Bronze or Silver

[ikubak]

Scenario, M 55 and F 59. MAGI for 2018 will be $29K...could be higher if we choose to recognize LT cap gains or move some tIRA funds to Roth. Would you go with a Silver Plan (900 deductible, 3300 OOP) at no cost up to a MAGI of 34830 and use the difference of $5,330 to recognize LT cap gains or move IRA to Roth, or would you take a Bronze Plan (14,300 deductible, 14300 max OOP) at no cost up to a MAGI of $64K and recognize LT cap gains and move tIRA to Roth up to that 64K threshold? We both take no medications and are fortunate to have very good health. Or are we totally missing the boat by not looking into Bronze w/HSA?

[RunningBum]

Are you willing and able to insure up to $11,000 more medical expenses in case you don't have a healthy year this year?

What do you figure the value of nearly $30,000 more LTCGs taken or tIRA converted to Roth? 10%? That would be $3000 in hand, risking up to $11,000. That's the kind of comparison to make. You might look at the average of your last 5 years of medical expenses. If it's over or at all close to $3000, I'd take the silver and protect yourself on the high side.

Re: the HSA, just a little more math. I think you can contribute $8750 with the catch-ups (verify that number yourself), estimate the value of that to you, and compare that to what you have to bring your MAGI down to for a $0 premium. For me (single) the premium is only about $300/yr more, so it's worth it to me. I get a lower deductible and max OOP with the HSA policy too.

[pb4uski]

Quote:

Originally Posted by ikubak Scenario, M 55 and F 59. MAGI for 2018 will be $29K...could be higher if we choose to recognize LT cap gains or move some tIRA funds to Roth. Would you go with a Silver Plan (900 deductible, 3300 OOP) at no cost up to a MAGI of 34830 and use the difference of $5,330 to recognize LT cap gains or move IRA to Roth, or would you take a Bronze Plan (14,300 deductible, 14300 max OOP) at no cost up to a MAGI of $64K and recognize LT cap gains and move tIRA to Roth up to that 64K threshold? We both take no medications and are fortunate to have very good health. Or are we totally missing the boat by not looking into Bronze w/HSA?

So if I understand you correctly, if you take the bronze then you can fill up an additional $30k or so with either 0% LTCG or low-cost 10-15% Roth conversions but you're risking that if you have a health event that you might have to pay an additional $11,000 ($14,300-$3,300)? And you are in good health.

I would probably go with the bronze... figuring that I'm saving $3k or more in taxes ($30k * (25%-15%)) and assuming a 10% chance of maxing out deductibles that the expected cost is $1,100 ($11,000 * 10%) and $3,000 beats $1,100. But you pick your poison with your eyes wide open.

I may be biased in that we have had a catastrophic plan (similar to bronze coverage) and doing low-cost Roth conversions for that last 5 years and it has worked out great for us with hardly any claims at all.

[ikubak]

Thanks for the input. I can handle the extra $11K in the event of a medical issue so that's not really a problem. I doubt I'll be getting any healthier as I get older so I'll probably go with the Bronze now while I'm still relatively young and use this time to move funds from tIRA to Roth. I've been doing those conversions to the top of the 15% bracket for a few years now (wish I had started sooner). RMDs will one day force us to sell some tIRA so the more I can move out now at 10-15%, the better. I also like recognizing LT gains right now as they are taxed at 0% for us. The downside is it changes your dividends from qualified to not so qualified.

[RunningBum]

Quote:

Originally Posted by ikubak Thanks for the input. I can handle the extra $11K in the event of a medical issue so that's not really a problem. I doubt I'll be getting any healthier as I get older so I'll probably go with the Bronze now while I'm still relatively young and use this time to move funds from tIRA to Roth. I've been doing those conversions to the top of the 15% bracket for a few years now (wish I had started sooner). RMDs will one day force us to sell some tIRA so the more I can move out now at 10-15%, the better. I also like recognizing LT gains right now as they are taxed at 0% for us. The downside is it changes your dividends from qualified to not so qualified.

What do you mean by that last sentence? You're not pushing dividends above the 15% line such that they are taxed, are you?

[pb4uski]

+1. That last sentence didn't make sense to me either.

[bobandsherry]

Quote:

Originally Posted by RunningBum What do you mean by that last sentence? You're not pushing dividends above the 15% line such that they are taxed, are you?

Maybe OP is unloading the stock to take gains within the required holding period?

[RunningBum]

Quote:

Originally Posted by bobandsherry Maybe OP is unloading the stock to take gains within the required holding period?

I have no idea what that means. I always thought a holding period was a minimum amount of time, with no end date, but you seem to imply the OP might have to take some gains before some holding period expires? What's an example of that?

The OP also seems to indicate a lot of flexibility in how much LTCGs to take, so I don't see any forced unloading of stock other than optimizing taxes by maxing out the 0% rate on them. Qualified dividends should be treated just like LTCGs for this purpose, keeping the two combined to be taxed at 0%.

[ikubak]

Quote:

Originally Posted by RunningBum What do you mean by that last sentence? You're not pushing dividends above the 15% line such that they are taxed, are you?

What I meant is if I sell some Vanguard SP500 shares which have been held for a few years and buy a different fund (balance my allocation) my dividends from the new fund shares would be ordinary dividends and taxed until they have been held for the required holding period as opposed to qualified and not taxed on the SP500 shares that have been held for a few years.

