Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
2017 AHC Open Enrolment
Old 10-21-2016, 09:20 AM   #1
Recycles dryer sheets
Islandtraveler's Avatar
 
Join Date: Apr 2012
Location: Long Island
Posts: 134
2017 AHC Open Enrolment

2017 will represent the first full calendar year that we are retired. I am 58 and DW is 56. We have one Son that is 21 and attending college. November 1st represents the first opportunity to examine Health insurance through the government exchange. We currently pay $18,300 per year for coverage. I calculate my annual income to be close to 80k comprising of about 70 in dividends and 10 in Muni bond income. This puts us just at the edge of the “cliff” as it relates to the AHC subsidies. Based upon what I have read, I can subscribe to a high deductable plan, open a HSA and contribute $6,750 for the year. I can deduct that contribution from my MAGI and fall well within the threshold for the subsidies. This should represent a savings of over $11,000 for the year in premiums in addition to providing another tax deferred investment account.
Does this sound correct to you? Am I missing anything? I do feel a bit conflicted about this strategy as it feels like I am gaming the system. On the other hand, I think I got hosed on taxes for a good amount of years. Any thoughts? Thanks
__________________

Islandtraveler is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 10-21-2016, 09:42 AM   #2
Thinks s/he gets paid by the post
 
Join Date: Feb 2007
Posts: 2,813
Since you are over 55 you can add an additional $1000 to the $6750 HSA contribution for a total of $7750.

https://www.towerswatson.com/en-US/I...hsas-and-hdhps

You are NOT "gaming the system"!

When the federal government wants to encourage you to do something they incentivize it by making it advantageous to the taxpayer. You are being encouraged to put money away to cover medical expenses. That's a really good thing. They make it a tax deduction, and if you don't use it for medical expenses (you cash flow them instead) it grows tax free. The trade off is that you must have a high deductible plan which means you are covering most of your medical expenses and carrying more risk, but hopefully paying a smaller premium.

If they didn't want taxpayers to use HSAs and reduce their taxes they would stop offering the tax deduction.
__________________

__________________
Married, both 65. DH retired June, 2010. I have a pleasant little part time job.
Sue J is online now   Reply With Quote
Old 10-21-2016, 10:40 AM   #3
Recycles dryer sheets
Islandtraveler's Avatar
 
Join Date: Apr 2012
Location: Long Island
Posts: 134
Great update and link and Thanks for the moral affirmation.
Islandtraveler is offline   Reply With Quote
Old 10-21-2016, 05:23 PM   #4
Thinks s/he gets paid by the post
Accidental Retiree's Avatar
 
Join Date: Feb 2012
Posts: 1,128
Quote:
Originally Posted by Sue J View Post
Since you are over 55 you can add an additional $1000 to the $6750 HSA contribution for a total of $7750.

https://www.towerswatson.com/en-US/I...hsas-and-hdhps


If they didn't want taxpayers to use HSAs and reduce their taxes they would stop offering the tax deduction.
If you have 2 separate HSAs, your wife can also put aside $1000 in catch-up funds.

I had an HSA-eligible plan for a few years before DH. We now put most of our family plan funds into his HSA, to make our HSA amounts more even; however, I still contribute my $1000 catch-up to my separate HSA, so we get the full $8750 (if I recall the correct amount correctly).
__________________
Chief Retirement Strategist
The AR Group
Accidental Retiree is offline   Reply With Quote
Old 10-22-2016, 06:11 AM   #5
Recycles dryer sheets
 
Join Date: Nov 2015
Location: Fort Myers, FL
Posts: 137
I do not know much about taxes, so excuse my ignorance .....

Can you use the HSA funds to pay for the Insurance Premiums? Along with your out of pocket expenses for medical care/needs?

Also, do you have to empty that HSA account by year end, each year ??
__________________
Live Life
LakeRat1 is offline   Reply With Quote
Old 10-22-2016, 06:30 AM   #6
Administrator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Sheltered in place
Posts: 31,304
Quote:
Originally Posted by LakeRat1 View Post
I do not know much about taxes, so excuse my ignorance .....

