Borderline ACA minimum

[Hyper]

If DW retires this yr, we will be ok for 2020 meeting the ACA minimum but after 2020 if interest rates are go lower...? Our state has not adopted the Medicaid expansion. Actually a good thing at the moment because the minimum is 100%FPL. If it adopts the expansion the minimum goes to 138% and we will surely go below unless IR rise. The reason our state hasn't adopted the expansion is because they want a work requirement attached to the expansion which makes no sense as the Federal gov picks up the tab. I guess we could move to another state that doesn't have a work requirement attached to the Medicaid expansion..? Is anyone else borderline? We're only 52 and fairly positive the minimum will just keep rising causing us to fall below. Only option I see is part time, most likely crappy job if/when to keep us above the minimum?

 

[Bamaman]

You don't say what state you live in, but the reason our state stays out of the ACA expansion is because they don't have any money for additional social programs. With 47% of the state's children on Medicaid, our coffers are already empty.

We were able to "purchase" healthcare at our MegaCorp's volume pricing from ages 58-64, and for that we were thankful that healthcare wasn't an issue in our ER. A HRSA paid the premiums.

 

[Fermion]

You only need like $24,000 or so to be above the 138% of poverty level for a married couple, which also happens to be the standard deduction for a married couple.

So....

If you have any IRA money, you can covert it to a Roth, which will generate taxable income. If you don't have an IRA but do have a 401K, you can roll some of the 401K to a IRA, then convert it to a Roth.

So....

Say you have $12,000 of interest income for 2021. You convert $12,000 of your or your wife's IRA to a Roth and thus have a ACA MAGI of $24,000, qualifying for a really really good subsidized silver plan with cheese. Because the standard deduction is $24,000, you pay $0 in federal income tax.

 

[RunningBum]

What Fermion said about using Roth conversions to raise your income.

Another possibility is to flip the common notion to make your taxable account tax efficient with things like equity index funds with lower dividends and little or no cap gains distributions. Instead, put bonds or managed equity funds that usually generate MORE taxable income in your taxable account. As a bonus, selling your current holdings to make this switch may generate the cap gains needed to put you over 138% so you could do this over time, with enough selling each year to put you just over.

 

[Hyper]

Bamaman - so there are additional social programs required for Medicaid expansion? I'd not seen that as our legislators kept going after the work requirement. That makes sense as our coffers are in serious trouble. With that I can see us not going for the expansion for a very long time.

Fermion - Our IRA's are about 20% of our NW. Adding the IRA IR, would keep us above for a good # of yrs. Our IRA are tied up for 5 yrs @ the 3.5%. Then we could convert to roth. Very good to know.

 

[RunningBum]

I would stay away from the bacon-bait topic of why states do or do not participate in Medicare expansion and keep it to your situation.

 

[Fermion]

We personally have the opposite problem. I keep estimating our income will be about $24,000 a year and sign up for the silver plan with cost sharing but then I end up getting 25% to 150% returns on my taxable investments and blow way past $24,000 and have to pay back the subsidy. This has happened for the past 2 years and this year is looking the same (to the point where I have already made $10k in estimated tax payments).

I start each year very honest and estimate a market return of 8% on our taxable accounts which would generate about $24,000....I mean that is all you can do really is estimate your income based on historical averages. I am scared that they will someday claim I am incorrectly estimating my income.

 

[Dtail]

We personally have the opposite problem. I keep estimating our income will be about $24,000 a year and sign up for the silver plan with cost sharing but then I end up getting 25% to 150% returns on my taxable investments and blow way past $24,000 and have to pay back the subsidy. This has happened for the past 2 years and this year is looking the same (to the point where I have already made $10k in estimated tax payments).

I start each year very honest and estimate a market return of 8% on our taxable accounts which would generate about $24,000....I mean that is all you can do really is estimate your income based on historical averages. I am scared that they will someday claim I am incorrectly estimating my income.

So you are paying back the subsidy, but aren't you keeping the cost sharing reduction you are receiving each year?

