Can Retired Couples Maximize IRA Contributions While Managing ACA Income Limits?
Many retirees face the challenge of balancing their retirement savings goals with the income limits set by the Affordable Care Act (ACA). This can be especially tricky for couples where one spouse has retired and the other is still working.
Understanding the ACA Income Limits
The ACA sets income limits for accessing premium tax credits and cost-sharing subsidies. For 2023, the Modified Adjusted Gross Income (MAGI) limit for a married couple filing jointly is $81,000. This means that if your MAGI exceeds this amount, you will not qualify for these financial assistance programs.
IRA Contributions and MAGI
Traditional and Roth IRA contributions can reduce your MAGI, as they are not included in the calculation. However, there are income limits for making IRA contributions. For 2023, the income limit for making deductible traditional IRA contributions is $73,000 for married couples filing jointly.
Case Study: A Retired Couple’s IRA Strategy
Let’s say a retired couple wants to save for retirement while staying within the ACA income limits. The wife has retired and has no earned income, while the husband continues to work.
Option 1: Husband Contributes to 401(k) Only
The husband can contribute to his 401(k) plan, which reduces his MAGI. However, the wife cannot contribute to an IRA because she has no earned income.
Option 2: Wife Contributes to Roth IRA
The wife can contribute to a Roth IRA because it is not subject to income limits. The contributions will not reduce her MAGI, but they will grow tax-free in retirement.
Option 3: Combination Approach
The couple can use a combination of strategies to minimize their MAGI while maximizing IRA contributions. The husband can contribute to his 401(k), while the wife contributes to a traditional IRA up to the income limit of $73,000.
Seeking Professional Guidance
Navigating the complexities of ACA income limits and IRA contributions can be challenging. It is advisable to seek the guidance of a licensed and experienced agent to ensure that you are maximizing your savings and accessing all available financial assistance programs.
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