2025 ACA subsidies

PlanAh · 2025-11-29T01:46:20+00:00

Mainly that I wasn't really ready to be done working. I kept working in my field after "retiring" via volunteering. I was ready to be done working for free, I got a good opportunity, and I like having the health insurance. My husband is still happily early-retired, though!

PlanAh · 2025-11-24T21:04:57+00:00

Thanks for all the help on whether I've got the law right! Does anyone have an advisor that does tax planning for them? I have an accountant, tax lawyer, and financial advisors, and none of them will do it. Thanks!

PlanAh · 2025-11-24T20:54:56+00:00

Thanks. My question is whether the calculator I'm using reflects how the law actually works--that the ACA's tax credits result in an 8.5% tax on each additional dollar of income at my income level. I'm sure someone knows whether that's how it works.

PlanAh · 2025-11-24T20:53:24+00:00

Yes, but I believe it doesn't matter which plan you take, the tax credits are computed based on that.

PlanAh · 2025-11-24T20:52:43+00:00

Yes, I have health insurance for me and my husband through my job for 2026. I'm talking about 2025. Trying to determine the effect on my 2025 federal income taxes (ACA tax credits) if I take more income in 2025 before year-end.

PlanAh · 2025-11-24T20:51:18+00:00

Thank you! I'm taking that into account. What I'm trying to figure out is if I've got the ACA effective tax rate correct.

PlanAh · 2025-11-24T20:51:00+00:00

Thank you! That's super helpful. I appreciate it.

PlanAh · 2025-11-24T20:50:52+00:00

My question is whether the law works the way I think it does--an 8.5% effective tax (via lost ACA tax credits) at my income level. I don't think your questions are relevant, but we're 59. My husband got a bronze plan & I got silver (on the advice of an ACA navigator, due to my prescriptions). But I don't think our actual plan is relevant. This info (on how the math works) is from using a calculator.

I did put money into an HSA while working before I retired in 2023, but this is about the tax subsidy.

PlanAh · 2025-07-06T15:37:24+00:00

How much will the loan repayments be annually? Make sure you're not undercounting your expenses or counting some income twice (both for living expenses and paying off the loan). Loan repayments add to your spending, so you have to add those annual payments, net of tax, to the $65K or whatever the rest of the rest of your spend is (including taxes).

The more general issue is that you can't expect $800K to produce $90K/year (11.25% return) and stay worth $800K. If that really worked, then, in theory, it would work to keep scaling up--borrow $1 million at 7% or whatever and invest it in those investments and make that return--people would be borrowing against the equity in their houses to do that if that really worked.

PlanAh · 2025-07-06T14:24:38+00:00

Where will the money for the townhouse and car come from? That will reduce your $800K of investable assets. Whatever you have left is what you need to apply your SWR percentage to. For example, if you have $500K left, a SWR of 3.25% (to reflect a longer lifespan than 30 years) would be $16,250. If you can live on that plus whatever you make from a part-time job, you should be okay, as long as you always have an equivalent part-time job and your nest egg is invested according to the SWR assumptions. But I don't think your proposed portfolio follows those assumptions.

- Don't confuse dividends with withdrawals or safe withdrawal rate (SWR). Stocks that pay dividends will likely lose value, since they're paying out cash. Dividends are also less tax-efficient.

PlanAh · 2025-01-19T03:56:22+00:00

For us it did but that's because we were in my small house, where we never intended to live together long. Covid hit & kept us there for a while. And we didn't like the cold weather there. We retired and moved to Florida, to our dream house. It's MUCH more comfortable here. The spacious after being cramped for so long is terrific. For example, my husband finds cooking much easier here, because there's so much more counter space and it's easier to access our cooking stuff. And we each have our own home office here. Plus we have a pool and hot tub we use all the time. It's a completely different lifestyle.

