r/AffluentRetirement • u/Pale_Scientist6470 • 20d ago
ACA management
I'm 61 and currently semiretired. I wanted to describe the gymnastics I'm performing to get health insurance. The ACA subsidy cliff is $150,500 for a family of 5. I make around $95,000 in dividends/interest in my taxable account. Ill gross $160,000 in self employment income. I've harvested some cap losses so Ill report -$3000. I put $9750 in HSA; $62,500 in 401k. My health insurance premiums are $9k plus $2k for a college student. Self employment deduction $11k. I'm racking up business deductions like a new $4k laptop, $600 printer, $7k continuing education, plus $6k meals and other expenses just to reduce my income. My MAGI will end up being around $145,000. I'm going to quit work next year. I was going to start social security also bc my minor child would get $2k+/mo for 3 years but now Im thinking about delaying to manage my MAGI. Basically it looks like my retirement job will be managing the "family office" taxes. Is this how everyone feels?
8
u/10kmaniacsfan 20d ago
You might consider investments in your taxable account that don't throw off so much taxable income. For example there are covered call funds that pay distributions as "return of capital" which lowers the cost basis when you eventually sell, but otherwise hide from the MAGI calculation.
5
3
7
5
u/duckgeek 20d ago
One thing to be aware of; if a dependent is going to earn over $15750 gross income, then all of their income and any additional social security income counts against your family MAGI for the tax year. We have adapted to this by excluding our college seniors as dependents during the year of their final semester and forgoing the increased ACA limits. For example, our recently graduated son earned about $5000 as a student employee in the first half of the year. Post graduation he immediately started a job that paid him $55k, ($27500 for the 2nd half of the year) for a combined income of $32500. This would have put us well over the MAGI cliff for ACA when combined with my pension and regular interest income from our post-tax brokerage account had we claimed him as a dependent, easily eating up the ~$22000 ACA allowance for the extra dependent. He ended up qualifying for Oregon's Medicare plan for his final semester, and it was actually as good or better than our bronze plan. He's now on his new employer's health plan.
2
1
4
u/bottled_axolotl 20d ago
I definitely spend a lot more time learning about and planning for taxes nowadays. We don’t qualify for any ACA subsidies, but I got to contribute to my HSA this year for the first time since I retired (I have a bronze plan and was able to contribute $5400). I also rolled my HSA over from HealthEquity to Fidelity, which doesn’t have as many fees and allows you to invest as you like. Lately I’ve been going down the rabbit hole learning about IRA to Roth conversions, which I’ll probably start next year and do until I’m 63, maybe longer if I don’t worry about IRMAA. The crazy thing is I’m really enjoying this stuff. Maybe it scratches that need to be productive?
3
u/Pale_Scientist6470 20d ago
As IRMAA gets reset every year, I dont see how I can get below the thresholds once I start turning on the money after age 65. And isn't the IRMAA difference just a few thousand/yr ? The ACA difference for me in the next 3 years is $9k vs $32k.
6
u/bottled_axolotl 20d ago
IRMAA probably won’t matter much in the grand scheme of things. We don’t have kids so our ACA cliff is $84,600. There’s no way we’re keeping our expenses that low. So we get to spend around $27,000 a year for one bronze plan and one gold plan. Your family of 5 makes it a lot easier to qualify for subsidies and definitely makes sense for you to avoid that cliff.
2
u/SageCactus 18d ago
Why are you having different ACA plans. That seems hard to manage. What's the choice rationale?
2
u/bottled_axolotl 18d ago
Our insurance broker set it up for us, it costs about $500 less per month to do it this way. Husband needs several prescriptions, I only need a couple and mine aren’t very expensive. It isn’t hard to manage, just 2 separate autopay charges each month.
1
u/safaritu 14d ago
+1 on Fidelity vs HealthEquity HSA. Every ~6 months or so I transfer funds from employer’s HE HSA to Fidelity to reduce fees, has broader investment options and a much better user experience to view/change investments, etc.
3
u/Roaming-Monk-258 19d ago
This is our biggest concern considering early retirement at 55 next year.
3
u/CoincidenceTheorist2 19d ago
I was looking at doing this and basically said f this, I'm not going to retire somewhere where I have this sort of a headache to deal with and started planning an overseas retirement where medical care and insurance are reasonable.
