How to manage income to stay under ACA cliff

[dayzero]

Try to keep the lowest distribution yield assets in your taxable account:

• I-Bonds
• Vanguard Total Stock Market Index (or equivalent)
• Cash and short term bonds.

International stocks index funds have higher yield (> 3%), try to keep them in tax-advantaged. Same for intermediate bonds.

Avoid dividend paying stocks in your taxable account if possible. Selling stocks will produce less income since part of the sale will be return of principle.

Use a high-deductible ACA plan so that you can get access to an HSA - you can reduce income each year by $6900 by contributing to HSA.


If you have any earned income at all use a TIRA to reduce that income.

 

[24601NoMore]

If those dividends from the IRA specifically are reinvested do they still count toward MAGI? I gather that dividends from taxable accounts will count whether reinvested or not, but I’m having difficulty understanding if reinvested dividends from ira will.

Reinvested dividends in a tax deferred account like an IRA do not count for MAGI. MAGI is only affected when you withdraw (capital or dividends) from a tax deferred account.

 

[Livefree]

This is a very important question that I feel is understated on this forum. My personal situation is similar, but I am age 63 with my wife age 64. In Phoenix, AZ the only plan offered is an ACA plan costing $27,500.00. The plan has very few doctors and only the worst hospitals and is an HMO plan. I struggle to keep my income under the $64,900, being sure that all dividends are qualified, I invest in no Reits, MLP's, or other dividends that are excluded. We live off of my wife's SS of $4,656. and pension of $12,000 total $16,656 and cash from my taxable account. I cannot withdraw from my very large IRA, draw SS, or continue in my small business without paying the $27,500 for substandard insurance. I have to be very careful regarding what investments I use with my taxable account. I refuse to pay the $27,500.00 for substandard insurance and a 7,000 deductible even if I incur poor returns in my taxable account.

I thought retiring would make life easier, now I have to worry about health insurance, my wife is sickly so it costs me $7,000.00 every year for the deductible, trying to find safe investments with reasonable returns 4% would be fine. Yes, I have won the game, but playing the final quarter is getting to be more difficult every day.
Sorry about the rant!
I need a new dog!

If your running a business, can't you invest in a SEP IRA? Don't know much about them, but I believe the limits are much higher than regular IRA's, and would think they would lower your magi.

 

[NoMoreJob]

We have no earned income. We have very tax efficient taxable investments (VTSAX) and we use that income for living expenses. To that add the funds from shares that we sell - with only the cap gains being counted as income (and taxed at a low rate). My wife contributes to an HSA which reduces our income and allows us to take addition $$ from the investments....again only the gains are taxed and count as income. Now that the $$ are in an HSA account they can be used without adding to ACA MAGI to pay medical expenses also without impacting MAGI. We save all receipts from unreimbursed medical expenses from year-to-year which creates a tax (and ACA income) exempt pool that can be used for other things in necessary. The same holds true for my Roth IRA which I funded in the past - it can be used for income without impacting ACA qualification.

 

[pb4uski]

.... I cannot withdraw from my very large IRA, draw SS, or continue in my small business without paying the $27,500 for substandard insurance. I have to be very careful regarding what investments I use with my taxable account. I refuse to pay the $27,500.00 for substandard insurance and a 7,000 deductible even if I incur poor returns in my taxable account.

I thought retiring would make life easier, now I have to worry about health insurance, my wife is sickly so it costs me $7,000.00 every year for the deductible, trying to find safe investments with reasonable returns 4% would be fine. Yes, I have won the game, but playing the final quarter is getting to be more difficult every day.
Sorry about the rant!
I need a new dog!

During the first couple years that I was retired, before ACA, my LLC sponsored a small group health insurance policy for me and DW. Is that a possibility and if so, might it be less expensive than ACA insurance? Have you considered moving to an area with more affordable health insurance?