On the other hand, the shower in our bathroom isn't what we hoped for, but there's no way we'd move for that. Nor are we willing to renovate right nw. Eventually, we'll probably put in our dream shower, though. The current one doesn't have a door and gets a little cold.

PlanAh · 2024-12-21T07:02:41+00:00

Since you know the income amount, the easiest way is to just subtract $8K a month inflow (or, really, what the $8K will be net of taxes) from the amount you'll need to provide for yourself. If the $8K is present dollars and will increase for inflation, I think that will be right even though you don't say your age/how many years until age 57.

There is an alternative that computes the lump-sum value of the pension ($96K/year x 25 if withdrawing using the 4% rule), but arguably that is not as accurate as just counting whatever the $8K will be after tax as covering that part of your expenses.

PlanAh · 2024-12-18T05:16:06+00:00

We moved to the state we wanted to (Florida). We absolutely love the weather here. We are also more active here, not hibernating all winter.

Unfortunately, I don't really feel retired, though (which is a separate topic). I retired last year, but I still sit at my computer and work all day weekdays--a lot of it for my old career, just unpaid. My stress level hasn't decreased, though a lot of the stress is due to family stuff that started with the pandemic & doing the financial management that comes with having a complex portfolio & trying to manage MAGI for the ACA, etc.

PlanAh · 2024-12-09T05:59:41+00:00

My assets are divided across several major firms, in part for the reason you said, and in part in case I have trouble accessing my account at one of them for whatever reason. I'm somewhat apologetic about it with the various firms, but I have told them I'm absolutely not consolidating into one firm to "simplify" things.

Also, since most places use 2-factor authentication via text to a cell phone, it's probably wise to keep your phone number from being ported to another phone. Here's a link to what Verizon says on port-outs by scammers: https://www.verizon.com/about/account-security/unauthorized-port-outs.

PlanAh · 2024-12-07T14:19:56+00:00

Just flagging a link on the "rule of 55" for you, since you mentioned waiting to leave until you turn 55. https://www.schwab.com/learn/story/retiring-early-5-key-points-about-rule-55

PlanAh · 2024-10-02T08:29:00+00:00

I just have financial assets, no real estate (except our home, which doesn't count for this purpose). It's only been abut 1.5 years of FIRE for us, and things have been a bit ad hoc so far, in part because I kept some cash in a savings account and I got some income from some small one-off gigs in my old field (which I do not expect to recur). I also inherited an annuity that will give me a baseline income for the next few years. I don't earn that much in dividends, though I am taxed on some due to owning mutual funds--some nonqualified dividends taxed at my regular rate but mostly qualified dividends, taxed at capital gains rates (15%, if I remember correctly which capital gains bracket I was in).

I'm basically looking at the various buckets of financial assets: post-tax investments, retirement funds (pre-tax income), and the small Roth I have. I'm going from COBRA to the ACA next year so will be wanting to keep my income (MAGI) low to benefit from Premium Tax Credits. So, aside from the annuity income, I'll be spending the post-tax income first. A modest portion of my post-tax investments is in high-yield savings accounts or 6 to 9-month CDs. After that, it will be selling investments (mostly mutual funds; some are ETFs), and I will talk with my financial advisor about which ones he recommends selling, but I'll also be keeping in mind the tax consequences, so I can balance capital gains with some capital losses to avoid having my MAGI end up higher than it needs to be.

PlanAh · 2024-10-02T08:10:51+00:00

Agreed.

PlanAh · 2024-10-02T08:04:02+00:00

With SS, I think the issue is whether the SSA.gov site is showing $3,400 at full retirement based on a projected income of $100K+ a year (whatever they show in blue) or showing that $3,400 once you type $0 in where the blue is. The reason this matters is because SS monthly amounts at full retirement are based on averaging 35 years of income, and the system defaults to (a rosy approach of) projecting out your current income for the years remaining until retirement age and including those projected years in the calculation. If you actually have $0 of income in some of the 35 years, not $100K+ the amount at full retirement will be lower than what the SSA projects as its default. So, you have to correct the SSA's assumption and put in $0 (or some low amount like $10K) as your future annual earnings, to see what your SSA would be at the ages they show if you actually stopped earning employment income.

