Enough retirement income to avoid Medicaid

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jkdzia
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Enough retirement income to avoid Medicaid

Post by jkdzia »

My husband and I are on track to retire early in about 2 years. With the new ACA, we have recently realized that we need to show "enough" income in retirement to stay above the Medicaid income threshold. We are in CA, which is an expanded Medicaid state.

What are our options for showing this income? We will have some dividend income, but not enough to get above Medicaid thresholds. We have simply lived below our means and were planning to live off of investment income so I'm trying to figure out how to manage this. I have a pre existing condition and would prefer to avoid Medicaid.

Thanks in advance for your suggestions.
dbr
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Re: Enough retirement income to avoid Medicaid

Post by dbr »

Is your question how to avoid the individual mandate tax penalty for not having health insurance because you plan to be uninsured?

Otherwise, it is not clear what the problem is, but being a retiree already on Medicare, I have not looked closely at how this might work in some cases.
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Dutch
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Re: Enough retirement income to avoid Medicaid

Post by Dutch »

I would think that qualifying for Medi-Cal would be a major perk in your situation, not something to avoid?
magazinewriter
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Re: Enough retirement income to avoid Medicaid

Post by magazinewriter »

If you happen to have stock that has appreciated a lot in value, you could sell some shares. That is what I am doing until I turn 59 1/2. Once you turn 59 1/2 you can start withdrawing from your 401k. I am like you and retired early with significant non-retirement assets and only a small pension.

Others on here have also mentioned rolling over 401k or traditional IRA money to a Roth IRA to create income. I have not explored that myself so you would have to double check that scenario.

Of course you could also buy a regular non-subsidized policy instead of taking Medicaid. Because of the ACA you cannot be turned down because of a pre-existing condition.

Good luck.
xsas
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Re: Enough retirement income to avoid Medicaid

Post by xsas »

I'm in the same boat, living on my savings and don't have enough income to avoid Medicaid. However, I think a Roth conversion is considered income. So, a TIRA to Roth IRA conversion of > 12,000 will put you over the cutoff dollar amount.
madbrain
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Re: Enough retirement income to avoid Medicaid

Post by madbrain »

Buy junk bonds, which have a higher interest rate.
Or leveraged close-ended muni funds with high distributions (return of capital).
Topic Author
jkdzia
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Re: Enough retirement income to avoid Medicaid

Post by jkdzia »

I just feel like it's not right for us to be on Medicaid. I didn't realize I could do non-subsidized ACA. I'll also look into Roth conversions. We are a family of 4 so I think we need to be over something like $25k. Thanks all.
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Flobes
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Re: Enough retirement income to avoid Medicaid

Post by Flobes »

I'm very much enjoying the ACA this year in early retirement. I too did not want to be on Medicaid, based on my primary care physician's recommendation.

Three strategies to raise your income over the Medicaid threshold:
1. Tax Gain Harvest: sell some of your taxable holdings for a gain. The gain counts towards the ACA's income determination. But you'll be in the lowest tax brackets, so you won't pay federal income tax on capital gains. You may have a state tax liability though.
2. Roth Conversion. Transfer some money from your IRA or other tax-deferred accounts to a Roth. You might have to pay federal income taxes. In my state, Roth conversion is considered Retirement Income, and the first $20,000 is exempt from income taxes each year for those aged 55-64.
3. Part-time job.

FYI Tax-exempt interest and Social Security payments count towards your income for ACA.
gerrym51
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Re: Enough retirement income to avoid Medicaid

Post by gerrym51 »

I have a non-subsidized ACA plan. wife is on medicare.
lululu
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Re: Enough retirement income to avoid Medicaid

Post by lululu »

I'm wondering why Medicaid is to be avoided?

I know some people prefer not to accept "charity," but when it's from the government and one has been paying taxes, a case can be made that one has already paid for it. Plus a lot of my tax dollars go for stuff that I disapprove of, so I would not have any problem accepting a benefit.

