ACA cliff question - please check my math

[jim584672]

With commissions going to zero it might make sense to own say 100 stocks individually, that way you have complete control of cap gains and can do some harvesting/adjusting on specific lots.

[Rianne]

This turned out to be a great thread and answered many questions I had, so thank you for posting OP.

I'm grateful we're 63 this year and won't have to deal with ACA teeter totter much longer. It's been a monkey on our back since 2014, but I'm not complaining. Better than the alternative.

[Lisa99]

Quote:

Originally Posted by ivinsfan She says that is the cheapest option doesn't say if that's option she is on. But a plan with that OOP SHOULD be HSA eligible depending on how it is written up.

It is the plan we're currently on and is an HSA eligible plan.

[Lisa99]

Quote:

Originally Posted by SecondCor521 Good point. The OP seemed to indicate that she was mostly wondering what her tax liability and "ACA penalty" would be, so that is what I focused my attention on in my replies. You're right, OP should either do estimated payments or withholding if they're going to have a ~$17K tax bill. I thought that was obvious, but maybe not.

Thanks for this addition. I'm leaning toward doing the withdrawal now and paying the additional HI premiums throughout the year.

[Lisa99]

Quote:

Originally Posted by jim584672 With commissions going to zero it might make sense to own say 100 stocks individually, that way you have complete control of cap gains and can do some harvesting/adjusting on specific lots.

We're 100% in Index funds so have no cap gains until we sell. All we have are dividends to deal with and they have been stable each year so are predictable.

[Lisa99]

Thank you everyone for the great discourse. You gave me a lot to think about and answered questions I didn't know I had.

And thanks Michael for keeping the thread open!

[I am He]

We did change one of us to an HSA for 2020 as we knew one person was going to save $ by going "gold" and hoping that one won't use the system at all. The HSA moves the amount we can (Roth) convert up by the amount of the HSA contribution. The plan is to annually max out the conversion to the top of the cliff.

I did a one time large Roth conversion last year to strategically go over the cliff for just 2019 by a large margin. So , one and done (going over the cliff; still smaller conversions coming).

I ran many scenarios with HR Block software (I think it cost $20-30) to analyze this, that and the other. Turbo would be good, too. There was no "right" answer but I'm comfortable with the choice.

The software shows you what you want to know and suggest it. But it's a bit confusing as to where the ACA subsidy payback comes back into play and the like but you can always just look at the amount of tax owed. I was using prior year's versions until the new one came out around thanksgiving for better numbers although I have to guess a bit for the state amount which wouldn't concern you in FL.

[Trawler]

For what it is worth DW and I are managing the cliff as well and my projections show we will be short on NON Ira money to make it till 65. Looks like about age 64 for me and DW will be 65. So need to look where best way to get the shortfall. Options for us is Roth withdraw and or use equity LOC on house for a year or two as the interest right now is lower than the loss of subsidy. We already use a Bronze HSA compatible plan . we would then payoff LOC after on Medicare.

[SecondCor521]

Quote:

Originally Posted by Trawler For what it is worth DW and I are managing the cliff as well and my projections show we will be short on NON Ira money to make it till 65. Looks like about age 64 for me and DW will be 65. So need to look where best way to get the shortfall. Options for us is Roth withdraw and or use equity LOC on house for a year or two as the interest right now is lower than the loss of subsidy. We already use a Bronze HSA compatible plan . we would then payoff LOC after on Medicare.

You can also look at Roth conversion ladder and 72(t) SEPP.

[Smitty700]

Quote:

Originally Posted by Lisa99 So I'll be able to keep the same HI policy just with no subsidy?

Yes. You can buy a policy in the healthcare.gov marketplace with no subsidy. They are the same policies, but there will be no Advance Premium Tax Credits to lower premiums.

But you can still get for Premium Tax Credits when you file if you’re eligible.

[oscar1]

@lisa99 I am struggling with this exact issue, figuring out a way to raise operating cash (~50k per year) while managing the $67k cliff. I’m 58 with about $1400/mo subsidy for wife and I. I am considering a blowout year too but can’t fathom the tax and subsidy repayment hit (talk about denting your returns?!). The ACA individual mandate is gone so if you can find a catastrophic health insurance plan for 1 year, or one of those faith-based co-ops, that may help. I am hearing the big insurers have those cheaper plans but are not yet fully marketing them. You might also be able to Home Equity Loan your home for cash but I sleep better at night knowing I have no mortgage. I have pretty much given up on my Roth conversion ladder due to having to manage MAGI for ACA cliff purposes.

On a more fun note, does The Villages have an early retirees club? Bet they have some tips on ACA cliff income management. Wife and I are in Texas (also a no income tax state) but considering a move to Florida. Do you like it there? Maybe DM me to keep the replies out of your original thread.

[scottpush]

Quote:

Originally Posted by ziggy29 Agreed in the general case. But I think the OP has made it clear that she understands the tax implications. I think the idea is to load up on LTCG one year, just surrender the ACA subsidy in a big way for that one year, and make it likely that they will not accidentally go "over the cliff" in future years since they can live off of some after-tax income that won't hit the MAGI in the future. I mean, the extra taxes here are basically about one year's ACA subsidy, so if it prevents one or more potential "accidents" by going over the cliff in the years to come, it's a reasonable idea. But so too is wondering if there might be a more tax-efficient way to help keep them on the right side of the cliff in the years to come.

