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Old 03-03-2019, 02:23 PM   #21
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For the 2 years we were on the ACA the SLCSP number, (as well as all the monthly plan costs), was always known to us by early OCT. prior to the start of the next calendar year. We used healthcare.gov and we always managed our income to maximize subsidy as well as cost sharing. I don't know if some states are different but don't know how one could get the advanced PTC if the numbers were not set in stone prior to the year starting.
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Old 03-03-2019, 02:34 PM   #22
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Originally Posted by robnplunder View Post
To OP, aggressively move to more tax efficient options - like low dividend paying ETFs and/or stocks, etc. Look at all income streams that you have, or may have in the future. One year, a casino winning of all things, added to our MAGI. Plan ahead with those. And be aware of any MFs or stocks under water and offset the gains to balance MAGI.
Thank you for all who've answered my thread so far.

Rob, while reading your quote above, I'm trying to understand it more clearly. I think I have some blockage in my brain on this topic . I think I should start another thread to ask people whether you like dividend growth kind of investing or TR and why... But for now to go back to your quote...
If people try to move to the low dividend paying ETFs/stocks by selling their current dividend stocks, would it be with the mindset of seeking growth and TR? However, if that growth or TR doesn't materialize especially considering the length of this bull market, wouldn't it bring a regret of losing a sure thing (dividends; I know dividends can be cut, but let's assume they're not) and losing money for TR. BTW, I've never explored growth ETFs. Any good ones out there? And I don't have interest in guessing who's the next Netflix or Amazon will be.
For example, we've invested in VTSAX and VFWAX for years, and I'm beginning to lose the patience with the latter one. I think we could have fared better in building a savings account or invested that money in I-Bonds instead. But of course I read that who knows it might switch and it might suddenly perform much better going forward. That's the reason I feel a psychological battle to sell individual dividend stocks that we've held for years and they've served us well for something unknown in order to build a different kind of portfolio to fit a tax strategy that I cannot visualize what it should be. This causes me discomfort. Has anyone been in such a situation? If so, what did you do?
In addition, we're both working and in 24% tax bracket...had to file/calculate 0.9% additional Medicare tax for the 1st time. I don't think it would be smart to realize all those gains and not much of losses to reorganize everything.
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Old 03-03-2019, 02:39 PM   #23
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Originally Posted by aida2003 View Post
If people try to move to the low dividend paying ETFs/stocks by selling their current dividend stocks, would it be with the mindset of seeking growth and TR? However, if that growth or TR doesn't materialize especially considering the length of this bull market, wouldn't it bring a regret of losing a sure thing (dividends; I know dividends can be cut, but let's assume they're not) and losing money for TR.
So, let's take two types of investments, both with risk, and pretend there is no risk with one type, tell me which is better? That's an invalid pretext. There is risk there, regardless of your bad assumption.
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Old 03-03-2019, 02:45 PM   #24
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The advice you've gotten so far here is excellent. Here are a couple more tools:

1) A helpful person on this forum recommended I use the i-orp calculator "Advanced" option to explore optimizing Roth conversions with regard to ACA MAGI. The UI is poor, but I recommend trying it to test different approaches. (Be prepared to invest some time if you try it.)

2) I've also used the Kaiser Foundation ACA subsidy calculator (kff.org/interactive/subsidy-calculator/). It's very easy to use and will give you approximate, state-specific numbers that take into account children and family size as well as income.
Happy calculating
Thank you. I'll put these on my list or things to explore before retiring.
A question: When does one need to start playing with various calculators? We're still working and have insurance via my DH's company (we've chosen high deductible and max out HSA). If he wants to work until 60 (that's his intention, so I hope it works out this way), I don't think we need to play with calculators until he's 55-57. Would you agree?
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Old 03-03-2019, 02:48 PM   #25
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Originally Posted by ocean view View Post
For the past three years I have determined my SLCSP while shopping for the upcoming year’s plan. So in Nov 2017 I determined that my SLCSP for 2018 was $20,695.32 (from my notes) actual reported on 2018 1095-A, (part III, line 33 col b) was $20,695.32.

What I do is on my exchange (covered CA) I enter my personal info (zip code, family size and ages) and for projected income I enter something large enough so that there is no PTC eligibility, say $100k. Then when it shows me the plans available in my area, filter for silver plans, find the second cheapest and multiply the monthly cost by 12. My result has been accurate within rounding differences each year.
This is what I did, and it got me close for a few years. The difference was the fact that here in New York pediatric dental was a required coverage on ACA plans but not required in general (why those of us without kids need to pay for this unnecessary coverage even though my policy is an adult-only one is beyond me). Therefore, the small addition to my premium was and excluded when Form 1095-A came out.

