5 ms·

> The greatest expense for me in retirement is now health insurance Obamacare changes that. If you don't have much income you get ACA federal tax credits.

handrous 5y ago
ACA plans in my state expose you to over $20,000 in annual risk, for a family plan. That's assuming you don't end up with a huge "out of network" bill by accident (and their networks are terrible, so that's very possible). I think the "gold" plan is a little better (though a much worse deal if you're having to pay the full premium, overall) but I'm not sure how much income-based help you get for the top-tier (and still quite bad, compared to group plans at employers around here) plan.
- flowerlad 5y ago
  Not sure what you mean by "annual risk". Do you mean out-of-pocket costs? > That's assuming you don't end up with a huge "out of network" bill by accident New laws mostly take care of that. No more out-of-network doctors walking by your hospital bed while you're sleeping and sending you a $5000 bill. Also if you have an emergency while out of state your insurance takes care of it. The "metal" plans all have the same network. The only difference is how much you pay vs. insurance.
  - handrous 5y ago
    > Not sure what you mean by "annual risk". Do you mean out-of-pocket costs? Yeah, max out-of-pocket per year. Something like ~$24,000 family / $12,000 individual on our ACA plans. Gold and Silver ACA plans are basically identical in this state, you're just guaranteeing you pay more in premiums with Gold (so, in a bad year, the totals work out about the same, but in a good year the Gold is more expensive). We have exactly two ACA plan providers here, and their plans are nearly identical except that they have very different (both terrible) networks. So if you get cancer you'll be paying $12,000/yr, on top of premiums (another $20,000 or so, for a family silver plan, if you're not getting assistance) until you're cured or you're dead. Two people get very sick, about $24,000 per year that they remain very sick, on top of premiums.
    - lotsofpulp 5y ago
      https://www.healthcare.gov/glossary/out-of-pocket-maximum-limit/ https://www.healthcare.gov/glossary/out-of-pocket-maximum-li... > For the 2021 plan year: The out-of-pocket limit for a Marketplace plan can’t be more than $8,550 for an individual and $17,100 for a family.
      - handrous 5y ago
        Yep, just checked, you're right, that's gotten a fair bit better, matching your numbers.
        EvanAnderson 5y ago
        But that's still on top of premiums. My last year on an ACA "Silver" family plan (2019) was just shy of $20,000 in premiums w/ a $13,500 family deductible.
        lotsofpulp 5y ago
        Health insurance premiums are a tax, not actual insurance premiums priced to one's own health risks. The Affordable Care Act stipulates various terms which result in young and/or healthy people explicitly subsidizing old and/or unhealthy people: 1) only age, location, and smoking status are able to be taken into account for pricing. And everyone must be offered insurance (i.e. no exclusions for pre existing conditions) 2) age rating factors - premium for costliest person (64 years old) must be at most 3x those of least costly person (21 to 24 years old) 3) out of pocket maximums
- dsizzle 5y ago
  The tax credits are the same regardless of your plan, and for modest income the credits are substantial: even for $100k, the credits are $500/mo for a family of 4. Not that healthcare still isn't a significant expense, but the assistance is meaningful.
randomdata 5y ago
Unless you go to great efforts to shelter, the couple of million in assets will provide an income that exceeds anything considered "not much income". His stated desire to spend the income is going to greatly complicate sheltering efforts.
city41 5y ago
And the covid relief bill increased the credits. If your income is low, you can get surprisingly decent insurance for not much money. "Surprisingly decent" is in the context of American health insurance.
cyberlurker 5y ago
If you withdraw from a 401k, doesn’t that become taxable income? I’m assuming if someone takes enough out per year to hit $50k+ they will reduce their federal credits to zero.
- neogodless 5y ago
  To avoid this, you want to have a multifaceted approach. Figure out how low your expenses can be while still being quite happy with your qualify of life. Some expensive things don't provide the happiness you think they will. Diversify the kinds of investment accounts you have. Maximize your tax-advantaged accounts like a 401k, but then contribute to a Roth IRA if available, and then plow money into a taxable brokerage account. When you approach retirement, plan to have some time period of expenses covered by cash on hand. Then use cash, brokerage and Roth funds to cover expenses, while converting what you can from 401k or traditional IRA into Roth funds, and minimizing the income/taxation that results so you can still qualify for credits. Funds converted to Roth will be available for tax-free withdraw after 5 years, so continue to convert over time, while using the post-tax accounts to cover expenses.
  - tkojames 5y ago
    This and HSA is nice to have as well. Max that out. Pay out of pocket for everything and keep records of it. When you retire you can pull all that out tax free. Irs says you can can do it. And it is pretax. Any left over money will turn into IRA when your old. But if you have family and can cover the out pocket cost HSA are really nice extra amount. My plan is use my taxable and withdrawal medical expenses from the hsa tax free. So I can convert 401k funds to Roth using the ladder. Ideally the normal Roth I have had for years never gets touched for a long time. Also you can also do a Roth via backdoor.
- ASinclair 5y ago
  This assumes all of your income comes from a traditional 401(k). As an early retiree that's unlikely. It's likely that a significant portion of your income will come from a taxable brokerage account. A significant portion of that income is your basis (what you paid for the investment) which is not taxable. There's a lot you can do to "engineer" your taxable income in early retirement.

