How do I qualify for ACA subsidy with $90K in income?

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Ependytis
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How do I qualify for ACA subsidy with $90K in income?

Post by Ependytis »

I’m estimating my annual income from investments will be $90K per year when I retire. The income would include dividends, the sale of stock, and capital gains divided roughly equally. I’m single trying to understand how is it that I can qualify for ACA Healthcare subsidy with this level of income. I am 57 and the assets would come from taxable accounts. I plan on finding a high deductible HSA. I appreciate your input. My current spending with non-subsidized healthcare and taxes would be with $50K per year. However, I’ve worked hard to get what I have and therefore I want to spend it while still being value conscious which is difficult given this mindset. I will give the extra away with my trust when my time is up. However this is a whole different topic.
Last edited by Ependytis on Fri Jul 30, 2021 3:12 pm, edited 6 times in total.
ShaftoesSpreadsheet
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Re: How do I qualify for ACA subsidy with $90K in income?

Post by ShaftoesSpreadsheet »

With income greater than 4x the federal poverty level you would no longer qualify. The actual amount depends if you are in the lower-48, Alaska or Hawaii:

https://aspe.hhs.gov/topics/poverty-eco ... guidelines

In the lower 48 the FPL is $12,880, so you are well over the 4x = $51,520 limit.

If you are able to contribute to IRAs that might reduce your taxable income, or tax loss harvesting, or ?? Anybody else have suggestions on lowering AGI while heading into retirement?

Time to settle down, start a family?? :D
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JoMoney
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Re: How do I qualify for ACA subsidy with $90K in income?

Post by JoMoney »

Ependytis wrote: Thu Jul 29, 2021 11:53 pm I’m estimating my annual income from investments will be $90K per year when I retire. I’m single trying to understand how is it that I can qualify for ACA Healthcare subsidy with this level of income. I appreciate your input.
Get married and have 2 children, I think with a family size of 4 you may qualify for some minimal level of subsidy with a $90k income.

Where is the $90k of retirement income coming from? Is it a pension or retirement account? Is it from a taxable investment account? If it's from a taxable investment account is some of it your purchase cost/basis your withdrawing (i.e. is that $90k of capital gains and dividends, or is some portion of that your cost basis) ?
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Ron Ronnerson
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Re: How do I qualify for ACA subsidy with $90K in income?

Post by Ron Ronnerson »

There is no subsidy cliff in 2021 and 2022 due to the American Rescue Plan. Health insurance premiums are capped at no more than 8.5% of household income during these two years. Also, prior to the American Rescue Plan, California provided a state subsidy to people whose income went up to 600% of the federal poverty level.

Your age and sources of income would be useful to provide for more specific suggestions.
InNameOnly
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Re: How do I qualify for ACA subsidy with $90K in income?

Post by InNameOnly »

What is your time period between retirement and medicare?

ACA is based on your MAGI. (Modified Adjusted Gross Income) and not assets.
If you delay some of your investment income to throttle back your MAGI during that time period to qualify and preposition enough in say checking to cover your expenses during that time, that would do it.
The realist sees the glass as completely full, 50% water and 50% air.
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fredflinstone
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Re: How do I qualify for ACA subsidy with $90K in income?

Post by fredflinstone »

To pursue a higher ACA subsidy, you may be able to lower your investment income by shifting assets
- from high-dividend stocks or stock funds into low-dividend stocks such as QQQ (current yield: 0.48 percent)
- from high-interest bonds to low-interest bonds such as 5-year treasuries (current yield: 0.89 percent)
- from yield-producing assets into precious metals, land, Bitcoin, or other non-income-producing assets.
J295
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Re: How do I qualify for ACA subsidy with $90K in income?

Post by J295 »

Please list details on the nature of investments generating this income, which may provide more targeted and helpful replies. In our case, for example, our gross income is six figures, yet due to the nature of the income we can structure (as a couple) to have modified adjusted gross income below the ACA threshold. Thus net premiums are $0.

And, are you using a high deductible plan and are you funding an HSA?
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Ependytis
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Re: How do I qualify for ACA subsidy with $90K in income?