And if that remained the only difference between the SLCSP I estimated and the actual one which came out the following January, I'd be okay with that. But a few years ago, the difference between my estimate doing it just the way you described and what was shown in Form 1095-A the following January grew to a much larger, unexplainable amount. When I called the NY Marketplace (exchange) to ask why and to try to find out the actual SLCSP prior to the following January, they had no answer. So, I'm stuck. The best I can do is to increase the prior year's SLCSP by a rough average increase in premiums.

Looks like your state's exchange is run better than mine.
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Old 03-03-2019, 03:17 PM   #26
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So, let's take two types of investments, both with risk, and pretend there is no risk with one type, tell me which is better? That's an invalid pretext. There is risk there, regardless of your bad assumption.
This is a valid counter argument. But then: If you've never learned to swim, should you still go deep into the lake or should you just stay closer to the shore where you feel comfortable?
That's how I view dividend companies (wading) vs. growth companies (going into deep water).
The LT success of S&P500 is thanks to reinvestment of dividends. Speaking of investing in individual stocks only, even though dividend investing is considered risky like any investing in the stock market, I view it more conservative than looking for the next growth gem. The comfort for me comes from reading history that some companies have paid dividends for many years, but I am sure I would have sold Apple or Amazon if I invested in them from the beginning. I wouldn't be able to hold through their historical drastic jumps. My former boss bought 200-300 Apple shares when it went public and sold it a year before its bad fortune turned onto its success journey. He doesn't even want to look at it...

OTOH, I am OK with index investing and that's where the majority of our investments are in the 401k's and Roth IRA's.
I personally think that investment choices stem from the beliefs an individual has. It's similar to car selection: some swear by American brands and I swear by Japanese.
When I constantly sat on BH forums, I was 'married' to the index investing, but when I learned about dividend stocks, I wanted a little bit of spice. I don't know if I'll change my mind about them, hence my questions to this board to learn from their real life experience where and how much this 'spice' might hurt us in the long run and whether it's warranted to change our choices going forward.
Is it better to pay a success tax or let the tax tail wag the investment dog and claim I was successful in that way?
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Old 03-03-2019, 03:27 PM   #27
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Old 03-03-2019, 03:33 PM   #28
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OK, but I think the dividend folks dismiss the lower risk of dividend stocks as having no risk at all, as you just did. Simply not true.

btw, neither Rob nor I discussed growth stocks. Someone else may have, and you hopped on that as if we were all saying that. My equities are almost all in total market index funds. Pretty safe, with risk additionally offset by a set part of my AA being bonds, MMs, and CDs.

Such index funds have the advantage of being easier to control my MAGI for an ACA subsidy, and are more tax efficient. I'm likely to be able to pass some very nicely appreciated funds to my heirs, and they get a reset basis, as opposed to paying more taxes on dividends all along the way.

You don't want to switch away from dividend stocks? Don't. You asked how dividend stocks are worse for ACA purposes. I told you. I fully understand if that's not enough to sway you.
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Old 03-03-2019, 03:45 PM   #29
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Looks like your state's exchange is run better than mine.

Or maybe I’ve just been lucky 🤞🏻
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Old 03-03-2019, 05:11 PM   #30
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IMO there is a disconnect in this discussion...


Some are talking about owning individual stocks and living off the dividends... that is fine if you pick the correct stocks and mitigate your risks... there is no CG as long as you do not sell anything...



Others are talking about dividend fund... where the fund will distribute out the dividends... now the problem with this is that it also will distribute out CG, and if you are with a managed fund it can be much more than the dividends... you have zero control of how much CG you will get...


When we talk about how to invest do not mix the two... there is a big difference in the outcome and also a possible big difference in return...
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Old 03-03-2019, 05:17 PM   #31
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So, let's take two types of investments, both with risk, and pretend there is no risk with one type, tell me which is better? That's an invalid pretext. There is risk there, regardless of your bad assumption.



+1. My reply would have been something similar.





ald2003,



I have Fidelity, E*trade accounts whose tools I use to select mutual funds. My oft used pre-screen criteria are age of MF (at least 10 years old), performance in its class, overall performance, and go from there for final selection. Even after that, it's a crap shoot. I.e, I really don't know if my selection is going to behave the way I imagined.



