How to Maximize ACA Subsidies for Early Retirees

The Affordable Care Act (ACA) provides subsidies to help low- and middle-income Americans afford health insurance. These subsidies are based on your income and family size. If you’re planning to retire early, you may be wondering if you’ll still be eligible for ACA subsidies. The answer is yes, but there are some things you need to know.

What Factors Determine My ACA Subsidy Eligibility?

First, let’s take a look at what factors determine your ACA subsidy eligibility:

– Your income: The amount of your income that counts for ACA purposes is your modified adjusted gross income (MAGI). MAGI is your adjusted gross income (AGI) plus certain deductions and exclusions.
– Your family size: The number of people in your household, including yourself, your spouse, and your dependents, affects your subsidy eligibility.
– The cost of health insurance in your area: The cost of the second-lowest-cost silver plan in your area is used to determine your subsidy amount.

How Do Withdrawals From a Taxable Investment Account Affect My ACA Subsidy Eligibility?

If you’re planning to withdraw money from a taxable investment account in retirement, you need to be aware of how it will affect your ACA subsidy eligibility. Withdrawals from a taxable investment account are considered income for ACA purposes. This means that they will increase your MAGI and could reduce or eliminate your subsidy.

How Can I Maximize My ACA Subsidies?

If you’re planning to retire early and want to maximize your ACA subsidies, there are a few things you can do:

– Delay taking Social Security benefits: Social Security benefits are considered income for ACA purposes. If you delay taking Social Security benefits, you can reduce your MAGI and increase your subsidy.
– Consider taking Roth IRA withdrawals: Roth IRA withdrawals are not considered income for ACA purposes. This means that they will not affect your subsidy eligibility.
– Use tax-advantaged savings accounts: Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) are tax-advantaged savings accounts that can be used to pay for health care expenses. Contributions to these accounts are not considered income for ACA purposes. This means that they can help you reduce your MAGI and increase your subsidy.

Conclusion

If you’re planning to retire early, it’s important to understand how the ACA subsidies work. By following the tips above, you can maximize your subsidies and save money on health insurance.