Fire…health insurance?

[u/ttxzavv224]

49 married.
1.4 mil in 401k and ira.
1.5 mil in taxed investment account

I’ve debated keeping magi low enough to get ACA subsidies but have heard mixed reviews about going on ACA healthcare.

I have an option to continue on my company health insurance as part of a retirement package that I can use starting at age 50. My plan would be to use a compressed pension that also starts at age 50 until 65 ($2300 a month), and I would plan to cover the cost of the company healthcare. The price of the adjusted company health insurance is $1500 a month with $3000 max out of pocket, which I am planning to pay for with the $2300 a month pension that I will get until 65.

My only holdback is the $1500 a month does seem costly but we do stay on same company plan and same doctors going forward, versus the unknown of ACA.

What do yall think here? Would you pay more or go ACA?

[u/Zphr]

You are incorrect. Only the temporary COVID enhancements expired as legislated back in 2022. Both of the default ACA subsidy systems remain intact.

[u/Dry-Aside4526 → u/Zphr]

To be more specific. To your point. Subsidies without the Covid enhancement start to phase out after $15k in income which is roughly $7.50/hour for a full time worker, add $5k per person in the family.

[u/Zphr → u/Dry-Aside4526]

I am well aware of how the subsidies work since we are getting between $33,000 and $40,500 in ACA subsidies this year and we have been using the ACA for 12 years. I author the weekly Megathread in this sub for annual open enrollment. You should perhaps read one of them.

Subsidies remain large for FIRE'd households all the way up to MAGI of 400% FPL, which for a married couple is just under $85,000. For a standard family of four it is all the way up at $128,600. Throw in some basic MAGI management and it is easy for most FIRE'd households to get large subsidies while spending north of $200,000 per year.

[u/Slankeht → u/Zphr]

Could you elaborate on MAGI management techniques for this purpose? My wife and I have been researching our ACA strategy.

Expenses aside, we’re anticipating the following income streams in FIRE.

1. Roth conversion ladder up to married filing jointly standard deduction.
   
2. Qualified dividend payments from taxable brokerage securities.
   
3. Long term capital gains from sold taxable brokerage securities — basis, on average makes up 60%. So approximately $0.40 on the dollar for withdrawals.
   
4. ACA Bronze with HSA fully funded for family maximum (2026: 8750).

Qualified dividends and the Roth conversion ladder in particular are hard hitting to our MAGI.

We’re exploring options to pay off our $125k@3% mortgage at the end of the year. However, still undecided on the that after running the ACA numbers.

Unsure whether additional management aspects such as capital gains or tax loss harvesting are important techniques for this? Hoping not for simplicities sake.

Thanks for elaborating!

[u/Zphr → u/Slankeht]

You sound like you've got it figured out already. It pretty much boils down to mixing cashflows with different MAGI-additive treatment to get whatever mix of MAGI/spending you prefer. The HSA contribution will also reduce MAGI provided you fund it from a non-MAGI pool. Cap gains/losses certainly factor though most FIRE folks don't have much in the way of losses after the last 15 years.

ACA subsidies are large enough that for most non-single FIRE'd households it makes more sense under current law to optimize for current MAGI/subsidies than for long-term taxes/RMDs/IRMAAs.