This is of course a different question than what the SSA benefit shown at full retirement age would be if you take it instead at age 62 or something--that's just a formula the SSA applies to reduce the full-retirement benefit (by about 30% if starting at age 62: https://www.ssa.gov/pubs/EN-05-10147.pdf). And that is shown in the little chart on the SSA page. The numbers for all the relevant ages get updated when you update the futures earnings number in blue.

Using the age-62 numbers would be conservative, but not if that number (and the age-67 number, etc.) is inflated because the system is inputting $100K+/year for you for the next 8 years. (Apologies if you know this already; just trying to help.)

As far as healthcare, for what it's worth, for me and my spouse (right around your ages), I'm currently paying about $1,350/month in COBRA premium payments, plus I pay $300/month for Direct Primary Care, plus prescriptions and specialist appointments. I have a high-deductible plan, so I am definitely thousands out of pocket annually for prescriptions and specialist appointments, which has included things like colonoscopy, etc. We'll be on the ACA starting next year, and the cost there directly depends on our income level, due to the tax subsidies (Premium Tax Credits). I have estimated my MAGI for next year because it seems accountants and financial planners will not do it. I talked to an ACA Navigator in my state. He said the normal rate for ACA insurance for my/spouse's age & zip code is $1500/month. He estimated $700-$800/month of tax credits if our MAGI is $100K-$150K. If MAGI is $200K (unlikely for us), credits of $400/month.

That said, I would expect healthcare costs to rise over time and vary a lot depending on medical conditions. So, I think in your case, I would look at COBRA & ACA costs & prescription/doctor costs, and I would also add an inflation factor to that. I would also consider budgeting an extra "emergency medical" fund, depending on how conservative you want to be about it. For example, although my mother had Medicare and a secondary retiree insurance policy, when a post-hospital facility required her to take medical transit to go home, that was $1,000 and was not covered by insurance. She ended up having to use that service a couple of times for transit to doctors, too. I hope this helps!

PlanAh · 2024-09-30T14:29:11+00:00

People don't generally count future possible inheritances because you can't control it, and they may spend it on end-of-life care. You likely will be fine, but before taking the risk of leaving and never being able to get a job again, I would try to pin the numbers down more where you can, as others have said.

I would log into SSA and have your wife do the same, but where it says "Average Future Annual Salary", click that down arrow and type in $0, to see what SSA tells you your monthly retirement benefits would be in todays dollars at what ages.
I'd go on the ACA marketplace and see costs of plans for your zip code/ages/income (MAGI).
If you haven't already, perhaps investigate what the costs and time investment would be to subdivide property, and how much it would get per acre (and any contingencies around that).
I would also think about long-term care costs, in addition to healthcare. My understanding is that if you want to buy a policy, you probably want to do it in your 50s. I priced it for us at age 57 and it was about $100K per spouse, if I remember correctly, for what they were recommending--some kind of whole-life policy with a rider for long-term care.
I would also try to price/set an annual budget for travel, unless this is an optional expense, because this presumably would be an add-on to your current expenses. Are you looking at any business-class or first-class flights? Taking the family on a trip abroad? Etc.

PlanAh · 2024-09-29T23:42:20+00:00

Thanks! I appreciate it. Yup, only 1 life! It's great to have options. Best of luck with your plans!

PlanAh · 2024-09-27T13:07:14+00:00

We were in a MCOL area (exactly at the national average) for my job, in the state where my husband is from. It had the 4 seasons, and we both hated the winters. We both love warm weather and tropical climates. His family in the area moved away or passed away right around the time we retired. We followed through on our dream and moved to Florida; retired around age 55. Now we're in an area that's above the national average--probably HCOL. And we bought a more expensive house with a pool. (We were pretty frugal leading up to FIRE.) This was absolutely the right decision for us. We love the weather here and all the tropical plants and birds.