Post by Ependytis »

I edited the original post to reflect my age, that I would be contributing to an HSA, and where is the assets would be coming from.
Last edited by Ependytis on Fri Jul 30, 2021 8:16 am, edited 3 times in total.
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Ependytis
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Re: How do I qualify for ACA subsidy with $90K in income?

Post by Ependytis »

Ditto.
Da5id
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Re: How do I qualify for ACA subsidy with $90K in income?

Post by Da5id »

Ependytis wrote: Thu Jul 29, 2021 11:53 pm I’m estimating my annual income from investments will be $90K per year when I retire. I’m single trying to understand how is it that I can qualify for ACA Healthcare subsidy with this level of income. I am 57 and the assets would come from taxable accounts. Oh I plan on finding a high deductible HSA. I appreciate your input.

Can you break down sources of the 90K investment income? I doubt you will be able to get to 400% FPL anyway though, as MAGI includes tax exempt interest and such.
PaunchyPirate
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Re: How do I qualify for ACA subsidy with $90K in income?

Post by PaunchyPirate »

It is unclear to me whether the OP is asking for ways to get an ACA subsidy (or perhaps a bigger ACA subsidy) if their income is $90k or is asking for an explanation on why they have already found that they can indeed get a subsidy with a $90k income.

Some of the responses in this thread do not seem to incorporate the changes in the subsidy levels for 2021 and 2022 as a result of COVID relief legislation that has already been incorporated into law. Prior to the legislation, a single person with $90k in income would get $0 in subsidy. But with the new legislation, there is a phase out of subsidy as income rises and not a sharp cliff where one suddenly fell off the subsidy assistance as was the previous situation. Now, $90k in income still can get some subsidy.

For the remainder of 2021, If we forget about the nuances of the $90k income and assume it is all taxable income, in my zip code of Pennsylvania, the OP could expect a $303/month subsidy for his ACA health plan. If he were able to reduce income to $85,000, he would qualify for a $345/month subsidy. He could use that on any ACA plan he desires (bronze, silver, gold, high-deductible, etc.).

The OP's actual number will differ since subsidies are based on the actual price of plans in that OP's own zip code.

Numbers will change for 2022, but still be impacted by the COVID relief legislation. In 2023, unless new legislation is passed, the subsidies will likely decrease.

As others have started to point out, there are nuances to what income actually counts as MAGI income used to determine the subsidy. The OP should further review these nuances to determine if all of their $91k is truly going to be counted when determining their subsidy level.

Is this helpful to the OP?
HomeStretch
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Re: How do I qualify for ACA subsidy with $90K in income?

Post by HomeStretch »

+1 on more details about the $90k in investment income from your Taxable account.

If the $90k is from ~2% dividends on a $4.5 million Taxable account with tax-efficient holdings, you probably will not be able to reduce your ACA MAGI enough to qualify for ACA subsidies if the 400% FPL ACA cliff is reinstated after 2022.

If the $90k is from one or more of the following, you may be able to make portfolio changes before you utilize ACA to reduce MAGI in several ways:
1. Reduce dividend/interest income with more tax-efficient holdings
2. Buy I-bonds to defer interest beyond ACA years.
3. Do Roth conversions and pay taxes from your Taxable account thus reducing the Taxable balance and dividends
4. Etc.

If the $90k is from projected capital gains on Taxable holding sales in order to fund retirement living expenses, some options may be:
1. Sell enough for 2 years of cash every other year so you can at least claim ACA subsidies every other year
2. Build a cash reserve prior to ACA for pre-Medicare retirement living expenses
3. Use a HELOC to fund a portion of your living expenses during ACA years and pay interest only until you reach Medicare age.
4. Etc.

As suggested by other posters, you can reduce current year taxable income by:
1. HSA contributions, if eligible
2. Sell Taxable tax lots with a loss during ACA years and/or tax loss harvest before/during ACA years such that you have carryforward losses that can be used to offset capital gains and up to $3k per year of ordinary income during ACA years.

Keep in mind that your Medicare MAGI at age 63 determines whether you pay Medicare IRMAA premiums at age 65. Same for age 64 MAGI/Medicare IRMAA age 66.
260chrisb
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Re: How do I qualify for ACA subsidy with $90K in income?