handrous 5y ago

ACA plans in my state expose you to over $20,000 in annual risk, for a family plan. That's assuming you don't end up with a huge "out of network" bill by accident (and their networks are terrible, so that's very possible). I think the "gold" plan is a little better (though a much worse deal if you're having to pay the full premium, overall) but I'm not sure how much income-based help you get for the top-tier (and still quite bad, compared to group plans at employers around here) plan.

flowerlad 5y ago
Not sure what you mean by "annual risk". Do you mean out-of-pocket costs? > That's assuming you don't end up with a huge "out of network" bill by accident New laws mostly take care of that. No more out-of-network doctors walking by your hospital bed while you're sleeping and sending you a $5000 bill. Also if you have an emergency while out of state your insurance takes care of it. The "metal" plans all have the same network. The only difference is how much you pay vs. insurance.
- handrous 5y ago
  > Not sure what you mean by "annual risk". Do you mean out-of-pocket costs? Yeah, max out-of-pocket per year. Something like ~$24,000 family / $12,000 individual on our ACA plans. Gold and Silver ACA plans are basically identical in this state, you're just guaranteeing you pay more in premiums with Gold (so, in a bad year, the totals work out about the same, but in a good year the Gold is more expensive). We have exactly two ACA plan providers here, and their plans are nearly identical except that they have very different (both terrible) networks. So if you get cancer you'll be paying $12,000/yr, on top of premiums (another $20,000 or so, for a family silver plan, if you're not getting assistance) until you're cured or you're dead. Two people get very sick, about $24,000 per year that they remain very sick, on top of premiums.
  - lotsofpulp 5y ago
    https://www.healthcare.gov/glossary/out-of-pocket-maximum-limit/ https://www.healthcare.gov/glossary/out-of-pocket-maximum-li... > For the 2021 plan year: The out-of-pocket limit for a Marketplace plan can’t be more than $8,550 for an individual and $17,100 for a family.
    - handrous 5y ago
      Yep, just checked, you're right, that's gotten a fair bit better, matching your numbers.
      - EvanAnderson 5y ago
        But that's still on top of premiums. My last year on an ACA "Silver" family plan (2019) was just shy of $20,000 in premiums w/ a $13,500 family deductible.
        lotsofpulp 5y ago
        Health insurance premiums are a tax, not actual insurance premiums priced to one's own health risks. The Affordable Care Act stipulates various terms which result in young and/or healthy people explicitly subsidizing old and/or unhealthy people: 1) only age, location, and smoking status are able to be taken into account for pricing. And everyone must be offered insurance (i.e. no exclusions for pre existing conditions) 2) age rating factors - premium for costliest person (64 years old) must be at most 3x those of least costly person (21 to 24 years old) 3) out of pocket maximums
dsizzle 5y ago
The tax credits are the same regardless of your plan, and for modest income the credits are substantial: even for $100k, the credits are $500/mo for a family of 4. Not that healthcare still isn't a significant expense, but the assistance is meaningful.

randomdata 5y ago

Unless you go to great efforts to shelter, the couple of million in assets will provide an income that exceeds anything considered "not much income". His stated desire to spend the income is going to greatly complicate sheltering efforts.

city41 5y ago

And the covid relief bill increased the credits. If your income is low, you can get surprisingly decent insurance for not much money. "Surprisingly decent" is in the context of American health insurance.

cyberlurker 5y ago

If you withdraw from a 401k, doesn’t that become taxable income? I’m assuming if someone takes enough out per year to hit $50k+ they will reduce their federal credits to zero.

neogodless 5y ago
To avoid this, you want to have a multifaceted approach. Figure out how low your expenses can be while still being quite happy with your qualify of life. Some expensive things don't provide the happiness you think they will. Diversify the kinds of investment accounts you have. Maximize your tax-advantaged accounts like a 401k, but then contribute to a Roth IRA if available, and then plow money into a taxable brokerage account. When you approach retirement, plan to have some time period of expenses covered by cash on hand. Then use cash, brokerage and Roth funds to cover expenses, while converting what you can from 401k or traditional IRA into Roth funds, and minimizing the income/taxation that results so you can still qualify for credits. Funds converted to Roth will be available for tax-free withdraw after 5 years, so continue to convert over time, while using the post-tax accounts to cover expenses.
- tkojames 5y ago
  This and HSA is nice to have as well. Max that out. Pay out of pocket for everything and keep records of it. When you retire you can pull all that out tax free. Irs says you can can do it. And it is pretax. Any left over money will turn into IRA when your old. But if you have family and can cover the out pocket cost HSA are really nice extra amount. My plan is use my taxable and withdrawal medical expenses from the hsa tax free. So I can convert 401k funds to Roth using the ladder. Ideally the normal Roth I have had for years never gets touched for a long time. Also you can also do a Roth via backdoor.
ASinclair 5y ago
This assumes all of your income comes from a traditional 401(k). As an early retiree that's unlikely. It's likely that a significant portion of your income will come from a taxable brokerage account. A significant portion of that income is your basis (what you paid for the investment) which is not taxable. There's a lot you can do to "engineer" your taxable income in early retirement.