^^^ If you are retired, you can still contribute to an HSA, if you are under 65.
Source: https://livelyme.com/contribute-HSA-after-retirement
Source: https://livelyme.com/contribute-HSA-after-retirement
ACA how to not fall over the cliff?
- Thread starter ut2sua
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"Your HSA eligibility isn’t determined by employment...but is instead dependent on the type of health insurance plan under which you’re covered as well as your age."
I.e., no HDHP = no HSA contributions.
Like several others here - I use a spreadsheet with my expected income sources and taxable portions of them
- DH's SS, rental income, my micro pensions, and... this hasn't been mentioned... Beneficiary IRA RMDs (inherited IRAs). Not optional - and yes taxable.
- Then I put my offsets (HSA contributions), expected rental expenses that offset rent payments,
If I have extra "room" in the taxable income, I roth convert to about $5k shy of the ACA cliff... $5k is my comfort level. (We have 3 family members on ACA, 1 on medicare)
- DH's SS, rental income, my micro pensions, and... this hasn't been mentioned... Beneficiary IRA RMDs (inherited IRAs). Not optional - and yes taxable.
- Then I put my offsets (HSA contributions), expected rental expenses that offset rent payments,
If I have extra "room" in the taxable income, I roth convert to about $5k shy of the ACA cliff... $5k is my comfort level. (We have 3 family members on ACA, 1 on medicare)
bobandsherry
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FYI, for formatting columnar text use the "Table" option. Formats it nicely.
| Plan | Premium | Yr | Ded | OOP | MaxHSA | CoInsure |
| Anthem HK Bronze X 6500 | 838 | 10,056 | 6,500 | 7,900 | no | 50% ER, 40% all else |
| Anthem HK Bronze X 5250 | 855 | 10,259 | 5,250 | 7,900 | no | 50% ER, 35% all else, $40 PCP |
| Anthem HK Bronze X 5900 | 878 | 10,533 | 5,900 | 7,900 | no | 50% ER, 35% all else, $30 generic drugs |
| Anthem HK Bronze X 4900 | 887 | 10,640 | 4,900 | 4,900 | YES | 50% ER, 35% all else |
| Anthem HK Bronze X 5700 | 890 | 10,682 | 7,900 | 7,900 | no | 50% ER, 30% specialist, Gen drugs $25, |
| PCP OptimaFit Bronze 6000 | 964 | 11,573 | 6,000 | 6,000 | YES | 40% ER, 20% all else |
| Piedmont POS Bronze HSA | 980 | 11,763 | 5,500 | 5,500 | Yes | 50% ER, 35% all else |
| Anthem HK Gold X 1350 | 1,086 | 13,028 | 7,900 | 7,900 | no | 40% ER, gen |
Curious, are you getting subsidy? Just looking at premiums it seems you are not. I'm also guessing, based on your deductibles you are single. So your taxable income and being single could then change results for married couple with income under the 400% limit. I do same analysis as you, trying to estimate my costs under each. So I was just curious if something in my analysis was overlooking something obvious.
I also compare with HealthSherpa, and while it uses some different assumptions, a quick check shows my "all-in" costs for HSA would be $8,490 and with plan I have it's $3,805. With almost $4,700 difference in cost I just can't find a scenario that I'd come out ahead with HSA with exception that both of us required some major medical attention.
My Bronze plan has $15,400 Ded, $16,300 OOP, almost all prescriptions are covered, $25/$65 for Dr/Specialist, no charge for labs. All-in per HealthSherpa = $3,805
By comparison, HSA plan $12,000 Ded, $12,000 OOP, no coverage for Dr, prescription, hospital, etc until deduction met. Premium is $16/mo cheaper than my Bronze plan. All-in per HealthSherpa = $8,490
RunningBum
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Thanks for the formatting tip. btw as I look back at my spreadsheets, the numbers I gave are for 2019. 2020 was fairly similar though.
At the start of the year I had not planned on the subsidy, but I will be taking it after all, due to some maneuvering I was able to do when the market dropped early this year. That doesn't make a difference though, because I'd get the same subsidy amount no matter which plan I chose. It's a subtraction across the board.
And yes, I am single, so that does change things for couples and families.
For your situation it sure looks like the non-HSA plan is a lot better.
One way that someone (I'm not saying you) could make up that $4700 difference is if the HSA contribution was the difference between getting a large subsidy or not. Last year I was something like $600 from the subsidy cliff edge, and I did not do any Roth conversions. The $4500 HSA contribution allowed me to get a $9500 subsidy. That turned a close call into a huge advantage for the HSA plan.
SecondCor521
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Just curious, how did you make a $4500 contribution to your HSA if you're single? I thought the maximum contribution for a single this year is $3550, and even less in previous years. (The only things I can think of are HSA overcontribution or you were MFJ before.)
Age 55+?
SecondCor521
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
You're smarter, or at least more forward thinking than I am. I retired in 2017 and didn't see the cliff until I was plunging over. My tax situation was easier, just IRA withdrawals as income. I had to return my last withdrawal (60 day limit), then refi mortgage with cash out to have $$$ that wasn't income. At that point I did a lot of projections (spreadsheets and Turbo Tax) to make sure I could stay off the cliff. Thought I had it covered in 2018, but my sons (attending college) both started working and then had to keep their income below the filing limit because it is not just MAGI that counts - it is total household income!!! It has been such a juggling act with a $19k+ penalty if you drop one of those balls.
bobandsherry
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That's my understanding of advantage HSA, but for me it's a catch 22. To get the additional $$ for HSA contribution means pulling more money out of investments, generating additional gains or, worse, straight up ordinary income (from 401K). And then the downside I see is that's largely locked up funds, waiting for a medical problem to happen (which then would be a blessing). Fortunately we are both relatively healthy. Will see what this years plans offer. Thanks for your comments.
