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Millionaires are a dime a dozen here in the Bay Area because of house values. If I've lived in my 1500 sq ft house since 1973 , it's the only asset I've got,and it's worth 1.5 million, shouldn't I qualify if I have no income?
Most people would say yes.
Now say I sold that house and decided to rent. I've got the same net worth....why should I be penalized by the asset type I hold?
See the problem with asset tests?
Millionaire in 2017 isn't the old Elmer Fudd "I'm Elmer Fudd, millionaire. I have a mansion and a yacht."
When I get there, I'll have no guilt about collecting Social Security and using Medicare. I've been high income my whole working career and have been supporting everyone else. Now it's my turn to retire and have all the high income people support me. I'll have a couple years of big part B premiums when I retire since my working income will be counted for 2 years. After those two years of $5K+ per year, it will drop down to what most retirees pay.
IMO, the thing that costs all of us in taxes is NOT millionaires gaming-the-system for healthcare subsidies. How many retired millionaires are going to intentionally live on nothing, in order to qualify for healthcare subsidies? (Some, but, not many!)
The problem is that there are too many who live like they are "entitled" to not work , while the working 'suckers' pay their way. They are aided by liberal politicians who agree ... in exchange for votes and public dole.
Socialism works for those on the receiving end, not those who pay for it!
2) service availability varies with immigration rules for each country, Several avail fairly quickly (Good thing for USA medical exiles)
Malaysia, Thailand, Philippines are all courting for USA medical $$, France, Spain, Portugal, and Italy are offering some new options. We met many USA medical escapees in Ireland. (Not sure of their coverage, but they were there because they couldn't get HC in USA)
1. How does one generate $50K of dividend-income from just $1M? Or does “million-dollar stock portfolio” imply several million?
2. The plan evidently is to sell a large portion of the stocks, with proceeds going into something like a money-market account, which generates next to zero in income. Correct? Then the annual income becomes small enough, as to qualify for the healthcare subsidy. But then… isn’t one forgoing the former dividend income? And isn’t the income forgone, higher than the amount of the subsidy?
3. Tax-exempt interest (say on municipal bonds) also counts for the MAGI for subsidy-qualification. So even moving assets around, such that one’s federal income tax liability is reduced, doesn’t help with qualifying for the health-care subsidy.
4. What about instead switching to stocks that pay no dividend, or mutual funds (with very low turnover) specializing in stocks without a dividend? Then there’s little or no annual income, in the sense of realized capital gains or dividends. Wouldn’t that accomplish what the OP desires, without forgoing appreciation on his/her portfolio?
BTW, OP’s concerns are operative not only for retirees, but for anyone with a large portfolio but moderate earnings.
1. How does one generate $50K of dividend-income from just $1M? Or does “million-dollar stock portfolio” imply several million?
2. The plan evidently is to sell a large portion of the stocks, with proceeds going into something like a money-market account, which generates next to zero in income. Correct? Then the annual income becomes small enough, as to qualify for the healthcare subsidy. But then… isn’t one forgoing the former dividend income? And isn’t the income forgone, higher than the amount of the subsidy?
3. Tax-exempt interest (say on municipal bonds) also counts for the MAGI for subsidy-qualification. So even moving assets around, such that one’s federal income tax liability is reduced, doesn’t help with qualifying for the health-care subsidy.
4. What about instead switching to stocks that pay no dividend, or mutual funds (with very low turnover) specializing in stocks without a dividend? Then there’s little or no annual income, in the sense of realized capital gains or dividends. Wouldn’t that accomplish what the OP desires, without forgoing appreciation on his/her portfolio?
BTW, OP’s concerns are operative not only for retirees, but for anyone with a large portfolio but moderate earnings.
Yes, #4 is what I do. It reduces taxes and qualifies you for ACA. Most people can't stomach the risk.
Personally, I think there are 2 groups of people who can employ this technique....those who have so little that other assets won't return enough, so they have no choice. Plenty of those people with the current interest rates.
The other group is those that have so much a prolonged market slump won't alter their lifestyles, and they are not real concerned about heirs.