Given my tax/ACA situation, I don't have higher dividend paying MFs. I also thought I accounted for my owned MFs' CG/distribution situation. The reason I got close to ACA subsidy MAGI limit for 2018 was ... there was this one MF I owned for years which had near 0% yearly CG in its long history. But in 2018, it unexpectedly gave out about 10% CG/div distributions putting my MAGI over the limit. This forced me to sell one of my "2018" bought MF which was under water. I sold it before the year-end to take a loss and reinvested right back to a similar MF in the 1st week of Jan.
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Old 03-03-2019, 05:52 PM   #32
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Here's an illustration of the ACA "cliff".

For a couple, both 63, in my medium cost of living area, the 2019 subsidy based on ACA MAGI income -

$40,000 = $1290/mo $15,480/yr
$45,000 = $1220/mo $14,640/yr
$50,000 = $1149/mo $13,788/yr
$55,000 = $1108/mo $13,296/yr
$60,000 = $1067/mo $12,804/yr
$65,000 = $1026/mo $12,312/yr
$65,840 = $1019/mo $12,228/yr
$65,841 = $0/mo

The subsidies are valuable and going over the cliff can cost you a bundle. That's why it's discussed here so often. They are based on plan costs in your zip code, for your family size and AGE, so your results could be very different.

For us, we contribute the full amount to our HSAs if we have qualified High Deductible Health Plans which lowers our ACA MAGI, by $9000 for 2019. Some years I also put my part-time income into a Traditional IRA so that it's not included in MAGI.
Thank you for sharing, Sue. This is the visual explanation I was looking for. If my understanding is correct, the ACA MAGI is pretty much as an AGI on Form 1040 which is *before* standard deduction, correct? If it's the same MAGI for a couple living in SF and NYC as opposed to a couple living in South Dakota or Florida, then it's extremely disproportionate, isn't it?

How does the situation change when one spouse reaches Medicare's age, but not the other?
Is MAGI calculated as if for a single person even though they MFJ?
Do people feel some alleviation in overall costs (premiums, co-pays, OOP max) as compared to ACA insurance once both spouses reach Medicare age?
I've noticed people IRMAA, but as I don't expect us to generate such income, I'm not concerned. However, my question is whether couples pay progressively more for Medicare depending on their AGI or MAGI? Just curious as we're quite a few years away from it.

Thank you.
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Old 03-03-2019, 06:01 PM   #33
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Originally Posted by aida2003 View Post
Thank you for sharing, Sue. This is the visual explanation I was looking for. If my understanding is correct, the ACA MAGI is pretty much as an AGI on Form 1040 which is *before* standard deduction, correct? If it's the same MAGI for a couple living in SF and NYC as opposed to a couple living in South Dakota or Florida, then it's extremely disproportionate, isn't it?

How does the situation change when one spouse reaches Medicare's age, but not the other?
Is MAGI calculated as if for a single person even though they MFJ?
Do people feel some alleviation in overall costs (premiums, co-pays, OOP max) as compared to ACA insurance once both spouses reach Medicare age?
I've noticed people IRMAA, but as I don't expect us to generate such income, I'm not concerned. However, my question is whether couples pay progressively more for Medicare depending on their AGI or MAGI? Just curious as we're quite a few years away from it.

Thank you.
See below for the MAGI rules. It is close to AGI, but there can be a few adjustments.
Same MAGI no matter where one lives. Conceptually while working, if one lives in a HCOL area, their eventual SS benefits might be higher than one who lives in a LCOL.
http://laborcenter.berkeley.edu/pdf/..._summary13.pdf

See below for the IRMAA rules. Yes couples would pay progressively more as their income (MAGI) rises.
https://www.ssa.gov/pubs/EN-05-10536.pdf
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Old 03-03-2019, 06:05 PM   #34
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Originally Posted by Texas Proud View Post
IMO there is a disconnect in this discussion...

Some are talking about owning individual stocks and living off the dividends... that is fine if you pick the correct stocks and mitigate your risks... there is no CG as long as you do not sell anything...

Others are talking about dividend fund... where the fund will distribute out the dividends... now the problem with this is that it also will distribute out CG, and if you are with a managed fund it can be much more than the dividends... you have zero control of how much CG you will get...

