Author Topic: What to do with $50k we kinda-sorta need  (Read 672 times)

LinLin

  • 5 O'Clock Shadow
  • *
  • Posts: 27
What to do with $50k we kinda-sorta need
« on: March 22, 2021, 04:55:00 PM »
So, I will try to keep a long story short here.

I ran a freelance business for 22 years...it did well but I really have nothing to show for it because I was a money doofus until only recently. Then, a couple of years ago I finally started taking it seriously. Hired an employee, structured as an S Corp, got a business bank account and liability insurance, and the rest. Started using the Profit First method to build buffers in different accounts: taxes, payroll, owners comp, operating expenses, profit, etc.

Now, a pain issue I've had for years started getting much worse, exacerbated by stress and constant sitting...so I decided to finally shut the business down.

To build up the bank account buffers, I was paying myself about $3k/month (after taxes). I now have $50k sitting in the business accounts once I pay taxes and pay a generous severance for my employee. (We had no debt and all expenses were cancelled.)

I can take the $50k as a distribution...but what do I do with it? I'd love it if we could live on just DH's income (about $65k after taxes) and I can use the extra time I now have to not only recuperate, but also to take steps to save money.

But just in case we can't swing t, I'd like the option to pay myself a bit each month, meaning I can't stash the $50k anywhere I can't get at it.

To complicate things, we have the worst health insurance in the world. DH works at a small company that doesn't offer health insurance, so for years we've been paying $450/month for a family of 3 with a $20k/person ($40k/family) deductible. We have come out ahead in the long run, but last year our son's medical expenses were over $25k out of pocket (misdiagnosed dance injury, eventual surgery). The deductible is so high that we aren't even eligible for an HSA.

I'm not sure if my new no income/low income status plays into that at all, but wanted to throw it out there in case t changes how/where I would keep the $50k.

Any thoughts/ideas? Face punches are also welcome and expected, because after running a thriving business for 24 years it's kinda sad that I don't have much to show for it. (Though I DID pay off $25k in debt in 6 months a few years ago, and now have no debt except mortgage and a a 0% payment plan for $11k for the surgery!)

THANKS!

maizefolk

  • Walrus Stache
  • *******
  • Posts: 6054
Re: What to do with $50k we kinda-sorta need
« Reply #1 on: March 22, 2021, 05:09:27 PM »
If your own taxable income after closing the business is your husband's $65,000 salary, I suspect health insurance is going to get a lot LOT cheaper for you while you'll also be able to get a better plan that will cover more.

Using this calculator with some random guesses about ages, you'd be able to buy a much more expensive health insurance plan ($1100/month) which would have lower deductibles and out of pocket maxes and yet pay only $323/month to cover the three of you.

LinLin

  • 5 O'Clock Shadow
  • *
  • Posts: 27
Re: What to do with $50k we kinda-sorta need
« Reply #2 on: March 22, 2021, 05:14:47 PM »
Thank you, @maizefolk ! I know that if you earn under $80k you can get health plan subsidies, but I assumed that was gross, not net? Because my husband makes more than that before taxes. Also, if I suddenly have this $50k come in all in one chunk, does that count as income? (Which would definitely put us over the $80k limit.)

Seriously, this stuff is just so incredibly confusing. I can market a business like nobody's business, but don't ask me to explain taxes, healthcare costs, etc. :D

LinLin

  • 5 O'Clock Shadow
  • *
  • Posts: 27
Re: What to do with $50k we kinda-sorta need
« Reply #3 on: March 22, 2021, 05:19:47 PM »
Interesting calculator! When I plug in our numbers, it says we qualify for a "silver" plan at $638/month. But max out of pocket is $17,100. That's the kind of stuff I see everywhere...if I want a reasonable deductible (like under $10k), the premiums become extravagantly expensive!

maizefolk

  • Walrus Stache
  • *******
  • Posts: 6054
Re: What to do with $50k we kinda-sorta need
« Reply #4 on: March 22, 2021, 05:25:11 PM »
The subsidy should be fixed regardless of which plan you actually pick, so you'd be able to get the same monthly subsidy value that calculator provides to offset the cost of any plan you want from the ACA exchange.

Can you look at what plans are offered in your zip code here: https://www.healthcare.gov/see-plans/#/ and what they'd cost you given that subsidy amount?

yachi

  • Pencil Stache
  • ****
  • Posts: 779
Re: What to do with $50k we kinda-sorta need
« Reply #5 on: March 23, 2021, 07:00:42 AM »
Interesting calculator! When I plug in our numbers, it says we qualify for a "silver" plan at $638/month. But max out of pocket is $17,100. That's the kind of stuff I see everywhere...if I want a reasonable deductible (like under $10k), the premiums become extravagantly expensive!

$17,100 out of pocket is the legislated maximum - you may or may not have a plan with that a high out of pocket available in your area, but you cannot be offered one with a higher out of pocket maximum.

Let's be clear on the terminology.  Deductible and max out of pocket are different things, sometimes very different things.  As you spend on healthcare, you'll meet your deductible first, and your insurance kicks in at a different (higher level).  At this higher level, you continue to spend on healthcare but at a reduced rate (because your insurance is paying more than before your deductible).  Continue spending and you may or may not reach your out of pocket maximum.

There are plans where the insurance kicks in at such a high level after you meet your deductible that you have no reasonable way of getting to the out of pocket maximum.  I had such a plan at a previous employer.  The insurance paid nothing (just allowed negotiated prices) until I met my deductible.  After my $5k or 6k deductible was met, I paid only $40 per doctor visit or $100 per emergency room visit.  The out of pocket maximum of over $15,000 was irrelevant.

LinLin

  • 5 O'Clock Shadow
  • *
  • Posts: 27
Re: What to do with $50k we kinda-sorta need
« Reply #6 on: March 23, 2021, 07:31:07 AM »
Thank you, all!

Oh my God, I just wrote this long reply and it was deleted! To make it short, I used the calculator above. Even understanding what everybody has written above, I'm wondering if the $450 plan is a better deal. We have averaged $350 per month in premiums over the last 10 years because it started at $250 and eventually went up over time to $450. We paid out about $48,000 out of pocket in that time…two surgeries and some miscellaneous expenses. For a total of $90k.

With one of the cheapest of these plans at $1500 per month premium, I would be paying out $180,000 over 10 years in premiums alone.

I thought we had the worst insurance in the world, but maybe we really don't, especially considering that so far, knock on wood, we don't use that much healthcare. I don't even think they offer this plan anymore, we are grandfathered in. Every once in a while they say they will need to get rid of the plan because it doesn't meet the federal requirements, but they never do.

How the heck does anyone without a traditional job afford health insurance???