I am wondering what the other reasons might be?
dbr
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Re: Enough retirement income to avoid Medicaid

Post by dbr »

jkdzia wrote:I just feel like it's not right for us to be on Medicaid. I didn't realize I could do non-subsidized ACA. I'll also look into Roth conversions. We are a family of 4 so I think we need to be over something like $25k. Thanks all.
If the conclusion is that you had a mistaken idea that the government can somehow force you to take a Medicaid plan and deny you the choice to buy a commercial plan, then the resolution to your question is that you can buy a commercial plan and the issue is resolved without any concern about what your Medicaid income adds up to. Is that right? Is this a consequence of poor explaining by the government and the press?
Tamales
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Re: Enough retirement income to avoid Medicaid

Post by Tamales »

Could someone please elaborate on what the issue is here, or point to an article explaining it accurately? We have some friends of the family where this sounds like it might be applicable so I'd like to find out more.
dbr
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Re: Enough retirement income to avoid Medicaid

Post by dbr »

Tamales wrote:Could someone please elaborate on what the issue is here, or point to an article explaining it accurately? We have some friends of the family where this sounds like it might be applicable so I'd like to find out more.
This is my understanding, which may not be correct:

The Affordable Care Act mandates that everyone have minimal health insurance coverage or pay a penalty on their income tax return. Coverage can be obtained by carrying employer supplied health insurance, by buying a commercial policy, by being on Medicare (after age 65), or by signing up for a subsidized Medicaid insurance plan in one's state, or maybe by being placed in pool coverage without a subsidy in one's state. The susbsidy option has an income threshold past which one is no longer qualified for a subsidy.

So far as we can tell the OP was confused that if your income is under a certain amount that the government is somehow going to knock on your door and force you to accept a subsidized Medicaid plan when he would prefer not to rely on government largess and either self insure or buy a commercial policy. He is planning to retire and presumably not have an employer supplied policy. I think we assume that the OP really intends to just buy a commercial policy as there was nothing about trying to be uninsured and avoid the tax penalty.

The details in the discussion about income would be relevant to someone who is trying to buy subsidized coverage and may not qualify. The issue is a red herring for a person who intends to voluntarily eschew a subsidy.
gerrym51
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Re: Enough retirement income to avoid Medicaid

Post by gerrym51 »

if you are going to meet the requirement of having insurance and the only option you have is going thru Obamacare plan you don't have a choice. if your income puts you below the medicaid minimum you get medicaid. you don't have a choice. in states that did not expand medicaid you actually get nothing.
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celia
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Re: Enough retirement income to avoid Medicaid

Post by celia »

A relative who does not have taxable income had his medical insurance premiums raised TWICE last year. The premiums finally became more than his VA disability benefits. He has medical coverage for this pre-existing conditions through the VA but that would not cover future car accident injuries (especially when he travels and is not near a VA facility). And he may want his pre-existing condition treated outside the VA if it should worsen. So he wants secondary insurance. He was not eligible for ACA subsidies as he was told he had to apply for Medi-Cal (in California).

He just went to the same insurer he had last year and after they restructured how they sell insurance (because of the ACA), he got a new policy for half the price that last year's policy cost. So if you want, just forget about ACA. It mandated changes in insurance overall, which could benefit you even if you don't buy insurance at a ACA website.

Also check to see if you would be eligible for COBRA through the employer(s) you would be leaving. I don't think employer-based medical insurance premiums are related to ACA or commercial premiums. (Of course, an employer plan may include better coverage.)
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
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celia
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Re: Enough retirement income to avoid Medicaid

Post by celia »

gerrym51 wrote:if you are going to meet the requirement of having insurance and the only option you have is going thru Obamacare plan you don't have a choice. if your income puts you below the medicaid minimum you get medicaid. you don't have a choice. in states that did not expand medicaid you actually get nothing.
You always have a choice, as I see it. You can get insurance or not.

If you don't get it, you may have a tax penalty, but many people are exempt from it. The largest group that is exempt is those who don't have to file income taxes because they don't have enough income (which is something like 47% of the population). There are many other exemptions.

If you do get insurance, there are many choices, as dbr outlined above.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
dbr
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Re: Enough retirement income to avoid Medicaid

Post by dbr »

gerrym51 wrote:if you are going to meet the requirement of having insurance and the only option you have is going thru Obamacare plan you don't have a choice. if your income puts you below the medicaid minimum you get medicaid. you don't have a choice. in states that did not expand medicaid you actually get nothing.
Where are you getting the idea that the law prohibits a person from buying a commercial policy whatever their "income"? Is that actually what you mean? Do you think insurance companies validate your income and refuse to issue policies under provisions of law? What does "the only option you have . . . " mean?
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BolderBoy
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Re: Enough retirement income to avoid Medicaid

Post by BolderBoy »

Flobes wrote:I'm very much enjoying the ACA this year in early retirement. I too did not want to be on Medicaid, based on my primary care physician's recommendation.

