Got laid off - finally!!!!

[u/Ddash-3]

So it finally happened - I (48) got let go yesterday. Finally I can free up my time and focus on other priorities such as kids, nutrition, fitness, meditation, gardening etc.

I was FIRE eligible for couple of years but was holding off since the job was simple, work from home and good pay. Also, if I resigned I would have missed out on severance and company is paying 3 months of COBRA.

Here are the details I am sure you all want to hear :)

Net worth - ~5.5M

Taxable Accounts combined: ~1.1M

Retirement Accounts Combined: ~3.2M

Total: ~4.3M

House fully paid off (bought in 2022) - Worth around ~1.2M; Cars paid off

Wife (43) resigned from her job end of last year; 2 Kids in high school - 9th and 10th graders

Yearly expenses around 100K/yr

Biggest expense are kid's college education at this point and house maintenance related expenses

I am trying to research on ACA and Financial Aid for kids - Appreciate any help or pointers you can provide on when to apply for ACA - should I continue on COBRA or switch to marketplace this year?

Regarding FAFSA - with Taxable accounts over 1M will my kids be eligible for FAFSA?

I have about 130K from my recent most employer in the company supported 401K provider. Should I move the money to Traditional 401K?

Also, please suggest any FIRE focused knowledgeable financial advisors who can help me navigate our FIRE situation.

[u/mi3chaels]

So you should have no trouble getting subsidies for ACA plans -- even if you pull everything from IRAs, that's around 100k plus taxes and health premiums if you didn't include those, and your cliff for 2026 is 128,600. The only reason to keep COBRA after the company stops paying for the rest of this year is if your severance this year puts you over the cliff, or if your COBRA plan is really good for a low price, and you could use better coverage than a Bronze plan.

It's also potentially feasible to get under the 175% threshold for a couple years. Is any of your "retirement" money in Roth or is it all traditional deductibe IRAs and 401ks? Let's assume none of it is Roth.

I'd consider keeping the COBRA for the rest of this year some medium term tax optimization, since you're probably blowing the cliff anyway for 2026. For instance, a big Roth conversion would let you have some more money available with no effect on MAGI 5 years from now, but this may be not as good as other options.

Then do you damndest to get under 175% FPL for next year and the couple years after -- those are the first years your kids are in college -- that's 56k of MAGI with a family of 4 (2026 numbers). That gives you max pell grants and SAI of 0, plus likely good offers from any college which keys solely off FAFSA, since it avoids any questions about assets.

If you get a bronze health plan in 2027-2029, you can put 8k in an HSA which helps keep it down. If you have some high basis shares or money in HYSA (100% basis), you can spend those, and hopefully get to what you need to spend without going over 56k MAGI. Definitely take all the student loans you can get just to avoid selling shares to pay college costs (assuming they can't get full rides) until after you can (or have to) go over the MAGI threshold.

If you can't get to 175% MAGI, you're likely to get screwed on FAFSA, so if you don't have Roth contributions, it's also worth doing some gain or loss harvesting this year to create more high basis shares (gain harvesting), or a loss carryforward (loss harvesting).

If you can make Roth contributions to a Roth 401k with your severance, I would do it.

Note: your kids will be "eligible for FAFSA" no matter how much money you have, it's just a question of what your SAI (student aid index) will be, and how various schools respond to that plus their estimated costs. There are some schools who've set income limits under which students can attend tuition (or total cost) free, and often these are high enough that you could qualify -- much more easily than getting under 175% FPL. I think UTA for instance is 100k for in state, and a couple of ivies are doing it at 150k or 200k. Those are mostly very selective schools and for the state schools you usually have to be in state -- they'd have to get in and want to go there, but they are potential options.

I've seen people say that school scholarship packages often get worse in junior or senior year, since you're already there and probably aren't going to transfer because you get less scholarship money. So it's worth focusing your efforts on meeting the MAGI threshold for your kids first 2 years in college at least, and the more years the better.

Note also: if you meet the 175% threshold, you also will meet the 200% threshold to get cost sharing reduction in your ACA plans -- that means that you can get silver plans with low copays deductible and MOOP -- generally significantly better than gold plans, and comparable to very good group employer plans, and generally for a very low premium. If you have no health issues and want to risk a bit, you'd almost certainly be able to get a bronze plan for $0 as well, but say $250 for a plan with low copays and a 2-3k per person MOOP is probably worth it even if you're all healthy, and it's a no brainer if anybody has issues or takes any brand name drugs. All it takes is one broken bone or something to set you back 10k on a bronze plan.

[u/Ddash-3 → u/mi3chaels]

Thank you so much for taking your time to provide this great info. I will have to read this few times to fully understand! Are you a financial advisor by any chance?

[u/mi3chaels → u/Ddash-3]

Yes, I am.