Bobaloo said:

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Great thread. QQ. For those not 65, what is the general source and cost of health care. Very broad topic, but it's one thing that concerns me about pulling the trigger. Full disclosure - wife and I are in very good health: daughter has two more years on the HC payroll. Thanks!

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Bobaloo said:

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Great thread. QQ. For those not 65, what is the general source and cost of health care. Very broad topic, but it's one thing that concerns me about pulling the trigger. Full disclosure - wife and I are in very good health: daughter has two more years on the HC payroll. Thanks!

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Bobaloo said:

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Great thread. QQ. For those not 65, what is the general source and cost of health care. Very broad topic, but it's one thing that concerns me about pulling the trigger. Full disclosure - wife and I are in very good health: daughter has two more years on the HC payroll. Thanks!

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Bobaloo said:

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Great thread. QQ. For those not 65, what is the general source and cost of health care. Very broad topic, but it's one thing that concerns me about pulling the trigger. Full disclosure - wife and I are in very good health: daughter has two more years on the HC payroll. Thanks!

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permabull said:

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Credits might get extended, there are members of the GOP pushing for it now.

Also the income levels to get credits are pretty low and you would probably be better off converting to Roth at 12% or realizing LTCG at 0% than trying to collect insurance credits in early retirement.

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YouBet said:

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permabull said:

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Credits might get extended, there are members of the GOP pushing for it now.

Also the income levels to get credits are pretty low and you would probably be better off converting to Roth at 12% or realizing LTCG at 0% than trying to collect insurance credits in early retirement.

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I don't think I understand what you are saying here. These credits are applied based on your MAGI for 2025 if you need health insurance and are going to use the exchange.

Do you mean from a purely financial POV that it makes more sense financially to do a Roth conversion than try to save some money with these credits? I'm sure but that's irrelevant if you are wanting/needing health insurance.

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permabull said:

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YouBet said:

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permabull said:

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Credits might get extended, there are members of the GOP pushing for it now.

Also the income levels to get credits are pretty low and you would probably be better off converting to Roth at 12% or realizing LTCG at 0% than trying to collect insurance credits in early retirement.

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I don't think I understand what you are saying here. These credits are applied based on your MAGI for 2025 if you need health insurance and are going to use the exchange.

Do you mean from a purely financial POV that it makes more sense financially to do a Roth conversion than try to save some money with these credits? I'm sure but that's irrelevant if you are wanting/needing health insurance.

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I am saying long term its probably not worth giving up the opportunity to fill up the 0% LTCG bracket and/or 12% Roth brackets just to chase healthcare tax credits. I would bet most people would be better off paying the full premium and maximizing those opportunities than kicking the tax can down the road to save a little on healthcare today.

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Quote:

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Yes, what you are explaining does make sense. You are essentially comparing the tradeoff between:

Keeping Modified Adjusted Gross Income (MAGI) low to qualify for Affordable Care Act (ACA) subsidies, which reduces annual healthcare premiums.

Using the low-income, low-tax years before Social Security, pensions, and Required Minimum Distributions (RMDs) to accelerate income via Roth conversions or realizing long-term capital gains (LTCGs) at 0% federal tax even if that means losing some or all of the ACA subsidy for those years.

Breaking Down Your Logic
A married couple filing jointly (MFJ) with $30K of "unavoidable" income (e.g., dividends, interest, small withdrawals) sits below the standard deduction (~$30K in 2025), so no federal income tax is owed.

With a MAGI near $30K, they qualify for sizable ACA subsidies, around $9K in the example.

However, that same couple could instead realize an additional $90K of long-term capital gains, pushing MAGI to $120K.

This eliminates their ACA subsidy but allows them to lock in $90K of gains taxed at 0%.

Later, when Social Security, pensions, or even RMDs kick in, those same gains would push them into the 15% LTCG bracket or higher and potentially trigger IRMAA surcharges on Medicare.

So your point is that the opportunity cost of clinging to ACA subsidies is missing the chance to harvest gains or do Roth conversions at a very low tax rate window.

Why This Makes Sense
The ACA subsidies function almost like a "negative tax," but they phase out as income rises.

The tax code gives early retirees a unique window where federal income taxes can be near zero if income is carefully chosen.

The tradeoff hinges on:

Value of a few years of subsidies versus

Long-term value of tax-free or Roth-converted assets that will benefit you forever (and can reduce future Medicare premiums).

Practical Considerations
ACA subsidies are an annual cash flow benefit (short-term).

Roth conversions and LTCG harvesting are long-term tax-optimization moves.

Which is preferable depends on:

How many years until Medicare starts

Future expected taxable income (pensions, Social Security, RMDs)

Potential effects on IRMAA thresholds (income-based surcharges on Part B and D premiums)

You are basically saying: Sometimes it's smarter to "pay" by losing the ACA subsidy if it lets you realize income in the 0% bracket that you'd otherwise be forced to recognize later at 15%+ and with possible IRMAA penalties.

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RightWingConspirator said:

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How long was your wife at Chevron?

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permabull said:

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Just to make sure I didn't go off the rails I plugged my posts into perplexity.ai and asked if it makes sense and maybe it explains it more clearly.

Quote:

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Yes, what you are explaining does make sense. You are essentially comparing the tradeoff between:

Keeping Modified Adjusted Gross Income (MAGI) low to qualify for Affordable Care Act (ACA) subsidies, which reduces annual healthcare premiums.

Using the low-income, low-tax years before Social Security, pensions, and Required Minimum Distributions (RMDs) to accelerate income via Roth conversions or realizing long-term capital gains (LTCGs) at 0% federal tax even if that means losing some or all of the ACA subsidy for those years.

Breaking Down Your Logic
A married couple filing jointly (MFJ) with $30K of "unavoidable" income (e.g., dividends, interest, small withdrawals) sits below the standard deduction (~$30K in 2025), so no federal income tax is owed.

With a MAGI near $30K, they qualify for sizable ACA subsidies, around $9K in the example.

However, that same couple could instead realize an additional $90K of long-term capital gains, pushing MAGI to $120K.

This eliminates their ACA subsidy but allows them to lock in $90K of gains taxed at 0%.

Later, when Social Security, pensions, or even RMDs kick in, those same gains would push them into the 15% LTCG bracket or higher and potentially trigger IRMAA surcharges on Medicare.

So your point is that the opportunity cost of clinging to ACA subsidies is missing the chance to harvest gains or do Roth conversions at a very low tax rate window.

Why This Makes Sense
The ACA subsidies function almost like a "negative tax," but they phase out as income rises.

The tax code gives early retirees a unique window where federal income taxes can be near zero if income is carefully chosen.

The tradeoff hinges on:

Value of a few years of subsidies versus

Long-term value of tax-free or Roth-converted assets that will benefit you forever (and can reduce future Medicare premiums).

Practical Considerations
ACA subsidies are an annual cash flow benefit (short-term).

Roth conversions and LTCG harvesting are long-term tax-optimization moves.

Which is preferable depends on:

How many years until Medicare starts

Future expected taxable income (pensions, Social Security, RMDs)

Potential effects on IRMAA thresholds (income-based surcharges on Part B and D premiums)

You are basically saying: Sometimes it's smarter to "pay" by losing the ACA subsidy if it lets you realize income in the 0% bracket that you'd otherwise be forced to recognize later at 15%+ and with possible IRMAA penalties.

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But maybe AI is just sucking up to me like it always does.

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MRB10 said:

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My understanding is that the math really depends on how long you think you'll live.

If you take it at 65, and die at 67, you would have been better off taking it early.

If you live until 90 then deferring is more beneficial.

Hard to know when you have to make that decision.

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