Three strategies to raise your income over the Medicaid threshold:
1. Tax Gain Harvest: sell some of your taxable holdings for a gain. The gain counts towards the ACA's income determination. But you'll be in the lowest tax brackets, so you won't pay federal income tax on capital gains. You may have a state tax liability though.
2. Roth Conversion. Transfer some money from your IRA or other tax-deferred accounts to a Roth. You might have to pay federal income taxes. In my state, Roth conversion is considered Retirement Income, and the first $20,000 is exempt from income taxes each year for those aged 55-64.
3. Part-time job.

FYI Tax-exempt interest and Social Security payments count towards your income for ACA.
+1, especially to #2 above.

You might want to set up a spreadsheet based on the federal 1040ES and your state's estimated tax worksheet so you can track where you are now (and are going) for the 3rd quarter of 2014, then monthly to December, then weekly after that. You can tweak your outcome pretty closely that way and make your finishing decisions the last week of the month.
gerrym51
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Re: Enough retirement income to avoid Medicaid

Post by gerrym51 »

dbr wrote:
gerrym51 wrote:if you are going to meet the requirement of having insurance and the only option you have is going thru Obamacare plan you don't have a choice. if your income puts you below the medicaid minimum you get medicaid. you don't have a choice. in states that did not expand medicaid you actually get nothing.
Where are you getting the idea that the law prohibits a person from buying a commercial policy whatever their "income"? Is that actually what you mean? Do you think insurance companies validate your income and refuse to issue policies under provisions of law? What does "the only option you have . . . " mean?

DBR- i said if you used the Obamacare website and wanted a subsidy you have to accept what they put you into. if your income puts you at medicaid level and you are in a state that expanded medicaid you don't have a choice. you cannot say i want a metal plan, you have to be above the medicaid minimum income to get a metal plan.

IF you don't want subsidy at all of course you can pay full price. I have an obamacare plan myself and pay full boat. income above maxes. or you can buy a plan not on Obamacare site. but no subsidy.
ourbrooks
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Re: Enough retirement income to avoid Medicaid

Post by ourbrooks »

First, check whether your doctors/hospitals aren't available under Medi-Cal. From the Medi-Cal site:
Medi-Cal offers 21 managed care health plans, some of which are also offered by Covered California. Your choices depend on the county in which you live. Most counties offer commercial plans, including Anthem Blue Cross, Kaiser, Health Net, and Molina, as well as local not for profit health plans like L.A. Care. In some counties, one public plan is available and all Medi-Cal members are enrolled in that plan. An example is Cal Optima health plan in Orange County. Every county’s Medi-Cal plans provide the same high quality care to Californians at low or no cost, no matter where you live. The directory of Medi-Cal health plans is online.
Keep in mind that if your doctor can have you as a patient either under a Medicaid plan or under private insurance, purchased with an ACA subsidy, the doctor needs to worry about his retirement as well and private insurance pays more.

Keep in mind that at age 65, the expectation is that you will sign up for Medicare and there's no subsidy for private insurance plans.
dbr
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Re: Enough retirement income to avoid Medicaid

Post by dbr »

[quote="gerrym51"]

IF you don't want subsidy at all of course you can pay full price.

Well, apparently that is what the OP wants to do and this whole thread is about him mistakenly thinking that the law would not let him do that unless he could establish that his income was above the max., a situation that seems unlikely and indeed is not so. That is all there is here, apparently.
gerrym51
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Re: Enough retirement income to avoid Medicaid

Post by gerrym51 »

dbr wrote:
gerrym51 wrote:
IF you don't want subsidy at all of course you can pay full price.

Well, apparently that is what the OP wants to do and this whole thread is about him mistakenly thinking that the law would not let him do that unless he could establish that his income was above the max., a situation that seems unlikely and indeed is not so. That is all there is here, apparently.
i interpreted from the ops original post is that he wanted to keep his income above the medicaid level so that he could be subsidized with a metal plan and not be enrolled in medicaid.

i looked at it again(the original post) and that sure seems what it implies

since i have Obamacare plan myself i can tell you all you have to do is click the 'i don't want subsidy button' and you don't fill out financial info and go right to purchase.
dbr
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Re: Enough retirement income to avoid Medicaid

Post by dbr »

gerrym51 wrote:
dbr wrote:
gerrym51 wrote:
IF you don't want subsidy at all of course you can pay full price.