And you are right on point. I'm single, 60, and own 9 rental properties that are burning me out. Always kept my MAGI under $48k (the cliff) and selling one property will put me over the cliff. Made a decision that I would sell three of them in 2020 which will cost me around $10K in ACA penalties as well as capital gains taxes for all the properties but only for this year. Lot less than the $20k in ACA penalties the OP will have to pay but obviously worth it to them just as it is to me.

[scottpush]

Quote:

Originally Posted by oscar1 @lisa99 I am struggling with this exact issue, figuring out a way to raise operating cash (~50k per year) while managing the $67k cliff. I’m 58 with about $1400/mo subsidy for wife and I. I am considering a blowout year too but can’t fathom the tax and subsidy repayment hit (talk about denting your returns?!). The ACA individual mandate is gone so if you can find a catastrophic health insurance plan for 1 year, or one of those faith-based co-ops, that may help. I am hearing the big insurers have those cheaper plans but are not yet fully marketing them. You might also be able to Home Equity Loan your home for cash but I sleep better at night knowing I have no mortgage. I have pretty much given up on my Roth conversion ladder due to having to manage MAGI for ACA cliff purposes. On a more fun note, does The Villages have an early retirees club? Bet they have some tips on ACA cliff income management. Wife and I are in Texas (also a no income tax state) but considering a move to Florida. Do you like it there? Maybe DM me to keep the replies out of your original thread.

Good luck finding a catastrophic plan. They interrogate you to no end to make sure you're in perfect health so that they can max out their $$ off of you. I was turned down twice for health insurance 15 years ago because I had slightly high blood pressure. Very manageable. Lived w/o insurance for almost a year until I found state sponsored insurance. Tried catastrophic insurance not on ACA again this year and to no avail. They want perfect health = more $$. I'd just take the over the cliff hit for one year. That's what I'm doing in 2020. Our broken healthcare system won't change for a long time.

[zinger1457]

Quote:

Originally Posted by scottpush Good luck finding a catastrophic plan.

As far as I know catastrophic plans are available through the ACA as long as you meet the requirements (age and/or hardship exemption), don't believe current health status is a factor. I think they also expanded the requirements to qualify for one like if only one insurer offers plans in your area, so more people now qualify.

[GenXguy]

Quote:

Originally Posted by scottpush Our broken healthcare system won't change for a long time.

And it could get a lot worse at the end of 2021.

http://www.early-retirement.org/foru...ml#post2358328

[GTFan]

Quote:

Originally Posted by scottpush Good luck finding a catastrophic plan. They interrogate you to no end to make sure you're in perfect health so that they can max out their $$ off of you. I was turned down twice for health insurance 15 years ago because I had slightly high blood pressure. Very manageable. Lived w/o insurance for almost a year until I found state sponsored insurance. Tried catastrophic insurance not on ACA again this year and to no avail. They want perfect health = more $$. I'd just take the over the cliff hit for one year. That's what I'm doing in 2020. Our broken healthcare system won't change for a long time.

This is not true in today's ACA market, there is no health screening for individual policies regardless of type. Bronze plans in our area are basically cat plans with same cost/bennies etc.

[scottpush]

Quote:

Originally Posted by zinger1457 As far as I know catastrophic plans are available through the ACA as long as you meet the requirements (age and/or hardship exemption), don't believe current health status is a factor. I think they also expanded the requirements to qualify for one like if only one insurer offers plans in your area, so more people now qualify.

There are many plans to choose from under the ACA umbrella. Nothing wrong with any of them but even the 'catastrophic' ones aren't cheap at all. You can find much cheaper outside of ACA, which is what I think she was talking about, although it's very hard to qualify for them. Yep ACA is the way to go. But they'll cost.

[scottpush]

Quote:

Originally Posted by GTFan This is not true in today's ACA market, there is no health screening for individual policies regardless of type. Bronze plans in our area are basically cat plans with same cost/bennies etc.

I haven't found any under ACA that I would say is reasonably priced. It's all ones perspective. I am under ACA because that's all I qualify for. None of it is cheap. My opinion. That's all.

[Dtail]

Quote:

Originally Posted by scottpush There are many plans to choose from under the ACA umbrella. Nothing wrong with any of them but even the 'catastrophic' ones aren't cheap at all. You can find much cheaper outside of ACA, which is what I think she was talking about, although it's very hard to qualify for them. Yep ACA is the way to go. But they'll cost.

Again it depends where you live and what your MAGI is.

[GTFan]

Quote:

Originally Posted by scottpush I haven't found any under ACA that I would say is reasonably priced. It's all ones perspective. I am under ACA because that's all I qualify for. None of it is cheap. My opinion. That's all.

I agree, but many of us are successfully managing MAGI to stay under the subsidy cliff which makes ACA reasonable. That's what OP was after, not the secondary market.