Quick IORP question

[cat4ever]

The IORP site states the following about ACA:

"Early retirees may wish to keep their Modified Adjusted Gross Income (MAGI) below ACA qualifying limits in order to obtain the subsidies that may save a couple $5000-$10,000 annually...

If your MAGI is $20K, you get a $10K discount, whereas if your MAGI is $40K you get a $7K discount..."

These numbers don't line up with my situation at all. For ACA purposes My MAGI is set to 30K (I have a lot of Roth money) and I'm receiving a $23k annual subsidy for family of 3.

is it perhaps just that the documentation is out of date on the IORP site, or maybe those numbers are for singles? Or is there something wrong in my understanding?

 

[punkinhead]

I suspect their information is out of date and iORP isn't the place I'd go for that kind of information anyway. I think that statement is just there as a heads up that ACA subsidies are something to be aware of. There's more that goes into ACA subsidies than MAGI and things can change year to year based on an executive order.

 

[cat4ever]

I just want to verify that it's not using old or incorrect numbers in their calculations, and that the ones they are using are up do date. If not I don't want to go to the trouble of entering in my info.. I did send an email asking them about this directly, will post if I get a response.

 

[monte1022]

I believe the i-orp owner/creator no longer has the ability/desire to maintain the site. If you scoll to the bottom of i-orp's page, its states that the last update was 11/8/2018. Another party stepped in to run the site, but I am unaware of any updates. Perhaps others have more info.

Pralana gold is supposed to have a good ACA calculator and a new web based version will be out in 2024.

 

[Exchme]

Under the "News" tab, the last update to tax tables was in 2020. I looked for a couple things from Secure 2.0 like later RMD ages and they are not in iORP, so it doesn't seem to be being maintained.

It always has had a limitation where it put IRMAA in the current year, so it's never been able to see that Roth Conversions at age 63 and 64 could cause IRMAA surcharges. It's never had NIIT or AMT so higher incomes were treated too gently. I don't believe it has taxation of SS benefits right (or at least its Roth Conversion recommendations keep going after age 70, whereas other models say to stop because we could avoid some benefits being taxed).

But to OP's question, in iORP, you enter the ACA income limit you want it to observe and then you enter the resulting premium tax credit, so you have to look that up yourself and make the calculation manually, it's going try to obey, but not optimize that choice.

The main thing that beginner's mess up is that, like most calculators, you will get goofy answers if you tell it that you have different asset allocations in different accounts. So if you tell it that your Roth contains all stocks, but tax deferred contains bonds, it will favor HUGE Roth Conversions, not because they are a good idea, but because it is not keeping your overall asset allocation constant as it does Roth Conversions, it is chasing the higher returns of stocks. The Bogleheads' Retiree Portfolio Model and Pralana Gold are two models I know of that can handle different allocations in different accounts and control your overall allocation.

(Back when iORP was more alive, every now then, we would get posters that had been following the spurious recommendations to make gigantic conversions, which cost them large chunks of extra taxes. One problem with highly automated systems that are light on output like iORP is you have difficulty figuring out if the way it is working is consistent with what you want.)

While it is easy to spend hours in front of iORP running different scenarios, I think it is best to move on and use tools that are being maintained.

 

[cat4ever]

Thanks Exchme for the thorough explanation. I think I'll move on as you suggest.

 

[SevenUp]

These numbers don't line up with my situation at all. For ACA purposes My MAGI is set to 30K (I have a lot of Roth money) and I'm receiving a $23k annual subsidy for family of 3.

The approach described in Roth Conversion and Capital Gains On ACA Health Insurance looks accurate.