Well, apparently that is what the OP wants to do and this whole thread is about him mistakenly thinking that the law would not let him do that unless he could establish that his income was above the max., a situation that seems unlikely and indeed is not so. That is all there is here, apparently.
i interpreted from the ops original post is that he wanted to keep his income above the medicaid level so that he could be subsidized with a metal plan and not be enrolled in medicaid.

i looked at it again(the original post) and that sure seems what it implies
Yeah, I'm wondering also what exactly the point really was, but it does seem significant to decide if there is a point before going through gyrations to create "income." He also said "I just feel like it's not right for us to be on Medicaid. I didn't realize I could do non-subsidized ACA. I'll also look into Roth conversions. We are a family of 4 so I think we need to be over something like $25k. Thanks all." which suggests he doesn't want a subsidy and that the whole income thing doesn't matter and also that he is trying to get income he doesn't need, so that led to further posts to try to get to the end of the problem.
Jack
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Re: Enough retirement income to avoid Medicaid

Post by Jack »

celia wrote:If you don't get it, you may have a tax penalty, but many people are exempt from it. The largest group that is exempt is those who don't have to file income taxes because they don't have enough income (which is something like 47% of the population).
That is not correct. You are not exempt from the ACA penalty even if your income tax is zero. And it is not true that 47% don't file a tax return.

Pretty much everyone with wage income files an income tax return, regardless of their income. In fact the number of income tax returns exceeds the number of households every year (about 120%) because some households file more than one tax return. Only about 5% of households do not file a return and about two-thirds of those non-filers are retired people on social security because social security is untaxed for most.

Even if your income tax obligation turns out to be zero, the only way to get back any income tax withheld from your wages is to file a tax return. If you have a refund, the IRS can withhold part of it if you owe an ACA penalty.
Jack
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Re: Enough retirement income to avoid Medicaid

Post by Jack »

jkdzia wrote:I just feel like it's not right for us to be on Medicaid. I didn't realize I could do non-subsidized ACA. I'll also look into Roth conversions. We are a family of 4 so I think we need to be over something like $25k. Thanks all.
If you don't want Medicaid and you don't want a subsidized ACA plan, then you can just go directly to any health insurance provider and buy a plan. All plans sold today are ACA compliant whether on or off the exchange. Your income is completely irrelevant so no need to worry about it.

But while you are considering your feelings about subsidies, you might consider that almost everyone is now getting healthcare subsidies. The average family with an employer plan gets about a $4000 per year subsidy through tax deductions. The ACA expanded subsidies to non-employer insurance. The elderly get Medicare. About the only ones not getting a subsidy are a small percentage of higher income families without employer insurance and the poor in some states that did not expand Medicaid.
teacher
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Re: Enough retirement income to avoid Medicaid

Post by teacher »

Perhaps this is why the OP's wants to avoid Medicaid:

Will Medicaid take my house when I die?

Q. If I enroll in the new expanded Medicaid program, when I die and try to leave something to my kids, can the government attach those assets to repay the benefits I received?
The answer is, it depends. Of the 25 states that have expanded Medicaid, "10 are planning to try to get their money back when beneficiaries die." Those states are: California, Colorado, Iowa, Massachusetts, Nevada, New Jersey, New York, North Dakota, Ohio, and Rhode Island. These 11 states will not try to get their money back: Arizona, Arkansas, Hawaii, Kentucky, Michigan, Minnesota, New Mexico, Oregon, Vermont, West Virginia, and Washington. They said they’re going to leave you alone.
Illinois and Maryland, Connecticut, Delaware, and the District of Columbia are undecided.
http://www.consumerreports.org/cro/news ... /index.htm
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magellan
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Re: Enough retirement income to avoid Medicaid

Post by magellan »

Jack wrote:If you don't want Medicaid and you don't want a subsidized ACA plan, then you can just go directly to any health insurance provider and buy a plan. All plans sold today are ACA compliant whether on or off the exchange.
Although this is true, be sure to visit healthcare.gov so you'll know what's on offer there. As others have said, you don't need to enter income information on healthcare.gov if you don't want a subsidy.