Post by 260chrisb »

Ependytis wrote: Thu Jul 29, 2021 11:53 pm I’m estimating my annual income from investments will be $90K per year when I retire. I’m single trying to understand how is it that I can qualify for ACA Healthcare subsidy with this level of income. I am 57 and the assets would come from taxable accounts. I plan on finding a high deductible HSA. I appreciate your input.
Seems to me retiring at 57 with that kind of income means you're not going to get the subsidy and frankly will have to pay the higher premiums for many years. The assumption (at least mine) is you likely have a pretty high net worth. None of us want to pay high premiums but not all of us can retire at 57 either. I'm faced with at least 2 years of higher premiums when I retire at 60 and before I get to 65 including one year that I'll not "make" the income to exceed the subsidy threshold.
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Watty
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Re: How do I qualify for ACA subsidy with $90K in income?

Post by Watty »

Ependytis wrote: Thu Jul 29, 2021 11:53 pm I’m estimating my annual income from investments will be $90K per year when I retire. I’m single trying to understand how is it that I can qualify for ACA Healthcare subsidy with this level of income. I am 57 and the assets would come from taxable accounts. I plan on finding a high deductible HSA. I appreciate your input.
It may seem obvious but you need to keep in mind that if you sell $100K in investments in a taxable account and have $30K in capital gains, then only the $30K is counted as your income. Some people forget that.

You would also have dividends and interest too but if you are retired and living on a taxable account and your combined interest, dividends, and capital gains are $90K then you must have a pretty high net worth which could make not getting an ACA subsidy reasonable.

The silver lining is that if you know you will not get an ACA subsidy then things like doing Roth conversions or tax gain harvesting might make sense.

A few things you can try though;

1) You might be able to juggle your income so that you could get a subsidy every other year.

2) I have a home equity line of credit on my paid off house that I use to manage my income to get a subsidy. For example I mainly need to use IRA withdrawals to pay my living expenses. By October I may have made enough IRA withdrawals so that I did not want to make more so for the last three months of the year I use my HELOC to pay for my living expenses. In January I can make an IRA withdraw to pay off the HELOC. It costs me some interest but that is a lot less than the subsidy so I come out way ahead. Paying off the HELOC in January with an IRA withdrawal impacts my taxable income for the next year so I have to do a lot of juggling of money but I will soon be on Medicare and not have to worry about that.

3) If you are going to buy a car you may want to use a car loan instead of paying cash if that will allow you to keep your taxable income lower.

4) Someone jokingly said to get married and have kids. That was a joke but if you have been living with someone for ten years you might run the numbers to see if it makes financial sense to get married now. That could also allow you to get Social Security on your spouse's account which can make a huge difference in some situations.
02nz
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Re: How do I qualify for ACA subsidy with $90K in income?

Post by 02nz »

ShaftoesSpreadsheet wrote: Fri Jul 30, 2021 12:22 am If you are able to contribute to IRAs that might reduce your taxable income, or tax loss harvesting, or ??
OP will be retired and living off of investment income. No earned income = no ability to contribute to IRA.

If the $90K is dividends, assuming VTI (around 1.7% dividend yield), we're talking about a $5M taxable portfolio. OP won't be able to get subsidies quite simply because the law wasn't designed to provide subsidies at that level of (taxable) wealth.
Last edited by 02nz on Fri Jul 30, 2021 9:16 am, edited 1 time in total.
Da5id
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Re: How do I qualify for ACA subsidy with $90K in income?

Post by Da5id »

Watty wrote: Fri Jul 30, 2021 9:07 am 4) Someone jokingly said to get married and have kids. That was a joke but if you have been living with someone for ten years you might run the numbers to see if it makes financial sense to get married now. That could also allow you to get Social Security on your spouse's account which can make a huge difference in some situations.
That could make the best proposal ever! Get down on one knee, look into their eyes, and say "Our joint MAGI will get us better ACA subsides, Marry Me".

But sure, it could be a plan.
ryman554
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Re: How do I qualify for ACA subsidy with $90K in income?

