My mom is 61 years old. The small employer she's been with for 20 years doesn't provide heath insurance so she gets it through the ACA. In 2017, her insurance premium went up to $590 a month and it was about all she could do to afford it. She makes a few thousand dollars more than the ACA subsidy cliff threshold so she doesn't get any help, even though her insurance premiums are unaffordable, by definition in the ACA. At her age she is very hesitant to go without insurance since she's had a couple major problems from a car accident a few years back. CareFirst is raising her premium by 40% for 2018, up to almost $900 a month, and there's no chance that she can afford to pay it.
Thanks to all the knowledge I've learned from this forum and other early retirement bloggers, I investigated how easy it would be for her small employer (about 8 people) to set up a Vanguard SIMPLE IRA for her, which the IRS considers a retirement plan and would allow her to contribute pre-tax dollars to, thereby reducing her modified adjusted gross income. I asked her if the owner would be willing to offer a SIMPLE IRA to employees of the business. She thought he might go for it so I created a short PowerPoint presentation highlighting the benefits of the plan and what it would cost the business and she gave it to him to review. She explained to him how it would make a tremendous difference to the cost of her health insurance so he went for it, and has created a plan through Vanguard.
Now that she can reduce her modified adjusted gross income via pre-tax retirement contributions, I sat down with her and we reviewed her income to show how she can shift IRA contributions she had been making on her own, how she can open an HSA to reduce her MAGI even further, and how everything will work and still leave her with the money she needs to cover her living expenses. She called the state insurance exchange to report a change of income and she will now receive over $600 a month in premium subsidies, bringing the cost of insurance down to about $230 a month. The end result between the small employer contribution she'll get on her SIMPLE IRA, the tax savings she'll receive on the HSA she's opening, additional tax savings on any retirement contributions she'll make above the $6,500 she was limited to with a self-directed IRA, and the premium subsidy is that she'll save over $10,000 in 2018 and she'll get to keep her insurance. Even better is the fact that she doesn't expect her income to rise in the next few years so she now has a viable path to keeping health insurance affordable until she's 65 and can start Medicare.
So I just wanted to say THANK YOU to all the folks here that I've learned from over the past couple years because without the knowledge I've learned here this wouldn't have been possible. My mom is over-the-moon happy.