IMO, the thing that costs all of us in taxes is NOT millionaires gaming-the-system for healthcare subsidies. How many retired millionaires are going to intentionally live on nothing, in order to qualify for healthcare subsidies? (Some, but, not many!)
The problem is that there are too many who live like they are "entitled" to not work , while the working 'suckers' pay their way. They are aided by liberal politicians who agree ... in exchange for votes and public dole.
Socialism works for those on the receiving end, not those who pay for it!
You don't have to intentionally live on nothing. You could have $500,000 in a checking account and live off that which is not income. Now just generate $25K of real "income" and you qualify for Obamacare subsidies.
The qualification for Obamacare is income based, not wealth based.
Yes, #4 is what I do. It reduces taxes and qualifies you for ACA. Most people can't stomach the risk.
Personally, I think there are 2 groups of people who can employ this technique....those who have so little that other assets won't return enough, so they have no choice. Plenty of those people with the current interest rates.
The other group is those that have so much a prolonged market slump won't alter their lifestyles, and they are not real concerned about heirs....
A typical portfolio might be 20% bonds and 80% stocks, and of the latter, the vast majority would be in index-funds. Said funds have low turnover, but even small-caps generate dividends, which count as annual income; likewise with the bonds, even if tax-free. For a single individual without children, the Obamacare subsidy is only something like $1500 at an annual income level of $20K. A $1M portfolio of the aforementioned structure can fall under $20K/year of apparent income. But what if it’s several $M?
Quote:
Originally Posted by skycaller23
You don't have to intentionally live on nothing. You could have $500,000 in a checking account and live off that which is not income. Now just generate $25K of real "income" and you qualify for Obamacare subsidies.
But then, the $500K incurs an opportunity-cost, of say 5% rate of return, that it would have had in a mixture of stock and bond index funds (leaning towards stocks). That's $25K/year. Suppose that one's theoretical income goes to zero. That's around a $2200/month subsidy, or $26,400 a year. With the $25K/year investment-income, and no other income, the subsidy falls to $800 a month, or $9600/year... for a net reduction of subsidy of $16,800. So, we are forgoing $25,000 to recover $16,800. Is this reasonable?
A typical portfolio might be 20% bonds and 80% stocks, and of the latter, the vast majority would be in index-funds. Said funds have low turnover, but even small-caps generate dividends, which count as annual income; likewise with the bonds, even if tax-free. For a single individual without children, the Obamacare subsidy is only something like $1500 at an annual income level of $20K. A $1M portfolio of the aforementioned structure can fall under $20K/year of apparent income. But what if it’s several $M?
But then, the $500K incurs an opportunity-cost, of say 5% rate of return, that it would have had in a mixture of stock and bond index funds (leaning towards stocks). That's $25K/year. Suppose that one's theoretical income goes to zero. That's around a $2200/month subsidy, or $26,400 a year. With the $25K/year investment-income, and no other income, the subsidy falls to $800 a month, or $9600/year... for a net reduction of subsidy of $16,800. So, we are forgoing $25,000 to recover $16,800. Is this reasonable?
If your income is $0 you get put on medicaid so you have to have some level of income above poverty level to qualify for obamacare subsidies.
What you want to do is play enough with your income so you can qualify for a few years until medicare hits.
So you can either take those dividends and pay $800/month of your money or juggle it around so that you get a subsidy of $800/month.
My $500,000 in a checking account was just an exaggerated example of how you can have $0 income but live very comfortably.
Income and wealth are two separate entities.
So you can either take those dividends and pay $800/month of your money or juggle it around so that you get a subsidy of $800/month.
My apologies - I misread the Obamacare table. The subsidy in question would be $800 per YEAR, not per month.
Quote:
Originally Posted by skycaller23
Income and wealth are two separate entities.
Of course. But wealth, invested soundly, generates income. My assertion is that intentionally forgoing this income is a greater cost, than the benefit of the subsidy.
1. How does one generate $50K of dividend-income from just $1M? Or does “million-dollar stock portfolio”
BTW, OP’s concerns are operative not only for retirees, but for anyone with a large portfolio but moderate earnings.
AT&T, Verizon and Ford pay 5% in dividends. Not guaranteed, stocks go up and down, but they are not going bankrupt tomorrow.
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