Post by ryman554 »

Ependytis wrote: Thu Jul 29, 2021 11:53 pm I’m estimating my annual income from investments will be $90K per year when I retire. I’m single trying to understand how is it that I can qualify for ACA Healthcare subsidy with this level of income. I am 57 and the assets would come from taxable accounts. I plan on finding a high deductible HSA. I appreciate your input.
Ah, I misread. Ignore my previous poor advice.
J295
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Re: How do I qualify for ACA subsidy with $90K in income?

Post by J295 »

You indicate the $90k income is from taxable account. As far as I can tell, the SPY annual income is about 1.5%, and BND about 2%. If you are invested only in these or similar income producing assets, your gross capital is approximately $5 million. I’m not sure I would let the ACA tail wag the investment dog in these circumstances.

On the equity side Berkshire Hathaway could be considered since it does not pay dividends, but personally I prefer SPY over BRKA from a pure investment perspective.

Not sure what might be good alternatives on the non-equity side.
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Ependytis
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Re: How do I qualify for ACA subsidy with $90K in income?

Post by Ependytis »

For clarity, I updated my post to indicate that the income would be from capital gains, dividends, and the sale of stock.
Last edited by Ependytis on Fri Jul 30, 2021 1:08 pm, edited 1 time in total.
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Ependytis
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Re: How do I qualify for ACA subsidy with $90K in income?

Post by Ependytis »

Duplicate post
PaunchyPirate
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Re: How do I qualify for ACA subsidy with $90K in income?

Post by PaunchyPirate »

Ependytis wrote: Fri Jul 30, 2021 1:05 pm For clarity, I updated my post to indicate that the income would be from capital gains, dividends, and the sale of stock.
OP, could you provide more clarity on what exactly your question is?

If that is your known income (it is all taxable and part of your MAGI), then it should be easy to determine what subsidy you are eligible for by going to your state's ACA Health Exchange website or healthcare.com if your state does not have its own exchange.

In my earlier post, I told you what your subsidy would be if you lived in my zip code.

Are you asking how to get MORE subsidy? Lower that income more.
prd1982
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Re: How do I qualify for ACA subsidy with $90K in income?

Post by prd1982 »

Of the items you listed, capital gains is the only one I think you attack. My assumption is that you need 90k a year to live on. So sell the stock shares with the smallest capital gains. If all the shares have the same basis, then nothing I can think of.
Da5id
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Re: How do I qualify for ACA subsidy with $90K in income?

Post by Da5id »

prd1982 wrote: Fri Jul 30, 2021 1:43 pm Of the items you listed, capital gains is the only one I think you attack. My assumption is that you need 90k a year to live on. So sell the stock shares with the smallest capital gains. If all the shares have the same basis, then nothing I can think of.
Well, as someone suggested above, you can bunch gains. Sell more every other year. No subsidy the big sell years, subsidy the other years. Need to balance any additional net taxes compared to selling evenly, but with Capital gains could work out well I guess.
J295
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Re: How do I qualify for ACA subsidy with $90K in income?

Post by J295 »

Glad to help more if you provide precise detail on your assets, gross income, debt service if any, your annual cash flow needs, and the ACA MAGI cutoff for a full premium subsidized policy

By way of an example where the detail will be helpful … if you had a home with no debt, and if the ACA cut off for a net zero dollar premium policy was $50,000 of modified adjusted gross income, you could look into a HELOC at 3%, thereby paying $3000 of interest for the year, and in return receive a fully premium subsidized policy.
Ron Ronnerson
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Re: How do I qualify for ACA subsidy with $90K in income?

Post by Ron Ronnerson »

You can try not to take as much in capital gains during the time you plan to get a subsidy. You can sell investments which are relatively flat or down. You may want to reduce investments that produce dividends. If you have bonds in your taxable account, that might be a good place to begin.

Then, as others have said, you could get a loan to help cover your current expenses and pay the loan back in the future. Rates are very low right now so borrowing costs are favorable.

By the way, you should clarify even further as to how much income is from each of these sources. Dividends can be lowered by changing investments, sale of stock by itself doesn’t generate income (and it could even be at a loss), and the timing of when to take capital gains is under your control. In other words, your AGI doesn’t have to be $90k. It could be more or less in a given year depending on the choices you make.
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FiveK
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Re: How do I qualify for ACA subsidy with $90K in income?

