What came first the chicken or the egg (MAGI or ACA Subsidy)?

[ReadytoLearn]

I'm preparing to retire within the next few months and I'm going through budget retirement calculations.  My yearly expenditures need to cover my health insurance costs, but I'm having trouble understanding how my subsidies are determined.  Let me walk you though an example:

Based off $45k of living expenses for my MAGI calculation (basically my AGI with no standard deduction AFAIK), being single, 40yr old male in Orlando, FL, the state says I am eligible for a subsidy of $102.32 / month or $1227.84 / year.  my $45 in income is wholly passive coming from interest, dividends, and some capital gains (let's assume I'm selling some ~really~ old shares from my brokerage account with $1 basis each) So now I need $45k for living expenses + $1227.84 for health insurance = $46227.84. 

Where does the extra $1227.84 come from to pay for the subsidized health insurance premiums if I ~really~ needed that $45k in MAGI to live on?

If I then sell a few more shares to ~include~ the $1227.84 in health insurance = $46227.84, my MAGI goes up, and I would expect my premiums go down....and then of course my MAGI  needs to go up because my health insurance is subsidized less. :(

Obviously I'm not thinking about this correctly.  I scanned some of the pinned posts at the top of the thread, if I missed one addressing this please show me away and my apologies in advance.  Many thanks.

EDIT: Made a mistake and mistook my ACA subsidy for the actual cost of my health insurance premium ~after~ subsidy.  Many thanks for the correction.

[teen persuasion]

I'm preparing to retire within the next few months and I'm going through budget retirement calculations.  My yearly expenditures need to cover my health insurance costs, but I'm having trouble understanding how my subsidies are determined.  Let me walk you though an example:

Based off $45k of living expenses for my MAGI calculation (basically my AGI with no standard deduction AFAIK), being single, 40yr old male in Orlando, FL, the state says I am eligible for a subsidy of $102.32 / month or $1227.84 / year.  my $45 in income is wholly passive coming from interest, dividends, and some capital gains (let's assume I'm selling some ~really~ old shares from my brokerage account with $1 basis each) So now I need $45k for living expenses + $1227.84 for health insurance = $46227.84. 

Where does the extra $1227.84 come from to pay for the subsidized health insurance premiums if I ~really~ needed that $45k in MAGI to live on?

If I then sell a few more shares to ~include~ the $1227.84 in health insurance = $46227.84, my MAGI goes up, and I would expect my premiums go down....and then of course my MAGI  needs to go up because my health insurance is subsidized less. :(

Obviously I'm not thinking about this correctly.  I scanned some of the pinned posts at the top of the thread, if I missed one addressing this please show me away and my apologies in advance.  Many thanks.

First, subsidy means that $# is what you are given to offset the cost of insurance, not what you pay for the insurance.

Next, AGI is not "the amount you need to live on" (at least, not directly), it is the measure of what your income actually IS (adjusted, of course).  That is, AGI is not really spendable income, it is just a snapshot of your dollars flowing in (for the purpose of testing and ultimately taxing them).


Your budget is actually = spending budget of $45k + cost of insurance (subsidized or not) + taxes.  Take a stab at total budget, say $50k.  What are taxes on that income? What are insurance costs after subsidies on that income?  Are taxes + insurance costs <= the amount you added of $5k?  If not, revise total budget upward and repeat.  Conversely, look at reducing expenses in spending budget to stay within your desired total budget, especially if you need to stay under the ACA cliff for subsidies.

Does that make more sense?

[ReadytoLearn]

Gah, you're absolutely right, the subsidy is not what I have to pay, but what comes off what I need to pay... serves me right for writing forum posts at 4am stressing about work and retirement.
 Thank you for the correction.  I'll digest the rest of your post in a bit.  Thanks!