Dividends and ACA Health Insurance
A Comprehensive Overview
ACA Health Insurance
The Affordable Care Act (ACA), also known as Obamacare, is a healthcare reform law that provides health insurance coverage to millions of Americans. The ACA includes subsidies to help people afford health insurance premiums. The amount of subsidy you receive depends on your income and family size.
Dividends
Dividends are payments made by a company to its shareholders. Dividends are considered income for the purposes of the ACA. This means that dividends can increase your MAGI (Modified Adjusted Gross Income), which can reduce your ACA subsidy.
How Dividends Can Affect Your ACA Subsidy
ACA subsidies are available to people with incomes up to 400% of the federal poverty level (FPL). The amount of subsidy you receive is based on a sliding scale. The higher your income, the lower your subsidy.
If your MAGI exceeds 400% of the FPL, you will not be eligible for ACA subsidies.
Example:
Let’s say you are a single person with an income of $50,000. You receive $10,000 in dividends. Your MAGI would be $60,000. This would reduce your ACA subsidy by $2,000.
Q1: What is the highest dividend yield number (for an ETF or mutual fund) you should accept?
There is no one-size-fits-all answer to this question. The dividend yield you should accept depends on your individual circumstances, such as:
Income
Asset allocation
Risk tolerance
Investment goals
Q2: What other places to store value (with growth) could be other alternatives?
There are a number of ways to store value with growth potential, such as:
Retirement accounts (401(k)s, IRAs)
Real estate
Bonds
Certificates of deposit (CDs)
High-yield savings accounts
Conclusion
Dividends can be a valuable source of income for investors. However, it is important to be aware of the potential impact of dividends on your ACA subsidy. If you are receiving ACA subsidies, you may want to consider limiting your exposure to dividend-paying investments.
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