 

[Fermion]

So you are paying back the subsidy, but aren't you keeping the cost sharing reduction you are receiving each year?

Yeah. I have mixed feelings on that. On the one hand I feel like I am doing everything correctly, using market index averages to estimate our income but on the other hand it looks bad to estimate $24,000 in income and then actually have $240,000 in income.

Everyone on here would say you can't beat the index long term, so if anything I am over-estimating our income at $24,000 a year in taxable.

 

[pb4uski]

.... Only option I see is part time, most likely crappy job if/when to keep us above the minimum?

Do you have tax-deferred savings? If so Roth conversions would increase your income and the tax cost would be negligible.

 

[VanWinkle]

You don't say what state you live in, but the reason our state stays out of the ACA expansion is because they don't have any money for additional social programs. With 47% of the state's children on Medicaid, our coffers are already empty.

We were able to "purchase" healthcare at our MegaCorp's volume pricing from ages 58-64, and for that we were thankful that healthcare wasn't an issue in our ER. A HRSA paid the premiums.

47% Wow that is sad.

 

[Hyper]

Do you have tax-deferred savings? If so Roth conversions would increase your income and the tax cost would be negligible.

Yes we have our IRAs but the IRA are in 5 yr cd!

If things stay as they are and our state doesn't expand Medicaid for 5 yrs, we'd be over the minimum ACA amount. "if"

There's also a good chance we will be selling our home (if we can find what were looking for elsewhere in the state). That would give us another 100,000 to 150,000 to collect a minute amount of interest on as we would be buying land and building again instead of buying something established.

We've lost half our NW twice over the yrs, so we just can't stomach playing the market anymore.

 

[ncbill]

We personally have the opposite problem. I keep estimating our income will be about $24,000 a year and sign up for the silver plan with cost sharing but then I end up getting 25% to 150% returns on my taxable investments and blow way past $24,000 and have to pay back the subsidy. This has happened for the past 2 years and this year is looking the same (to the point where I have already made $10k in estimated tax payments).

I start each year very honest and estimate a market return of 8% on our taxable accounts which would generate about $24,000....I mean that is all you can do really is estimate your income based on historical averages. I am scared that they will someday claim I am incorrectly estimating my income.

Can you switch your taxable investments to those that allow you to control the timing of distributions?

 

[Fermion]

Can you switch your taxable investments to those that allow you to control the timing of distributions?

Not easily. My holding period is usually less than a month and I don't have enough IRA room to allow me to trade in those accounts, even if they would settle faster than 3 days.

 

[pb4uski]

Do you have tax-deferred savings? If so Roth conversions would increase your income and the tax cost would be negligible.

Yes we have our IRAs but the IRA are in 5 yr cd!
...

Many banks allow "partial" withdrawals... where any early withdrawal penalty is only applied to the amou withdrawn... so for example, if you have a $100k CD and convert $5k to a roth the early withdrawal penalty is only on the $5k withdrawn.

Also, talk with your bank... if you open a Roth IRA with them and transfer money from your tIRA to your Roth IRA they might be willing to treat is as a proportional transfer since at teh end of the day they still have the same amount of money.

 

[Senator]

I guess we could move to another state that doesn't have a work requirement attached to the Medicaid expansion..?

Move to MN. Everything is free. Heathcare, dental (including crowns), pharmacy, vision. No asset test. No work requirement.

Healthcare for my DGF is cheaper than when she worked and had employer subsidized HC by a major bank.

 

[MichaelB]

Move to MN. Everything is free. Heathcare, dental (including crowns), pharmacy, vision. No asset test. No work requirement.

Healthcare for my DGF is cheaper than when she worked and had employer subsidized HC by a major bank.

Healthcare is not free in MN, or anywhere else in the US. You refer to a program designed to provide taxpayer suppprted medical care to low income and disadvantaged individuals.

 

[Fermion]

Healthcare is not free in MN, or anywhere else in the US. You refer to a program designed to provide taxpayer suppprted medical care to low income and disadvantaged individuals.

So for them it is free?

