The ACA is a big bite to swallow for those that are wishing to retire early. It offers some, but not all, a chance to get Medicare and have less costs associated with health care. However, some employees might consider spending more in order to be covered under a more private insurance instead of workplace insurance. This can be difficult for a lot of retirees to afford.
The subsidies that are being offered through the ACA can provide what is needed when it comes to affording and getting insurance when you retire. Those that do not qualify might be able to save some costs by planning ahead. A family can only make up to 400 percent of the federal poverty level in order to be considered for a subsidy. If it goes over this amount, then you can’t get insurance through the government and must find a private plan. If a family makes more money, subsidies decrease. They will have to pay some money out-of-pocket for their health-insurance plan in order to cover the costs.
With this information and some tax planning, you’ll be able to retire early and not have to worry about spending too much money in the process. When household income declines, more subsidies are available. It’s possible to reduce your household’s modified adjusted gross income (MAGI) with some financial planning in order to qualify for these subsidies.
You have to understand how MAGI works when it comes to calculating household income. IRAs, wages, tips, salaries and taxable interest are all counted. There are also items that are deducted while doing the calculations, such as moving expenses, retirement accounts and alimony. You might face penalties for savings-account withdrawals, self-employment expenses and deposits made to retirement plans. Some people who retire early and have CDs might be able to use that money towards MAGI, while those that are already retired might take their distribution this year instead of waiting another year.
There are many rules and regulations that go along with MAGI and the Affordable Care Act, and the outcome of the calculations may differ. Consulting with a tax professional will help you make the best decisions in the end.