Author Topic: Geographic Arbitrage and Health Insurance  (Read 440 times)

fluxgame

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Geographic Arbitrage and Health Insurance
« on: October 12, 2018, 06:43:43 PM »
My wife and I are getting within a few years of hitting our FI number so we're starting to plan what life looks like in Post-FI existence. The bulk of our assets are and will be in tax-deferred vehicles and the plan is to execute a Roth conversion ladder once we quit our jobs. My thought was to establish residency in a tax-free state to reduce state taxes (We currently live in Massachusetts, so we'd pay 5.1% on everything in excess of $8,800), but I started to consider the impact that would have on the cost of health care. MA subsidizes the cost of health plans for lower-income residents; I pay $126/month as long as we keep our income under 300% of the FPL (easy to do with a Mustachian spending level). I did a little looking at average insurance costs on the Kaiser Foundation website and was surprised to see that a health plan would cost us nearly $400/month in the states I spot checked. Is that in line with what others are actually seeing in other parts of the country? If so, seems like it makes more sense to maintain MA residency as the additional health insurance costs would far outweigh the state tax on the Roth conversions.

Laura Ingalls

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Re: Geographic Arbitrage and Health Insurance
« Reply #1 on: October 12, 2018, 10:03:39 PM »
There are a couple of states that expanded Medicaid  and have no income tax (Washington and Alaska).  If you lived in a state like Texas or South Dakota you would need to be careful to stay above 100% of poverty.  There might be other states that you could keep expenses under 138% of poverty and be on expanded Medicaid, but you might still have tax liability.  ACA subsidies are a function of income not the cost of the unsubsided plan. 

There might be compelling reasons to stay in MA but I think for ultimate low cost it’s not your choice

fluxgame

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Re: Geographic Arbitrage and Health Insurance
« Reply #2 on: October 12, 2018, 10:15:30 PM »
I wasn't aware of the expanded Medicaid option, good to know. I'm not sure we're prepared to live on 138% of FPL though.

Laura Ingalls

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Re: Geographic Arbitrage and Health Insurance
« Reply #3 on: October 13, 2018, 07:03:57 AM »
I wasn't aware of the expanded Medicaid option, good to know. I'm not sure we're prepared to live on 138% of FPL though.

You wouldn’t have to.  You could spend Roth money or spend down cash in taxable.

fluxgame

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Re: Geographic Arbitrage and Health Insurance
« Reply #4 on: October 13, 2018, 03:26:03 PM »
We won't have much in post-tax dollars available. Enough to get us through the 5 year "seasoning" period in the Roth ladder, but not a ton more. So, we'll need to convert enough to cover a full year of expenses at each rung in the ladder.