 

[Senator]

Healthcare is not free in MN, or anywhere else in the US. You refer to a program designed to provide taxpayer suppprted medical care to low income and disadvantaged individuals.

It is not free to the taxpayer, but it is to my DGF who is as low income as anyone else. Just like the ACA subsidy for people that choose that route.

No premium. No deductibles.

And I should add, she even gets 2 free round trip rides every week to a heathclub, and a free electric toothbrush. And the care is good anywhere in the USA. No network limitations.

You can't beat it. She even gets Visa gift cards when she gets preventitive care visits. Like $25 or $50.

Taxes are a big part of why I am now a FL resident.

 

[Hyper]

So another question as our legislators and gov just announced yesterday they are going to hammer out a deal to expand Medicaid regardless of cost. I mentioned we already would meet the aca minimum for 2020. Could I and DW contribute to 2019 IRA's, 2 x $7k for over 50 yrs old. Convert one of the 2019 IRA to a roth to raise income if needed for 2021 if interest rates stay low to stay above the aca minimum with Medicaid expansion? And continue contributing to IRA yrly until our current IRA mature in 5 yrs. This way we would not lose any $ pulling our current IRA early.

 

[cathy63]

Could I and DW contribute to 2019 IRA's, 2 x $7k for over 50 yrs old.

Yes, as long as between the two of you, you have wages or self-employment income of at least $14K.

Convert one of the 2019 IRA to a roth to raise income if needed for 2021 if interest rates stay low to stay above the aca minimum with Medicaid expansion?

Yes.

And continue contributing to IRA yrly until our current IRA mature in 5 yrs. This way we would not lose any $ pulling our current IRA early.

Yes, but you can only contribute as much as you earn from working and when you're both retired, you may not earn enough to be able to contribute to IRAs.

Also, if you do keep working and earn very little, then any contribution you make to a tIRA in 2021 will be deductible (i.e. it will reduce your income). At low income levels it usually doesn't make sense to put money in a tIRA and convert it to a Roth in the same year since those transactions cancel each other out from a tax perspective.

 

[jim584672]

Remember if you need to get over 100% FPL (over 138% in expansion states) you only need to convince the healthcare.gov folks of your estimate. Even if your actual numbers are lower at the end of the year it doesn't matter. Just don't commit fraud, use a reasonable estimate. Roth conversions are easy ways to bump up income.

 

[Fermion]

Remember if you need to get over 100% FPL (over 138% in expansion states) you only need to convince the healthcare.gov folks of your estimate. Even if your actual numbers are lower at the end of the year it doesn't matter. Just don't commit fraud, use a reasonable estimate. Roth conversions are easy ways to bump up income.

Also realize they are not highly paid accountants with master degrees. They will be appeased by a simple excel spreadsheet showing how much you have invested and a proposed monthly income from that investment with columns for dividends, interest, capital gains.

 

[jim584672]

It is not free to the taxpayer, but it is to my DGF who is as low income as anyone else. Just like the ACA subsidy for people that choose that route.

No premium. No deductibles.

And I should add, she even gets 2 free round trip rides every week to a heathclub, and a free electric toothbrush. And the care is good anywhere in the USA. No network limitations.

You can't beat it. She even gets Visa gift cards when she gets preventitive care visits. Like $25 or $50.

Taxes are a big part of why I am now a FL resident.

Bribing people into preventative medicine is a money saver since it lowers incidence of major medical events in the population. Since MMCs are paid via monthly capitation (and not by procedure done) a healthy population increases their profits.

 

[jim584672]

You don't say what state you live in, but the reason our state stays out of the ACA expansion is because they don't have any money for additional social programs. With 47% of the state's children on Medicaid, our coffers are already empty.

We were able to "purchase" healthcare at our MegaCorp's volume pricing from ages 58-64, and for that we were thankful that healthcare wasn't an issue in our ER. A HRSA paid the premiums.

At the risk of porky appearing...

For every 10 cents a state spends on the expansion they get 90 cents back from the Feds. CHIP (child medicaid) is also in the mid 80 cents back, depending on the state.