[RunningBum]

Quote:

Originally Posted by ikubak What I meant is if I sell some Vanguard SP500 shares which have been held for a few years and buy a different fund (balance my allocation) my dividends from the new fund shares would be ordinary dividends and taxed until they have been held for the required holding period as opposed to qualified and not taxed on the SP500 shares that have been held for a few years.

Whether dividends are qualified or not does not rely on how long you have held the fund, as far as I know. Is there a fund are you thinking to buy to balance that actually does this? If it's a bond fund, it's (almost?) never going to throw qualified dividends. This is why many people keep bond funds in their tax deferred or tax free accounts. If you have some stock funds in those accounts, you could trade those for bond funds, and continue buying stock funds in your taxable account.

[pb4uski]

Quote:

Originally Posted by ikubak What I meant is if I sell some Vanguard SP500 shares which have been held for a few years and buy a different fund (balance my allocation) my dividends from the new fund shares would be ordinary dividends and taxed until they have been held for the required holding period as opposed to qualified and not taxed on the SP500 shares that have been held for a few years.

Probably not a problem unless you are doing a lot of trading... it is unlikely to come into play for plain-vanilla rebalancing as we are talking about. See: https://www.fidelity.com/tax-informa...fied-dividends

[ikubak]

Good point RB. I was thinking the dividends from the next stock fund I buy would be treated like a dividend from a new individual stock purchased but that's not the case...that's good.

And the Fidelity link was very informative. Thanks pb.

[bobandsherry]

Quote:

Originally Posted by RunningBum I have no idea what that means. I always thought a holding period was a minimum amount of time, with no end date, but you seem to imply the OP might have to take some gains before some holding period expires? What's an example of that? The OP also seems to indicate a lot of flexibility in how much LTCGs to take, so I don't see any forced unloading of stock other than optimizing taxes by maxing out the 0% rate on them. Qualified dividends should be treated just like LTCGs for this purpose, keeping the two combined to be taxed at 0%.

Maybe I misunderstood what OP was saying, but what I thought they were going to sell off securities and realize LTCG. IRS requires that you hold a stock for a minimum period of time to be considered 'qualified'. For common stock you must hold for more than 60 days during 121 day window that starts 60 days before the ex-dividend date. For preferred it's different window time frame.

[pb4uski]

Quote:

Originally Posted by bobandsherry Maybe I misunderstood what OP was saying, but what I thought they were going to sell off one security in order to realize LTCG. IRS requires that you hold a stock for

We are waiting with baited breath for the second part of the sentence.

[RunningBum]

Quote:

Originally Posted by bobandsherry Maybe I misunderstood what OP was saying, but what I thought they were going to sell off securities and realize LTCG. IRS requires that you hold a stock for a minimum period of time to be considered 'qualified'. For common stock you must hold for more than 60 days during 121 day window that starts 60 days before the ex-dividend date. For preferred it's different window time frame.

I was unaware of that 60/121 day holding period, but as pb4's link in post #11 shows, as long as you continue to hold the new funds for at least 60 days in that 121 day window they'll be qualified. Unless I'm reading that wrong.

[bobandsherry]

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Originally Posted by pb4uski We are waiting with baited breath for the second part of the sentence.

OK, so I accidentally fat fingered the keyboard while posting and accidentally clicked on the submit button. Guess things like that don't happen to you. I immediately did an edit and completed my post.

Was it necessary for your to post something so snarky? Have I done something to offend you?

[bingybear]

sounds like bobandsherry were bringing in the wash sale rule... kind of separate from LTCG or qualified dividends in general.

I do need to learn more about not so qualified dividends. I was wondering if he was doing too much LTCG and pushing them above the 15% bracket and making them taxable. He could be selling an investment too close to the dividend and making it not qualified. Not sure what was meant... or how it place gold or bronze.

[bobandsherry]

Quote:

Originally Posted by bingybear sounds like bobandsherry were bringing in the wash sale rule... kind of separate from LTCG or qualified dividends in general. I do need to learn more about not so qualified dividends. I was wondering if he was doing too much LTCG and pushing them above the 15% bracket and making them taxable. He could be selling an investment too close to the dividend and making it not qualified. Not sure what was meant... or how it place gold or bronze.

Not confusing wash sale. Found this info for reference -> Qualified Dividend

And this is the specific reference:

Quote:

The Holding Period The Internal Revenue Service (IRS) requires investors to hold the stock for a minimum period of time to benefit from the lower tax rate. Common stock investors must hold the shares for more than 60 days during the 121-day period that starts 60 days before the ex-dividend date. For preferred stock, the holding period is more than 90 days during a 181-day period that starts 90 days before the ex-dividend date.

Perhaps I am reading more into it than stated. But that's why I read-up here so I can become better informed.

[pb4uski]

Quote:

Originally Posted by bobandsherry OK, so I accidentally fat fingered the keyboard while posting and accidentally clicked on the submit button. Guess things like that don't happen to you. I immediately did an edit and completed my post. Was it necessary for your to post something so snarky? Have I done something to offend you?

I was kidding. But my bad. I should have included an emoticon to my post so it was clear that I was kidding.