When we talk about how to invest do not mix the two... there is a big difference in the outcome and also a possible big difference in return...
Texas Proud, yes, you're right about dividends and CGs from the dividend funds. That is one of the disconnects that you caught correctly. Thanks

Could you elaborate more on your last paragraph please? If you have some examples with numbers to show the difference I would be curious to read.
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Old 03-03-2019, 06:09 PM   #35
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If it's the same MAGI for a couple living in SF and NYC as opposed to a couple living in South Dakota or Florida, then it's extremely disproportionate, isn't it?

I live in Bay Area where a couple making $65k won't live well at all. Penalty for living in near paradise.
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Old 03-03-2019, 06:14 PM   #36
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See below for the MAGI rules. It is close to AGI, but there can be a few adjustments.
Same MAGI no matter where one lives. Conceptually while working, if one lives in a HCOL area, their eventual SS benefits might be higher than one who lives in a LCOL.
http://laborcenter.berkeley.edu/pdf/..._summary13.pdf

See below for the IRMAA rules. Yes couples would pay progressively more as their income (MAGI) rises.
https://www.ssa.gov/pubs/EN-05-10536.pdf
Thanks so much! I'll add this to my Word document too. Whenever people share useful links or discussions that might apply to my future, I copy/paste in my document because it might come handy once I approach that age. All I will need to do is look for an updated future information.
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Old 03-03-2019, 06:41 PM   #37
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My equities are almost all in total market index funds. Pretty safe, with risk additionally offset by a set part of my AA being bonds, MMs, and CDs.

Such index funds have the advantage of being easier to control my MAGI for an ACA subsidy, and are more tax efficient. I'm likely to be able to pass some very nicely appreciated funds to my heirs, and they get a reset basis, as opposed to paying more taxes on dividends all along the way.

You don't want to switch away from dividend stocks? Don't. You asked how dividend stocks are worse for ACA purposes. I told you. I fully understand if that's not enough to sway you.
I think I sound argumentative because we are still in accumulation stage and we don't have a lot in CD apart from EF. Bond fund is within 401k's. I think I'm having a hard time visualizing the difference in math terms when switching from one kind of investments to 'tax-efficient' investments. Like somebody suggested, I should play with a tax preparation program to get an idea. Of course, that would only be a play with hypothetical numbers.

Just for curiosity: What MAGI do you shoot for each year?
It depends on location. Couples living in HCOL are probably forced to go over the 'cliff' every year. Perhaps I started this topic in vain, but I wanted to get my questions answered in one place . I don't know where we will live in 5-10 years and whether we'll have an insurance via employment or not. Some people leave to live outside the USA until Medicare, so who knows what the future will bring to us.
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Old 03-03-2019, 06:52 PM   #38
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You can find out your 2019 subsidy amount via healthcare.gov or https://www.kff.org/interactive/subsidy-calculator/ . There's no reason to wait until early 2020. Everyone trying to manage MAGI for the ACA subsidy should know exactly where the edge is. You may not be able to precisely know your income but at least know your target.

This is a classic case where you can do some planning. The worst thing is to go just over the edge. If you're going over, set yourself up for the following years by selling off some of those funds that give unpredictable and often large distributions. Perhaps set yourself up with enough cash to supplement dividends to live off of so you don't have to sell big gainers for living expenses. Invest the other proceeds with index funds that rarely throw cap gains, and a predictable level of dividends.
I think this is where we will fall when/if we FIRE. We will need to bite the bullet one year in order to reap benefits the following few years. However, I think one should play on TT or other tax preparation tool to see how worth it is.
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Old 03-03-2019, 07:03 PM   #39
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OP, I'm an income-oriented investor, but not because we need it right now. It's just something I sort of fell into as a defensive measure against my lousy stock investing abilities in the past. RunningBum gave you an excellent reason why growth investing vs. income investing is preferable to some for ACA purposes. I think the most important thing first is that you continue to invest in a way that is understandable to you and helps you sleep at night. Income management for ACA purposes should be secondary.

Here is a PDF that shows the FPL's for 2018 and 2019. You can see they're not indexed much for inflation:

http://www.healthreformbeyondthebasi...holds_2019.pdf
I think you got my thinking right as you appear to be doing something similar. It could be faulty thinking and I will learn of my mistakes the hard way, but I found this discussion very beneficial to me. I gained new information and I appreciate it.

Thank you for the link. This is awesome! It also backs up Sue's provided numbers for her family.
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Old 03-03-2019, 07:56 PM   #40
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Just for curiosity: What MAGI do you shoot for each year?
I shoot for just under 400% FPL. I can't get down to 250% and cost sharing, so I convert some of my tIRA to a Roth each year up to a safety factor under 400%.
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