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Old 09-20-2017, 04:44 PM
 
Location: Gilbert, AZ
3,182 posts, read 1,958,918 times
Reputation: 3320

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Quote:
Originally Posted by ohio_peasant View Post
OK, understood. But let me give an admittedly outlandish (though not impossible) example. Suppose that you're a young lawyer, a junior associate in a firm, who was recruited to defend a corporate client in some intellectual-property case. The client grows disgusted with the firm. Our young lawyer quits, starts his own firm, and goes to work for the client as lead-attorney. 5 years later, the case closes, with a resounding victory. The lawyer, barely in his/her mid-30s, receives a $25M payout... closes his/her firm, and retires... to a cabin in Idaho. He/she has 30 years before reaching Medicare eligibility age, and lives for essentially $0/year, as some ascetic survivalist. But... what to do for health insurance? Note that I said nothing about actual health CARE - since this ex-lawyer of ours lives in the forest, with no medical doctors nearby. The point is simply how to stay legal, with health-insurance coverage, at minimal cost.
Of course the whole trick is to not show any income, or very little income. Given enough money there's not even any need to generate an investment return. $25M would be plenty for me, personally. I could take the payout in twenty dollar bills and live just fine for the rest of my life. Of course that would be silly because I'd be giving up way more in likely investment returns than I'd save in medical costs.

Most of us would want to make our money "work". So the trick is changed a bit into investing the money, but not showing any income (or very little). I expect the real estate guys have some ideas. I abhor the idea of being a landlord again so I'd pass on that notion. Buying "growth" stocks which pay no dividend is a thought, but there is no certainty to that idea. Many growth companies morph into stalwart dividend payers. Or that growth company could be purchased for cash and then create a taxable event that cannot be avoided. Gold would probably work, but it's not been a great investment in the long run.
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Old 09-20-2017, 05:01 PM
 
Location: Gilbert, AZ
3,182 posts, read 1,958,918 times
Reputation: 3320
I honestly wouldn't invest too much emotion and thought into this. I feel the odds of the health system changing in the medium term are pretty high. What we have today is obviously broken, and who can even guess what the new game will look like? If a person is retiring in 1-2 years then sure, take a stab at it. But for someone 10+ years away I'd structure investments so they make sense from an overall tax point of view, without giving ACA much (if any) consideration.
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Old 09-20-2017, 05:09 PM
 
1,057 posts, read 515,228 times
Reputation: 1814
Quote:
Originally Posted by hikernut View Post
I honestly wouldn't invest too much emotion and thought into this. I feel the odds of the health system changing in the medium term are pretty high. What we have today is obviously broken, and who can even guess what the new game will look like? If a person is retiring in 1-2 years then sure, take a stab at it. But for someone 10+ years away I'd structure investments so they make sense from an overall tax point of view, without giving ACA much (if any) consideration.
Agree completely.
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Old 09-20-2017, 06:07 PM
 
2,215 posts, read 743,219 times
Reputation: 1376
Quote:
Originally Posted by ohio_peasant View Post


The part that continues to confound me, is how can it be possible to simultaneously have a sufficiently large portfolio, as to fully find one's own retirement.... AND to so construct it, as to generate such a low income, that ACA subsidies are still substantial.

Or to rephrase: I don't see how intentionally allocating one's investments to generate minimal income, such as to qualify for the subsidy, is financially wise, relative to forgoing the subsidy but earning a higher investment income.
The way I set up my retirement "lucked" me into being able to get an ACA subsidy. My portfolio though does not fully fund my retirement.
I also have a company pension.

When I retired I had 1 year's spending in my bank account. That was the full 1 year budget money without counting my pension. So right off the bat I had more money than I needed for the year. I did that on purpose to have a cash buffer so I wouldn't have to sell off securities or dip into my tax deferred accounts at a moment's notice and could also splurge.

So I get my pension and supplement with cash. During the course of the year I take profits on some investments and replenish the bank account to get back to the yearly balance. I pay tax on pension and cap gains on what I sold. If the market were to tank I also have a Roth that I could withdraw from while leaving my taxable account alone.

Along comes ACA. Well since I don't spend all that money in the bank account I now just replenish every other year so only my pension is taxed and I can qualify for the subsidy. I don't get as big a subsidy as the OP but it's still considerable and I end up paying what I payed before ACA ended my previous plan.

It's only temporary though and I have no debts which really lowers the amount of money you need to live on annually.

I don't do anything with dividends or bond interest.

Last edited by skycaller23; 09-20-2017 at 06:31 PM..
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Old 09-20-2017, 06:19 PM
 
1,057 posts, read 515,228 times
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Quote:
Originally Posted by skycaller23 View Post
The way I set up my retirement "lucked" me into being able to get an ACA subsidy. My portfolio though does fully fund my retirement.
I also have a company pension.