In some states, insurers only offer their lowest cost plans on the exchange and not their own website. It's usually the plans with limited provider networks or the lowest benefit level that aren't sold off exchange. The difference in premium can be as much as 25%. For some folks, limited network plans may be worth considering because of their low premiums despite their obvious downside.

Jim
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magellan
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Re: Enough retirement income to avoid Medicaid

Post by magellan »

Jack wrote:But while you are considering your feelings about subsidies, you might consider that almost everyone is now getting healthcare subsidies. The average family with an employer plan gets about a $4000 per year subsidy through tax deductions. The ACA expanded subsidies to non-employer insurance. The elderly get Medicare. About the only ones not getting a subsidy are a small percentage of higher income families without employer insurance and the poor in some states that did not expand Medicaid.
According to this report by the Kaiser Family Foundation (pdf), the annual cost to the Treasury for the tax subsidy on employer provided insurance is $200 billion. Some quick googling shows that the total cost of Obamacare subsidies is about $11 billion a year.

IMO, people shouldn't feel uneasy about minimizing their taxes by applying for ACA subsidies. In fact, for folks with incomes of 300-400% of the federal poverty level, the subsidy is likely to be lower than the subsidy that many people in employer plans get.

As the saying goes, citizens have no obligation to arrange their affairs or prepare their taxes in a manner that maximizes their tax bill.

Jim
Jack
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Re: Enough retirement income to avoid Medicaid

Post by Jack »

magellan wrote:According to this report by the Kaiser Family Foundation (pdf), the annual cost to the Treasury for the tax subsidy on employer provided insurance is $200 billion. Some quick googling shows that the total cost of Obamacare subsidies is about $11 billion a year.
It is worth noting that while Obamacare subsidies are means tested, the employee healthcare subsidy is reverse means tested. The average low income employee gets a healthcare tax subsidy of less than $4000 per year while the high income employee gets a healthcare tax subsidy of over $6000 per year.
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Re: Enough retirement income to avoid Medicaid

Post by lululu »

celia wrote: If you don't get it, you may have a tax penalty, but many people are exempt from it. The largest group that is exempt is those who don't have to file income taxes because they don't have enough income (which is something like 47% of the population).
Well, not quite. After decades of paying federal taxes through the nose, I am now retired and my income of Social Security and interest on my taxable accounts, while quite decent, is swamped by my Schedule A stuff. Plus Social Security is not taxable until overall income reaches a certain level. So my adjusted income for federal tax purposes is negative and I pay no federal taxes. (I still pay state taxes, because my state limits deductions to standard amounts much smaller than I have on Schedule A.)

I certainly have to file income tax forms.

This oddity is partly due to the abysmal interest rates my taxable accounts earn and partly due to the fact that most of my savings are in IRAs. Now that I have to take RMDs, this happy no federal tax situation is going to change.

There are many other people in that 47% who do have significant income. I think people in the military on active overseas duty or somesuch pay no federal taxes, but certainly have income.
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celia
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Re: Enough retirement income to avoid Medicaid

Post by celia »

Jack wrote:
celia wrote:If you don't get it, you may have a tax penalty, but many people are exempt from it. The largest group that is exempt is those who don't have to file income taxes because they don't have enough income (which is something like 47% of the population).
That is not correct. You are not exempt from the ACA penalty even if your income tax is zero. And it is not true that 47% don't file a tax return.

Pretty much everyone with wage income files an income tax return, regardless of their income. In fact the number of income tax returns exceeds the number of households every year (about 120%) because some households file more than one tax return. Only about 5% of households do not file a return and about two-thirds of those non-filers are retired people on social security because social security is untaxed for most.

Even if your income tax obligation turns out to be zero, the only way to get back any income tax withheld from your wages is to file a tax return. If you have a refund, the IRS can withhold part of it if you owe an ACA penalty.
Here are the exemptions for those who don't have to have insurance: https://www.healthcare.gov/exemptions/

And here are the statistics (which also I've heard from other places) on how many pay federal income tax: http://money.howstuffworks.com/only-53- ... me-tax.htm

I will acknowledge that there is a difference between filing income taxes and having to pay them, as lululu showed, but the second link also tells that half of those who don't pay taxes are because they don't have enough income while the other half are primarily seniors and families with children who have tax advantages.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
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