ACA in retirement?

[Frugal D]

Hi folks,

I recently was able to (finally) FIRE and am now confronted with the very expensive healthcare decision.

Live in Washington state and have a family of 3 including myself (38), wife (44), and son (7). Gross income is about $145k in ordinary and qualified dividends.

I'm seeing monthly premiums of about $1k on the marketplace for a decent plan, but plans can range up to $1.7k.

Does this seem about right based on my income and state? Do you have any tips and tricks to find lower healthcare insurance?

Thanks!
D

[geekette]

Tips and tricks?  Lower your income...

Watch out as you age, since the price of insurance will go up.  Ours (for 2 of us, early 60's) it's well over $2k for a reasonable plan, but they go up to over $4k. Since our income is fairly low, we get a substantial subsidy, as well as the Silver plan's lower deductibles and copays.

[reeshau]

There are a wide range of plans.  What kind of plan are you looking at?  And, are you considering your total costs, or just the premiums?

$1k is plausible, but they can be much less.  Bronze, Silver, or Gold?  HDHP, or not?

Is $145k your planned income next year, or this year?  That's a hell of a lot in just taxable dividends. (i.e. not a 401k / IRA)  Working / salaried income means nothing once you FIRE.  Don't be afraid to state something completely unrelated, as long as you can show a plan as to why.  You are at a major life milestone, so big changes can happen.

My #1 tip:  check to make sure any plan you are considering has the doctors, facilities, and prescriptions you need and want.  Network depth is a way to cut corners.  And it's nowhere near as easy as a workplace plan, at least for a major employer.

And if you travel a lot, consider that too.  I have no plans available that cover more than mandatory emergency care outside of our metro, so we buy travel insurance, even in the US now.

[Financial.Velociraptor]

The second cheapest (Cheapest doesn't have my doctor or meds) Bronze plan for a single 51 male in Houston TX is 456/mo.  I manage my AGI through careful withdrawals (and other shenanigans) and qualify for the full subsidy.  That is equal to the second lowest cost Silver plan so I actually get paid to have insurance e.g. my tax credit in May more than covers my premium with some spending cash left over. 

TX has relatively low cost plans for ACA (they are ALL "high deductible")  That suits me fine as I can choose an HSA compatible and further manage my AGI to maximize subsidy while accumulating tax benefits for my SS years. 

Your 1k/mo sounds normal for a family of three from what I've heard. Make sure you understand your deductible, max out of pocket, and fit that to your needs (the 2k plan might be a better fit!) 

If you can qualify for the subsidy through year end tax planning (contributing to IRA or Roth conversions) do so!

[curious_george]

This sounds about right to me. You could try to lower your taxable income if you can - 145k in dividends seems like a lot.

Alternatively you can self insure (I do NOT recommend this) or use one of those health shares (I also do not recommend this either). Just pointing out that you technically have options, they are just all horrible imo.

To put things into perspective, a 1k /month insurance premium is around 8% of your income. I'm not sure if I would worry too much about this if I were in your shoes.

[reeshau]

TX has relatively low cost plans for ACA (they are ALL "high deductible") 

Actually, when we arrived in 2020, we went on a $0 deductible plan with Oscar.  We knew we had to re-establish a local network, with a lot of new patient appointments and testing, so it made sense for that year.

This year we are on Community Health Choice (for better hospital coverage) our individual / family deductibles are $1,600 / $3,200.  Far from HDHP.  But we know we will have some spending, so again, makes sense for us.

[seattlecyclone]

Health care is expensive in the US. Health insurance is expensive as a result. Your income is high enough that you won't get much (if any) of that cost subsidized.

Plugging your income and family details into the exchange's browse function (using King County), you'd get a very minimal $36/month subsidy for 2023 plans. The net costs of the various plans in King Country would range from $740 to $2,461 after applying that tax credit. You're quoting different numbers so I assume you live elsewhere, but the same general principles apply.

How easy would it be for you to have a lower income on paper? At the upper end of the tax credit phase-out range, every $1,000 you can reduce your income is worth $85 in annual premium savings.

[flyingaway]

Question:

In retirement without any earned income and with a HDHP plan, can you contribute to an HSA (using money from IRA accounts or any other taxable income) and lower your tax and income for ACA subsidy?

[reeshau]

Question:

In retirement without any earned income and with a HDHP plan, can you contribute to an HSA (using money from IRA accounts or any other taxable income) and lower your tax and income for ACA subsidy?

Yes, there is no earned income requirement, like an IRA.  Official requirements:

https://www.irs.gov/publications/p969#en_US_2022_publink1000204025

If you take a distribution from your IRA, it would be subject to penalties (or not) like any other distribution.

[Financial.Velociraptor]

Question:

In retirement without any earned income and with a HDHP plan, can you contribute to an HSA (using money from IRA accounts or any other taxable income) and lower your tax and income for ACA subsidy?

I have done so three times and it wasn't challenged.

[4tify]

Question:

In retirement without any earned income and with a HDHP plan, can you contribute to an HSA (using money from IRA accounts or any other taxable income) and lower your tax and income for ACA subsidy?

Contributions to HSA come off your final tax bill but not the amount calculated for ACA subsidies. Those are calculated before all deductions.

In retirement your total income would include interest and dividends even if you don't "earn" any money (along with whatever else is kicking off passive income like rental real estate). ACA uses that amount to calculate your subsidy.

[seattlecyclone]

Question:

In retirement without any earned income and with a HDHP plan, can you contribute to an HSA (using money from IRA accounts or any other taxable income) and lower your tax and income for ACA subsidy?

Contributions to HSA come off your final tax bill but not the amount calculated for ACA subsidies. Those are calculated before all deductions.

This is false. HSA contributions do reduce your AGI. ACA subsidies are based on a slightly modified AGI, but those modifications don't add HSA contributions back in.

[4tify]

Question:

In retirement without any earned income and with a HDHP plan, can you contribute to an HSA (using money from IRA accounts or any other taxable income) and lower your tax and income for ACA subsidy?

Contributions to HSA come off your final tax bill but not the amount calculated for ACA subsidies. Those are calculated before all deductions.

This is false. HSA contributions do reduce your AGI. ACA subsidies are based on a slightly modified AGI, but those modifications don't add HSA contributions back in.

Oh thank you! I looked here and there’s no mention: https://www.healthcare.gov/income-and-household-information/income/#magi

Do you know of a resource that explains HSA contributions etc as MAGI?

[Firepants]

Your link only includes income. Check out the link about reporting deductions.

https://www.healthcare.gov/reporting-deductions

[moneyman31]

https://www.healthcare.gov/reporting-deductions/

HSA contributions do reduce your ACA Magi

[4tify]

Thank you.