When I retired I had 1 year's spending in my bank account. That was the full 1 year budget money without counting my pension. So right off the bat I had more money than I needed for the year. I did that on purpose to have a cash buffer so I wouldn't have to sell off securities or dip into my tax deferred accounts at a moment's notice and could also splurge.

So I get my pension and supplement with cash. During the course of the year I take profits on some investments and replenish the bank account to get back to the yearly balance. I pay tax on pension and cap gains on what I sold. If the market were to tank I also have a Roth that I could withdraw from while leaving my taxable account alone.

Along comes ACA. Well since I don't spend all that money in the bank account I now just replenish every other year so only my pension is taxed and I can qualify for the subsidy. I don't get as big a subsidy as the OP but it's still considerable and I end up paying what I payed before ACA ended my previous plan.

It's only temporary though and I have no debts which really lowers the amount of money you need to live on annually.

I don't do anything with dividends or bond interest.
Ok. Seems like it would work as long as the taxable pension and amount of cash you need to live on are relatively small.... under 50k needed to live on.
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Old 09-20-2017, 06:33 PM
 
2,215 posts, read 743,219 times
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Quote:
Originally Posted by Cabound1 View Post
Ok. Seems like it would work as long as the taxable pension and amount of cash you need to live on are relatively small.... under 50k needed to live on.
The amount of cash is irrelevant because that is not counted as income. Only my pension is counted as income to be taxed every other year.

Cash money is not taxable as income.

I could have $35K in pension and spend an additional $50K in cash but on my tax form only list $35K as my income.
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Old 09-20-2017, 06:36 PM
 
6,617 posts, read 3,746,469 times
Reputation: 13682
Quote:
Originally Posted by CatPeople View Post
Retired, million-dollar stock portfolio. At $50K in income from dividends a year, no subsidy, cheapest policy for 2018 looks to be $800 a month. Option 1: sell enough stocks to last a year, take tax lumps in 2017, keep 2018 dividends under $20K, get a $750 a month tax subsidy to pay for insurance.

I feel creepy that I can game the tax system by being able to move taxable income from year to year and pay next to nothing. When I was working, I couldn’t pull this stunt, so I paid plenty, including the Medicare surcharge in my one stock option glory year, so I do not feel that bad.

Any thoughts?
It's not a stunt. It's because people who are not yet eligible for Medicare could end up using their retirement account for medical premiums and care, and end up poor....and on Medicaid or otherwise reliant on the govt.

People are often not in control on when they retire. During the last recession, which was bad and long, a lot of older workers were laid off and not able to find employment for a long time, if ever. And those who did, did not earn nearly the wages they earned before. Retirement accounts were wiped out, aided by large ins. premiums and copays and deductibles and co-insurance.

It is intentional that you not use your retirement funds for medical at this time, unless you want to.

$1M is a nice retirement account...but if you live to 95, during which time there will be several recessions, it may not last as long as you think.

You didn't say if you are getting Social Security.

Obamacare is going away. And finding a doctor to accept it is difficult. I get it, and frankly, I have been unable to find a dr. to take it. It's thought of as Medicaid where I live.

I wouldn't get involved with it at this late stage. It has serious problems, is not good care, the drs that take it aren't the best (if you can find one), and will probably be an HMO (only HMOs are sold where I am).
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Old 09-20-2017, 07:00 PM
 
1,057 posts, read 515,228 times
Reputation: 1814
Quote:
Originally Posted by skycaller23 View Post
The amount of cash is irrelevant because that is not counted as income. Only my pension is counted as income to be taxed every other year.

Cash money is not taxable as income.

I could have $35K in pension and spend an additional $50K in cash but on my tax form only list $35K as my income.
Yes, agreed

As long as you have an everlasting cash buffer, you never have to worry about AGI. But doing that forever is foregoing asset appreciation. Whenever you have to replenish that cash buffer, income taxes might be involved.
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Old 09-20-2017, 07:47 PM
 
2,952 posts, read 1,637,878 times
Reputation: 5292
Quote:
Originally Posted by bpollen View Post

Obamacare is going away. And finding a doctor to accept it is difficult. I get it, and frankly, I have been unable to find a dr. to take it. It's thought of as Medicaid where I live.

I wouldn't get involved with it at this late stage. It has serious problems, is not good care, the drs that take it aren't the best (if you can find one), and will probably be an HMO (only HMOs are sold where I am).
Boy are you full of it. I will bet you have never bought health insurance and was an employee your whole life. Do you know you can buy a medicare supplement?

All the ACA insurance is not crap. you get what you pay for. I pay $919.00 per month(gold plan) for mine and have no issues getting a good doctor. Where do you live that you spew such BS.
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Old 09-20-2017, 08:28 PM
 
Location: S.W. Florida
2,206 posts, read 931,839 times
Reputation: 6228
If it feels that creepy to you, don't do it.
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