Can you use the HSA funds to pay for the Insurance Premiums? Along with your out of pocket expenses for medical care/needs?

Also, do you have to empty that HSA account by year end, each year ??
No, you do not have to empty the account by year end, you can keep the funds in a tax exempt HSA account for decades.

In most cases, health insurance premiums are not eligible expenses. From IRS pub 969 https://www.irs.gov/pub/irs-pdf/p969.pdf
Quote:
Insurance premiums. You cannot treat insurance premiums as qualified medical expenses unless the pre- miums are for:
1. Long-term care insurance.
2. Health care continuation coverage (such as coverage under COBRA).
3. Health care coverage while receiving unemployment compensation under federal or state law.
4. Medicare and other health care coverage if you were 65 or older (other than premiums for a Medicare sup- plemental policy, such as Medigap).
MichaelB is online now   Reply With Quote
Old 10-22-2016, 06:35 AM   #7
Dryer sheet aficionado
 
Join Date: Sep 2015
Posts: 46
I don't believe you can use HSA funds for medical insurance premiums, but if I remember correctly you can use them to pay for LTC premiums. You can use them to pay for medical care/needs, but you would have to look at the plan to verify what restrictions there might be.

Your HSA account does NOT need to be emptied each year. As a matter of fact the monies in the account can be invested, if you so choose. It actually is rather nice - you don't pay taxes on the money contributed, no taxes on money withdrawn if used for medical expenses, possibility of growth, and after a certain age (65, but I could be wrong) funds can be withdrawn for non-medical needs and you would only pay ordinary income taxes. Not bad.

Sent from my SAMSUNG-SM-G900A using Early Retirement Forum mobile app
ScottS is offline   Reply With Quote
Old 10-22-2016, 06:56 AM   #8
Recycles dryer sheets
 
Join Date: Nov 2015
Location: Fort Myers, FL
Posts: 137
Thank You .....
Seems strange that you can use the funds for Cobra Premiums, but not regular healthcare premiums if you are not working (retired younger than 65), as well as can use for your medicare premiums ??
__________________
Live Life
LakeRat1 is offline   Reply With Quote
Old 10-22-2016, 08:06 AM   #9
Full time employment: Posting here.
GTFan's Avatar
 
Join Date: Apr 2013
Location: Atlanta
Posts: 889
Quote:
Originally Posted by Sue J View Post
You are NOT "gaming the system"!
Heh, I would submit that all of us with substantial assets that are intentionally holding down income to get generous subsidies are indeed 'gaming the system'. The ACA was not intended for us, but there was no easy way to handle asset exclusions in the original law so it was taken out of what was passed.

Having said that, I really don't care what anyone thinks about how much money we're getting from Uncle to get insurance on the exchange. The law is what it is.
GTFan is offline   Reply With Quote
Old 10-23-2016, 04:30 AM   #10
Recycles dryer sheets
 
Join Date: Sep 2011
Location: MSP
Posts: 304
Quote:
Originally Posted by Islandtraveler View Post
[LEFT] [LEFT][FONT=Calibri][SIZE=3]Based upon what I have read, I can subscribe to a high deductable plan, open a HSA and contribute $6,750 for the year. I can deduct that contribution from my MAGI and fall well within the threshold for the subsidies. This should represent a savings of over $11,000 for the year in premiums in addition to providing another tax deferred investment account.

I have trouble grasping the advantage of adding to tax-deferred accounts in retirement. Perhaps ongoing comments here will help me understand. I'm retired and DW will follow a couple of years before reaching Medicare eligibility so we'll be dealing with ACA for her and I'll be needing to get my head around all this. But at the same time, I'm two years into withdrawing/Roth converting from tax-deferred accounts so I feel the last thing I need is another tax-deferred account.

