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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?
I do something similar and don't feel creepy at all. No different from taking advantage of tax code.
I find the best way to control income is to always know where you stand as far as realized and unrealized gains (so you can take losses and gains appropriately). Also, I use a lot of indexed etfs to control capital gains. You can find ones that keep dividends down too.
The most important part, though, is having very little cash flow need since I have no debt. I can live on about 35k a year, so I've been able to do this since ACA came in 2014. The strategy won't work forever, but the ACA will be gone one way or another anyway.
the laws say subsidies are based on magi NOT ASSETS . if you qualify you qualify . it is not gaming the system . those are the laws .
is it gaming the system when your fair share of taxes is the lowest amount you can legally get it down to using the tools and laws left in place ? not in my book .
the law says subsidies are income based . spending your own assets is not earned income . so in essence someone with 50k in earned income has even a higher income than that retiree who has to spend assets to create an income .
why is the person earning 50k on a job with a million bucks in assets any different ? why does the working person with 50k and a million in assets get a subsidy and it is not gaming the system but the retiree with no earned income , spending their assets to live is gaming the system ?
there is no logic in either being any different .
if you can use the laws and tools left in place to utilize what was put in place via good tax planning , more power to you.
had i had greater knowledge of retirement tax planning in advance of getting here i would have tried for a subsidy if i was eligible .
some people are just smarter about using the laws and tools available to them and some of us like myself learned to late .
You can't always anticipate what the laws will be.
The ACA was 10 years away when I retired in 2004. I was lucky in that I decided to pay off all debt , and thus reduce income needs. After looking at many FIRE simulators, my gut told me that controlling the expenses made more sense than trying to take additional risk to jack up the nest egg.
I think I made the right decision given that thatexpenses haven't gone up much, and the nest egg is about 50% bigger after 13 years. Part of that was having "free' healthcare since ACA, but also knowing that property taxes are capped to 2% increase a year here in CA. I sure couldn't make that bet when I lived in the northeast. All my other expenses were predictable (other than veterinary costs, but they've been healthy, knock on wood).
"Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands." -Judge Learned Hand, Helvering v. Gregory, 69 F.2d 809, 810 (2d Cir. 1934), aff'd, 293 U.S. 465 (1935)
Were Judge Hand with us today, he'd write this way instead:
"Anyone may arrange his affairs so that his benefits shall be as great as possible; he is not bound to choose that pattern which best preserves the treasury. There is not even a patriotic duty to decrease one's benefits. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep benefits as great as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to receive less than the law permits."
Well, on one hand we have thread like this - but I wonder if some of the same people declare "Socialism is when you run out of others money".....
IMHO, given our current system, those with very high assets should not get the Full Boat of Medicare or other such programs. And - I speak as one who is of that population. Right is Right, even if it affects me.
You can't always anticipate what the laws will be.
The ACA was 10 years away when I retired in 2004. I was lucky in that I decided to pay off all debt , and thus reduce income needs. After looking at many FIRE simulators, my gut told me that controlling the expenses made more sense than trying to take additional risk to jack up the nest egg.
I think I made the right decision given that thatexpenses haven't gone up much, and the nest egg is about 50% bigger after 13 years. Part of that was having "free' healthcare since ACA, but also knowing that property taxes are capped to 2% increase a year here in CA. I sure couldn't make that bet when I lived in the northeast. All my other expenses were predictable (other than veterinary costs, but they've been healthy, knock on wood).
no you can't anticipate .aca did not exist when i started preparing for retirement land
Well, on one hand we have thread like this - but I wonder if some of the same people declare "Socialism is when you run out of others money".....
IMHO, given our current system, those with very high assets should not get the Full Boat of Medicare or other such programs. And - I speak as one who is of that population. Right is Right, even if it affects me.
You're very noble...while the tax law is written as it is written and can be followed in such a way that you (collective you) maximize your own benefit, some do wonder that they are "getting away" with something they could afford to a greater degree than others who don't have the benefit of having certain investments.
Of course, nice guys finish last. I do believe that "Behind every great fortune lies a great crime.". No one qualifies as having a great fortune here on c-d I suppose...and the word crime sounds much worse than everyday unethical behavior, so no worries.
Well, on one hand we have thread like this - but I wonder if some of the same people declare "Socialism is when you run out of others money".....
IMHO, given our current system, those with very high assets should not get the Full Boat of Medicare or other such programs. And - I speak as one who is of that population. Right is Right, even if it affects me.
why should a retiree generating a 40k income off a million bucks be treated any different medicare wise than a worker with a 40k pension and no assets to speak of ? they are not treated differently and shouldn't be .
that is why things like medicare and aca subsidy are not asset based . it would make little sense.
why should a retiree generating a 40k income off a million bucks be treated any different medicare wise than a worker with a 40k pension and no assets to speak of ? they are not treated differently and shouldn't be .
that is why things like medicare and aca subsidy are not asset based . it would make little sense.
Right.
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?
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"Nothing Sinister" — Judge Learned Hand