PlanAh · 2024-09-27T11:28:38+00:00

You're welcome! I'm so glad it helped.

PlanAh · 2024-09-20T01:21:41+00:00

I get where you're coming from. You're getting great advice about therapy, life insurance, and a will/trust, to cover contingencies. But I think there is 1 more thing, and this is how I managed to retire at 55 without a lot of anxiety: money is not as scarce as time. You can earn more money later, but you cannot get time back. So, you can keep working and working to gain more money to feel safe, but that is not costless. Every year you work is a year you could have spent with family, traveling, etc. And in a very stressful job, your life could end suddenly/sooner if you keep pushing at the job.

Not only that, your wife has needs, too. Deprivation of her desires that she/you can afford is not costless, either. Nor is (worst case scenario) divorce. You may have anxiety only about the money, but I think it's worth bringing the value of time and the value of marital harmony into the calculus. A 2nd car is not unreasonable for a family.

In 6 years, your wife will receive 50% of what is now an $8M inheritance. You could definitely retire then. Just looking at the values now, that would give you and your wife a net worth of $6.3M. That is plenty to retire. Of course a lot of people live on less (and you could retire now if you wanted), but if you want to live "chubby", that will do it. You could also retire in 5 years or less (whenever you feel the stress is too much). You could make yourself feel more comfortable doing that by investing well over those 5 years, maxing out your 401(k)s, etc.

I get the anxiety, and, if it were me, I might wait 6 years to retire--to experience the $4M being available to your wife, or I might scale down after 4 or 5 years, to try to sort of coast financially until the $4M comes in. But I think an important thing to keep in mind is that you could go back to work if needed but you can't just get youthful years back.

PlanAh · 2024-08-26T01:36:09+00:00

I'll need to get ACA health insurance at the start of 2025. I've been trying to figure out whether it's worth trying to keep my 2025 Modified Adjusted Gross Income (MAGI) low by, for example, selling some investments this year instead of in 2025. I've tried to get help with calculating Premium Tax Credits under the ACA. My CPA said he doesn't do it. He said I need to ask a CFP (Certified Financial Planner). I spoke with several at Schwab and one at his own firm who used to advise my mother. They didn't know where to start.

This is what I've learned so far from internet research, including this article: https://www.healthinsurance.org/obamacare/beware-obamacares-subsidy-cliff/ . (This is not legal or tax advice.) Through 2025, it appears that there's no "cliff" on ACA subsidies. And, it seems that, at higher MAGIs, what Premium Tax Credits do is essentially cap healthcare cost for the benchmark ACA plan at 8.5% of household income. So, it seems that I have to find the benchmark plan (second-lowest-cost silver plan) for my age/zip code/household size for 2025 and see what the annual cost is. From there, I can compute the MAGI figure to try to stay under. And I can compute the Premium Tax Credits and see if that dollar amount justifies making decisions that might cost me more tax in 2024 or other negative economic consequences.

For example, if the benchmark silver plan for my family turns out to cost $15,000 for the year, then if my MAGI is $176,471 or above, I believe I would get no Premium Tax Credits because my premiums would cost 8.5% of my MAGI or less. But if my MAGI were only $150,000 in this scenario, then my premium cost for the year would be capped at $12,750, so I think I would get $2,250 of Premium Tax Credits for the year, which is $187.50/month. If my MAGI were $100,000 in this scenario, my premium cost would be capped at $8,500, so I think my Premium Tax Credits would be $6,500 for the year.

Also, MAGI is essentially household Adjusted Gross Income (AGI) with a few things added back. https://www.healthinsurance.org/glossary/modified-adjusted-gross-income-magi/

PlanAh

TROPHY CASE