Fermion
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I tried really hard to stay away from the cliff edge but it was still summer, so I backed up, took a running start, and just jumped.
Wing suit deployed ok (apt reference for biotech investing risk)
Next year I will again try to stay away from the edge
Wing suit deployed ok (apt reference for biotech investing risk)
Next year I will again try to stay away from the edge
This is how ACA Bronze HDHP + HSA saved us a few thousand over the last few years.
ACA Silver Plan: $520 premium/month + co-pays + deductibles for 2 adults. ~ 5K deductible. As 2 pretty healthy adults our OOP costs were approx. $7000/yr.
ACA Bronze HDHP: $7.62/month premium and $6000/per adult or $12,000 deductible. We contribute $8000 to HSA which helps stay under ACA cliff.
OOP healthcare costs ~ $2000/year
Why? We're relatively healthy. Our total premiums for the year is $91.44. If we see a DR or Specialist the insurance discount often is slightly more than a silver plan co-pay. So, a $120 DR visit might cost $60-$70, sometimes less.
If we have a major health issue: ER, hospital stay...the most we pay for one of us is $6000. But because we've been pretty healthy that's not been the case.
Moral of the story: You still have a deductible on a Silver plan and there are OOP expenses. By relying on the insurance discount, we are saving quite a bit. Our ACA insurance broker pointed this out to us as we always thought Silver is better. Not so. But that depends on how often or serious your health is. For standard blood work, a DR visit or two, even a specialist or two, we've come out way ahead.
ACA Silver Plan: $520 premium/month + co-pays + deductibles for 2 adults. ~ 5K deductible. As 2 pretty healthy adults our OOP costs were approx. $7000/yr.
ACA Bronze HDHP: $7.62/month premium and $6000/per adult or $12,000 deductible. We contribute $8000 to HSA which helps stay under ACA cliff.
OOP healthcare costs ~ $2000/year
Why? We're relatively healthy. Our total premiums for the year is $91.44. If we see a DR or Specialist the insurance discount often is slightly more than a silver plan co-pay. So, a $120 DR visit might cost $60-$70, sometimes less.
If we have a major health issue: ER, hospital stay...the most we pay for one of us is $6000. But because we've been pretty healthy that's not been the case.
Moral of the story: You still have a deductible on a Silver plan and there are OOP expenses. By relying on the insurance discount, we are saving quite a bit. Our ACA insurance broker pointed this out to us as we always thought Silver is better. Not so. But that depends on how often or serious your health is. For standard blood work, a DR visit or two, even a specialist or two, we've come out way ahead.
SecondCor521
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
The ACA premium amount is not deductible (* but see next paragraph).
Generally the HI premium won't affect MAGI. There is a situation where I think you can deduct it as a business expense if you have a sole proprietorship (plus some other criteria), which would reduce the Schedule C net income, which would reduce MAGI. And in this case, I think you would only be able to deduct your portion of the ACA premium; generally the rules frown upon double-dipping. But this is a less common situation.
If eligible, it will reduce AGI and thus MAGI, but not Schedule C net income and thus not self-employment tax.
golfnut
Full time employment: Posting here.
If the cliff looms, withdrawing funds from a home equity loan might be an alternative.
SecondCor521
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
You're right. Health insurance for self employed folks is a Schedule 1 adjustment, not a Schedule C expense.
Since the original question was about deducting ACA health insurance premiums and reducing MAGI, the point is that it does.
You're also correct in your point that it would not affect Schedule C net income and therefore also not affect SE taxes.
Bold is mine. @Rodi, So, I guess depreciation doesn't come into the MAGI calculation? But rental expenses do (property taxes, insurance, maintenance)? Thanks.
Follow links in MAGI for Affordable Care Act purposes to avoid the need to guess.
Short answer: depreciation reduces AGI, and thus reduces this MAGI.
Depreciation is an expense on a rental property. You can get the entire list of expenses on Schedule E, lines 5 through 19. https://www.irs.gov/pub/irs-pdf/f1040se.pdf
Thanks for the links.Follow links in MAGI for Affordable Care Act purposes to avoid the need to guess.
Short answer: depreciation reduces AGI, and thus reduces this MAGI.
Canoeboy
Recycles dryer sheets
In my first year with ACA. Use a spreadsheet to add up MAGI. Like others, I sold off mutual funds that throw off high/unpredictable capital gains distributions (usually in late December). Added benefit is that 80% of magi This year will be from LTCG’s. Keeping MAGI under the cliff means our federal income tax Will likely to be zero this year. That’s a nice change which I don’t feel guilty about. By 2022 our income will be primarily from pre-tax account withdraws which should be easy to manage for ACA cliff purposes.
OK so a question on this. I may not be following the MAGI vs AGI as it applies to ACA. For instance, if the MAGI cliff is $68k for a couple, with the $24k standard deduction, does that make gross income cliff of $92k.
I ask because in retirement, I will have some part-time income, but will supplement with existing taxable accounts. The plan is not to touch the IRA for a few years. So if we kept our gross income under that $92k threshold, we should be ok. Am I following this correctly.
I ask because in retirement, I will have some part-time income, but will supplement with existing taxable accounts. The plan is not to touch the IRA for a few years. So if we kept our gross income under that $92k threshold, we should be ok. Am I following this correctly.
RunningBum
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AGI and MAGI both are income before the standard deduction, so your cliff is $68K of income, not 92K.
Thanks for the clarification. Got my acronyms confused.
That will make it a bit more difficult.