Post by FiveK »

Ron Ronnerson wrote: Fri Jul 30, 2021 12:35 am There is no subsidy cliff in 2021 and 2022 due to the American Rescue Plan. Health insurance premiums are capped at no more than 8.5% of household income during these two years.
+1

In other words, if the smaller of the Second Lowest Cost Silver Plan (SLCSP) or the OP's actual premium is above $7650 (=8.5% * $90K), the OP is eligible for an ACA Premium Tax Credit.
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Re: How do I qualify for ACA subsidy with $90K in income?

Post by Ron Ronnerson »

FiveK wrote: Fri Jul 30, 2021 2:18 pm
Ron Ronnerson wrote: Fri Jul 30, 2021 12:35 am There is no subsidy cliff in 2021 and 2022 due to the American Rescue Plan. Health insurance premiums are capped at no more than 8.5% of household income during these two years.
+1

In other words, if the smaller of the Second Lowest Cost Silver Plan (SLCSP) or the OP's actual premium is above $7650 (=8.5% * $90K), the OP is eligible for an ACA Premium Tax Credit.
In my neck of the woods, the OP (assuming single, age 57, with a MAGI of $90k, and on an HSA Plan) would get a subsidy of about $520/month and their share of premiums would be around $220/month for this year. So someone at 700% of the federal poverty level would have roughly 70% of the cost of premiums covered this year.

My family of three (mid-40s with a 7-year-old) in the Bay Area pays $50/month for gold coverage and we receive a subsidy of about $1600/month. Prior to the American Rescue Plan, we were also receiving an additional state subsidy from California. Part of the consideration with ACA can include where to live as the size of subsidies can vary quite a bit based on location.
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Ependytis
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Re: How do I qualify for ACA subsidy with $90K in income?

Post by Ependytis »

Thanks for all the input it definitely makes me think about my options. It seems like I’ll have to go with the subsidy every other year based on my income. For the income, I’ve updated the sources.
VanGar+Goyle
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Re: How do I qualify for ACA subsidy with $90K in income?

Post by VanGar+Goyle »

FiveK wrote: Fri Jul 30, 2021 2:18 pm
Ron Ronnerson wrote: Fri Jul 30, 2021 12:35 am There is no subsidy cliff in 2021 and 2022 due to the American Rescue Plan. Health insurance premiums are capped at no more than 8.5% of household income during these two years.
+1

In other words, if the smaller of the Second Lowest Cost Silver Plan (SLCSP) or the OP's actual premium is above $7650 (=8.5% * $90K), the OP is eligible for an ACA Premium Tax Credit.
The short answer is move to a high cost of ACA health insurance location.
This all depends for the next two years on the cost in your zip code and your age group of the second lowest Silver plan.
This can exceed $10,000 per year, so your income could exceed $117K and still get a partial ACA premium tax credit.

There are better ways to save money.
Last edited by VanGar+Goyle on Sat Jul 31, 2021 6:45 am, edited 1 time in total.
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Ron Ronnerson
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Re: How do I qualify for ACA subsidy with $90K in income?

Post by Ron Ronnerson »

VanGar+Goyle wrote: Sat Jul 31, 2021 2:59 am
FiveK wrote: Fri Jul 30, 2021 2:18 pm
Ron Ronnerson wrote: Fri Jul 30, 2021 12:35 am There is no subsidy cliff in 2021 and 2022 due to the American Rescue Plan. Health insurance premiums are capped at no more than 8.5% of household income during these two years.
+1

In other words, if the smaller of the Second Lowest Cost Silver Plan (SLCSP) or the OP's actual premium is above $7650 (=8.5% * $90K), the OP is eligible for an ACA Premium Tax Credit.
The short answer is move to a high cost of ACA health insurance location.
This all depends for the next two years on the cost in your zip code and your age group of the second lowest Silver plan.
This can exceed $10,000 per year, so your income could exceed $117K and still get a partial ACA premium tax credit.
In my zip code, a single 57 year old would qualify for a partial ACA tax credit this year even with a MAGI greater than $160k (more than 1200% above the federal poverty level). It’s interesting how much these numbers can vary by location.
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