retire early knowing that a subsidy would be available to keep costs somewhat manageable

Who's to say what age is too early? In each case someone left the workforce and was back-filled, helping increase the employment rate, and provide career opportunities to someone else.

Just looking at "but my taxes pay for that..." is a small part of the overall picture.

The "multimillionaires getting free ACA" is not exactly accurate, unless their assets are very well managed and mostly non-taxable. Depending where you live, the ACA premium savings on an income of $40k are still going to be a few hundred a month, with a considerable deductible.

 

[Huston55]

Note that the person/family you’re referencing still pays monthly premiums into the system. RoG & DW have three children so, they’re likely paying somewhere btwn $300-$800/mo in ACA premiums depending on income level (I’m assuming they’re in the 200%-400% FPL range).

I know children might use a bit of healthcare resources but, two healthy 30-something adults paying into the system sounds pretty good to me.

I’d expect RoG to be along shortly with his view on this.

 

[COZICAN]

I have serious ethical issues with those who are sitting on major assets, but managing income in such a way as to game the ACA system (getting free government handouts while the national debt continues to climb). The lawyers who wrote ACA didn't foresee this legal loophole, or they thought it was so small, few would use it. IMHO, time for means testing for the ACA! I'm sure this will annoy those who are using the loophole, but seriously, why should America pay health expenses for those who retire early so that they can hold on their $? Doesn't really matter, as it's unlikely to last IMHO.

The problem for me is cost for HI. I do not want to pay $1800 (and rising) a month for something I can get free or discounted by keeping my "income" low. They do not make it easy but with 72t and cash it can be done. My fear is asset testing but have heard that it would have to be a complete rewrite to implement that.

 

[pb4uski]

A single with $40k of income in 2018 would have to pay 9.56% of their income for the second lowest cost silver plan... whether the $40k of income is from working 60 hours a week or from interest and dividends... that's just the way they designed the subsidies.

 

[COZICAN]

It is true that a number of people were able to leave the workforce early because of the ACA. In many cases, people left jobs that helped others gain employment. Many left for reasons such as:

- become a full time stay-at-home parent
- become a caregiver for their own aging parents or other family members with special needs
- start a small home business that provided small income but improved their home life
- work part time
- volunteer
- leave high stress full time work to take lower paid jobs some with no benefits
- and yes (me, lots on this board) retire early knowing that a subsidy would be available to keep costs somewhat manageable

Who's to say what age is too early? In each case someone left the workforce and was back-filled, helping increase the employment rate, and provide career opportunities to someone else.

Just looking at "but my taxes pay for that..." is a small part of the overall picture.

The "multimillionaires getting free ACA" is not exactly accurate, unless their assets are very well managed and mostly non-taxable. Depending where you live, the ACA premium savings on an income of $40k are still going to be a few hundred a month, with a considerable deductible.

There are zero cost silver plans in Oklahoma for 40K income and $99 for 60K.

 

[MRG]

We're also paying taxes to subsidize healthcare for working people with employer provided health care insurance. In fact, the total subsidy for employer provided healthcare insurance is greater than the ACA subsidies.

Thank you for that gem. I've always suspected that was the case but don't remember seeing it.

 

[Conundrum]

i don’t blame anybody that manages their taxable income within the limits of the law. They didn’t write the laws, they are just following them.

Full disclosure: I am working on my own ACA plan for 2019. I started filing a tax return at 17. Started bucking hay at age 15. I’m 51 now.

 

[cyber888]

Nothing wrong with it. People look for loopholes in taxes and subsidies .. I guess we all do.

 

[Golden sunsets]

Note that the person/family you’re referencing still pays monthly premiums into the system. RoG & DW have three children so, they’re likely paying somewhere btwn $300-$800/mo in ACA premiums depending on income level (I’m assuming they’re in the 200%-400% FPL range).



I know children might use a bit of healthcare resources but, two healthy 30-something adults paying into the system sounds pretty good to me.



I’d expect RoG to be along shortly with his view on this.

I don’t think the range of amounts you are assuming are correct. Root of Good on his blog states that his 2018 monthly premiums average out to $40/mo for a Silver plan(As I recall) for a family of five and his Net Worth is now over $2,000,000. He has stated on his blog that he is prepared to make adjustments if his ACA subsidy disappears.

 

[Big_Hitter]

I know it's legal, but it really bothers me. Am I overreacting?

yes you are overreacting - no one who gets subsidized premiums "paid" into a system to get them regardless of age

 

[GrayHare]

Though history as the standard of living has increased so has leisure time. A concern in the current era is our standard of living is being financed through government debt growing along an unsustainable path. When that breaks, and it will, things won't be pretty. For now, apparently "kick the can and party on" is the rule.

 

[Bestwifeever]

Overreacting. And bloggers have been known to “enhance” their situations to get more clicks. You can be happy you upped his income a bit by going to the blog—keep it up and he’ll have to pay more in taxes!

 

[flintnational]

I have serious ethical issues with those who are sitting on major assets, but managing income in such a way as to game the ACA system (getting free government handouts while the national debt continues to climb). The lawyers who wrote ACA didn't foresee this legal loophole, or they thought it was so small, few would use it. IMHO, time for means testing for the ACA! I'm sure this will annoy those who are using the loophole, but seriously, why should America pay health expenses for those who retire early so that they can hold on their $? Doesn't really matter, as it's unlikely to last IMHO.

In our case, if we are "gaming" the tax system through ACA subsidies, we have a poor track record of tax avoidance. Cumulatively we have paid more taxes than the vast majority of Americans. Not complaining. I just don't like the cherry picking and the suggestion we pay taxes not owed.

Edit to add: We work very hard to stay healthy. Accordingly, we use very little health care. Who is subsidizing whom?

 

[aja8888]

Many corporations pay zero taxes, but root of good getting subsidized health care for his family bothers you?

Corporations provide jobs for people who get paid and they pay the taxes. Many corporations also subsidize health insurance (among other benefits) for the employees. Isn't that good?

Where, exactly, would this country be without corporations?

When I was an owner in a private corporation, our company paid no income tax (Sub S Charter). All profits were distributed to the owners and employees and we paid the federal, state and local income taxes (and we paid plenty).