How Will My ACA Subsidy Be Calculated When I Turn 65?

Turning 65 is a significant milestone that comes with several changes, including becoming eligible for Medicare. However, if you’re planning to retire and have not yet enrolled in Medicare Part B, you might need ACA health insurance coverage. Understanding how your ACA subsidy will be calculated when you turn 65 is crucial to plan for your health insurance costs.

ACA Subsidy Calculation

Generally, your ACA subsidy is calculated based on your household income. The subsidy lowers what you pay for monthly premiums, deductibles, copayments, and other out-of-pocket health care costs. However, the annual income limit for subsidy eligibility changes each year, and you must meet specific criteria to qualify.

Turning 65 and ACA Subsidy

When you turn 65 and enroll in an ACA plan, your subsidy will be calculated differently. For the year you turn 65, your subsidy will only be based on your income for the months you’re enrolled in the ACA plan, not your entire year’s income.

For instance, if you turn 65 in July 2024 and enroll in an ACA plan, your subsidy for 2024 will be calculated based on your income from January to June 2024.

Starting the following year (2025) and in subsequent years, your subsidy will be calculated based on your full year’s income.

Example:
Let’s say you plan to withdraw funds from your 401(k) account in December 2024. This withdrawal will increase your income for 2024. However, because you are only enrolled in the ACA plan for the last six months of 2024, your subsidy for 2024 will not be affected by the 401(k) withdrawal.

It’s important to note that this situation is only applicable to the year you turn 65. In subsequent years, your subsidy will be calculated based on your full year’s income, including any 401(k) withdrawals or other income sources.

Planning for ACA Subsidy

If you plan on turning 65 and enrolling in an ACA plan, consider the following tips to maximize your subsidy:

•Estimate your income: Accurately estimate your income for the months you’ll be enrolled in the ACA plan to project your subsidy amount.

•Consider income changes: If you anticipate any significant income changes, such as a 401(k) withdrawal or starting Social Security, plan accordingly to avoid unexpected changes in your subsidy.

•Seek professional guidance: Consulting with a licensed agent or financial advisor can provide personalized guidance on optimizing your ACA subsidy based on your specific circumstances.

If you need assistance navigating the complexities of ACA health insurance and subsidies, our licensed agents are here to help. Contact us today to schedule a free consultation and explore your coverage options.