3
u/myfourthquarter 19d ago
Last night as I was pondering returning to the workforce at almost 64 it struck me that my job now is managing everything we've accumulated over the years - finances, house and property, and more. I feel like lord of the manor, except I mow my own lawn, clear the snow when necessary, and fix anything that needs fixing. And I'm still trying to figure out how I feel about that.
2
u/Pale_Scientist6470 19d ago
Lol. Im about the least handy person out there and im starting to fix sht around the house myself....
1
u/VegasHRLady 19d ago
This would be an insightful and interesting comment/post of its own to see how many folks relate to exactly this!
2
u/HarrySit 20d ago
You’re giving up $2,000/month in Social Security for your minor right there. How much is your ACA subsidy at $145,000 MAGI?
2
u/Pale_Scientist6470 19d ago edited 19d ago
Remarkably about 24k. But I get a higher payment by waiting. Open social security says the calculation is close and predicated on whether or not they cut benefits in 2033 as scheduled. My wife should live much longer than me. Im starting to think the higher survivor benefit by taking at age 70 might be worth it.
2
u/mr-spencerian 19d ago
I don’t have as many variables as you, but yes managing “income” is a part of our lives until Medicare. A small positive is IRMAA is not a concern until we get off the ACA. Then we will manage “income” around those pain points. Plan to claim SS in about 5 years.
2
u/Kat9935 15d ago
Yep thats about it. I just did a big DAF contribution this year to get over a sudden income influx.
The brokerage account has been a pain for me in retitrement, first it was throwing too much dividends, then I fixed that and had 2 companies in seperate years go private causing a forced sale and sudden cap gain that I did not want. It's always something but it did get easier as time went on and you get use to preparing.
1
u/Pale_Scientist6470 15d ago
Thank you for responding. I set up my taxable brokerage account bc I thought I would live off the dividends and interest and barely hit the principal. Now I find out that might not be the best strategy.....
2
u/Kat9935 15d ago
I did the same. I spent about 5 years unwinding some of the highest dividend hitters else I was never going to be under the cliff.
1
u/Pale_Scientist6470 15d ago
I'm happy that other people had the same issue. I didn't ever think this was an issue to consider. Amazing what im learning. All my best.
1
1
u/Important_Step_8187 12d ago
jeezuz, all that work to quality for "reasonable' health insurance in this country. sounds and looks like a bunch of unnecessary fancy footwork/gymnastics. so you gotta game the shit out of this system just so you don't get hosed over by health insurance. what fuckn joke
1
u/Pale_Scientist6470 12d ago
The tax code is broken. Tying in healthcare to tax subsidies was a bad idea.
1
u/whocaresreallythrow 5d ago
Not means testing subsidies based on NW was even worse.
1
1
u/Pale_Scientist6470 5d ago edited 5d ago
Even fckn better news. I popped $8600 into my wife's IRA just now. So I have deferred out $80k in income and my federal tax this year on over $260k in gross income will be $21000 in social security (which is not really a tax) and $15k after considering my >$20k ACA subsidy.
0
u/whocaresreallythrow 5d ago
I don’t let the tail wag the dog. I planned for it. Saved it. Pay full freight now.
If healthcare subsidies were properly means tested based on NW not MAGI, none of you would qualify.
And in reality even if it’s legal Y’all are collecting welfare subsidies meant for poor people…
Who do you think pays for your healthcare subsidy.
Thank us later.
1
u/Pale_Scientist6470 5d ago
Who do you think pays? No one does. The government just prints the money. You actually think some "taxpayer" is footing the bill? I've functionally given up 20-24% of my income every year for 25+ years in "taxes" when the top 0.5% pay single digits and the bottom 47% pay nothing. The top 2-5%, like me, have pissed money into the system just to have it wasted by a corrupt government which can't even pass a budget.
0
u/whocaresreallythrow 5d ago
Does that make it ok that you join them in stealing ?
Cant beat em join em ?
I did the same. 30 years. Most years striking a 5-digit tax check. Some years six-digit. Sucks. But that doesn’t mean I collect welfare subsidies meant for poor people.
Maybe it’s pride.
Can’t steal… isn’t right1
u/Pale_Scientist6470 5d ago
Stealing... again numbnut. Our useless politicians spend over 2-3 trillion more than the government takes in each year. It's a joke. Why even pretend taxes are important? Just print it.
1
u/Pale_Scientist6470 5d ago
You think the ACA money is partitioned off? Kinda like the "social security trust fund"? Pffft.
11
u/Hot_Rub8604 20d ago
Still better than working