Easily confused.
UpAnchor is offline   Reply With Quote
Old 10-23-2016, 06:16 AM   #11
Recycles dryer sheets
Islandtraveler's Avatar
 
Join Date: Apr 2012
Location: Long Island
Posts: 134
I have not set out to open another tax deferred account. In my situation, doing so makes me eligible for a subsidy on my premiums to the tune of about $11,000 per year. I can withdraw from those accounts for any oop medical expenses now and for anything that I want after age 65. Sounds like a no brainer to me.
Islandtraveler is offline   Reply With Quote
Old 10-23-2016, 06:33 AM   #12
Full time employment: Posting here.
 
Join Date: Jan 2014
Posts: 949
Quote:
Originally Posted by UpAnchor View Post
I have trouble grasping the advantage of adding to tax-deferred accounts in retirement. Perhaps ongoing comments here will help me understand. I'm retired and DW will follow a couple of years before reaching Medicare eligibility so we'll be dealing with ACA for her and I'll be needing to get my head around all this. But at the same time, I'm two years into withdrawing/Roth converting from tax-deferred accounts so I feel the last thing I need is another tax-deferred account.
HSA withdrawals for qualified medical expenses are tax-free, not tax deferred. Some refer to it as "triple tax free" as contributions are not taxed, growth is not taxed, and qualified withdrawals are not taxed. And there is no RMD.
MBSC is offline   Reply With Quote
Old 10-23-2016, 08:52 AM   #13
Thinks s/he gets paid by the post
 
Join Date: Feb 2007
Posts: 2,813
Quote:
Originally Posted by UpAnchor View Post
I have trouble grasping the advantage of adding to tax-deferred accounts in retirement. Perhaps ongoing comments here will help me understand. I'm retired and DW will follow a couple of years before reaching Medicare eligibility so we'll be dealing with ACA for her and I'll be needing to get my head around all this. But at the same time, I'm two years into withdrawing/Roth converting from tax-deferred accounts so I feel the last thing I need is another tax-deferred account.

Easily confused.
We are using ACA and getting a subsidy. I have a part time job and this year I will earn $5000. For years, I've put my income into a Roth IRA. This year I'm putting it all in a Traditional IRA because that will increase our subsidy by 14% of that $5000. Add that to the 15% Federal tax and that's 29% of my small income! Easy decision!

I didn't expect to do this when we estimated our income for 2016. We are just about 250% of FPL which means 8.5% or so of your income is your expected health insurance cost. But when I deduct the $5000 from our estimated income the difference was $700 in additional subsidy for the year.

I didn't do this in 2014 and 2015 because we had HDHP plans with HSAs and making full HSA contributions were larger than my income. This year our high deductible plan is not HSA compatible.

This is how it works out for us in our situation. YMMV. ACA costs and subsidies are based on your zip code and age and vary, so I don't know if it would have this kind of difference for folks in other places. But when I used the Heathcare.gov estimator and reduced our income by $5000 the result pointed to a Traditional IRA for this year. I still get to keep my income, I'm just deferring the taxation and use of it for a few years, until at least Medicare age!
__________________

__________________
Married, both 65. DH retired June, 2010. I have a pleasant little part time job.
Sue J is online now   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Class of 2017 Bryan Barnfellow Life after FIRE 398 01-02-2018 06:04 PM
Retire from the Navy in 2017 HawkeyeNFO Hi, I am... 36 10-02-2017 07:47 PM
48 - Loooking to ER in 2017/2020. Is my plan real or I am dreaming? retire2020 Hi, I am... 18 01-11-2013 08:27 PM
52 - Semi-demi Fire 4/30/2017 cgarden Hi, I am... 3 12-15-2012 07:13 AM
Hi!! I am Ramona, 56, going to retire June 1, 2017 Ramona Hi, I am... 3 05-30-2012 04:15 AM

» Quick Links

 
All times are GMT -6. The time now is 02:04 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2020, vBulletin Solutions, Inc.
×