ACA ... Asset Allocation backed in a corner

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quantAndHold
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Re: ACA ... Asset Allocation backed in a corner

Post by quantAndHold » Tue Jan 14, 2020 8:28 pm

Hockey10 wrote:
Tue Jan 14, 2020 10:21 am
quantAndHold wrote:
Mon Jan 13, 2020 6:10 pm
Another option would be moving to a state with a functional insurance marketplace. My unsubsidized premiums (bronze, HSA eligible), are about $450/month. My subsidy at $66k income is only about $150/month. So if I go over the cliff, I thank the market gods for a good year, and go on with my life.
What state do you live in?
I’m in California. Without getting into politics, there are vast differences in how well or badly the different states have implemented the ACA, and what the resulting rates and plan selection are. California has some of the better ACA plans, but I think there are a few states that are better still.

michaeljc70
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Re: ACA ... Asset Allocation backed in a corner

Post by michaeljc70 » Tue Jan 14, 2020 8:35 pm

quantAndHold wrote:
Tue Jan 14, 2020 8:28 pm
Hockey10 wrote:
Tue Jan 14, 2020 10:21 am
quantAndHold wrote:
Mon Jan 13, 2020 6:10 pm
Another option would be moving to a state with a functional insurance marketplace. My unsubsidized premiums (bronze, HSA eligible), are about $450/month. My subsidy at $66k income is only about $150/month. So if I go over the cliff, I thank the market gods for a good year, and go on with my life.
What state do you live in?
I’m in California. Without getting into politics, there are vast differences in how well or badly the different states have implemented the ACA, and what the resulting rates and plan selection are. California has some of the better ACA plans, but I think there are a few states that are better still.
Is that due to further subsidies though? I don't really know- that is why I am asking. I imagine small markets have it tougher (less competition). Beyond that, I would think it would have to be subsidies. And by subsidies I don't mean they have to be direct.

bltn
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Re: ACA ... Asset Allocation backed in a corner

Post by bltn » Tue Jan 14, 2020 8:45 pm

mrgeeze wrote:
Mon Jan 13, 2020 5:32 pm
curmudgeon wrote:
Mon Jan 13, 2020 3:19 pm
If you have an HSA option, that gives a bit more space under the cliff, but I'm presuming you've already done what you can there. Beyond that, you can rebalance in your tax-deferred space, to the extent possible. If we get a market crash, that will take care of it for you :twisted:

I don't regard Asset Allocation as a god to be worshiped with strict devotion, so I mostly let things ride and chip away around the edges to move in my desired direction when feasible. If you are expecting (hoping) to stay under the ACA cliff for 10 years more, the issue might be a bit more pressing than if you only have three or four years to go before medicare. I'd agree with tfb that if you get concerned enough about it, then blow past the limits one year and make a big enough adjustment to cover for an extended period; maybe do a big DAF donation that year to partially balance. If you are getting closer to medicare, do be aware of the IRMAA effects that can show up two years later.

Fortunately NC, an otherwise pretty lousy state when it comes to healthcare, has an HSA option on a Bronze plan.
So we max that out every year.

No real income so no IRA opportunity.

we've Got 4 years left on ACA till Medicare.
I not enslaved to Asset Allocation. My real concern is a significant appreciation in the 2 stocks I mentioned in the original post.

curmugeon, i do appreciate your twist on the market crash. That will indeed rid me of the whole matter.
also some over balancing on the tax deferred stuff may make sense.

Another option we just started thinking about was to leave the country for a year. We could find 2 countries and stay in each for 6 months. We could join their health plan (many to choose that have superior healthcare to USA at a fraction of the cost) for the time we are there. During the year abroad we could take the gains. Missing the 20 grand ACA cliff will go a long way in Chile or Colombia.

just spitballin here
Do Chile and Colombia have better medical care than the U.S. at a fraction of the cost?

motorcyclesarecool
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Re: ACA ... Asset Allocation backed in a corner

Post by motorcyclesarecool » Tue Jan 14, 2020 8:52 pm

livesoft wrote:
Tue Jan 14, 2020 10:28 am
motorcyclesarecool wrote:
Tue Jan 14, 2020 9:16 am
If you have charitable intent, it might make sense to contribute to a Donor-Advised Fund. The deduction would not lower MAGI, but it would reduce your dividends and cap gains distributions. And you could lower your overall cost basis to better take advantage of TLH in a down year.
Exactly right. The OP could just give away lots of shares and the ?problem? is solved for the most part. Maybe give them to a charity that provides health care for the indigent?
I was attempting to think of what might help in the event OP already makes cash donations or even desired to pre-fund charitable gifts for future years. But your point is taken. Probably not a factor in this case.
Understand that choosing an HDHP is very much a "red pill" approach. Most would rather pay higher premiums for a $20 copay per visit. They will think you weird for choosing an HSA.

motorcyclesarecool
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Re: ACA ... Asset Allocation backed in a corner

Post by motorcyclesarecool » Tue Jan 14, 2020 8:56 pm

To the folks implicitly or explicitly criticizing the OP for seeking to optimize his / her health insurance dollar under the ACA, is this materially different from someone on Medicare trying to avoid getting whalloped by IRMAA?
Understand that choosing an HDHP is very much a "red pill" approach. Most would rather pay higher premiums for a $20 copay per visit. They will think you weird for choosing an HSA.

quantAndHold
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Re: ACA ... Asset Allocation backed in a corner

Post by quantAndHold » Tue Jan 14, 2020 9:37 pm

michaeljc70 wrote:
Tue Jan 14, 2020 8:35 pm
quantAndHold wrote:
Tue Jan 14, 2020 8:28 pm
Hockey10 wrote:
Tue Jan 14, 2020 10:21 am
quantAndHold wrote:
Mon Jan 13, 2020 6:10 pm
Another option would be moving to a state with a functional insurance marketplace. My unsubsidized premiums (bronze, HSA eligible), are about $450/month. My subsidy at $66k income is only about $150/month. So if I go over the cliff, I thank the market gods for a good year, and go on with my life.
What state do you live in?
I’m in California. Without getting into politics, there are vast differences in how well or badly the different states have implemented the ACA, and what the resulting rates and plan selection are. California has some of the better ACA plans, but I think there are a few states that are better still.
Is that due to further subsidies though? I don't really know- that is why I am asking. I imagine small markets have it tougher (less competition). Beyond that, I would think it would have to be subsidies. And by subsidies I don't mean they have to be direct.
No. Not further subsidized, as far as I know. Health insurance is a stable competitive market in CA, apparently not so in NC. The reasons it’s so much cheaper have to do with matters that we can’t discuss on Bogleheads. The only point I was trying to make is that before considering moving to a foreign country for a few years, OP might just consider a different state.

michaeljc70
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Re: ACA ... Asset Allocation backed in a corner

Post by michaeljc70 » Tue Jan 14, 2020 10:04 pm

quantAndHold wrote:
Tue Jan 14, 2020 9:37 pm
michaeljc70 wrote:
Tue Jan 14, 2020 8:35 pm
quantAndHold wrote:
Tue Jan 14, 2020 8:28 pm
Hockey10 wrote:
Tue Jan 14, 2020 10:21 am
quantAndHold wrote:
Mon Jan 13, 2020 6:10 pm
Another option would be moving to a state with a functional insurance marketplace. My unsubsidized premiums (bronze, HSA eligible), are about $450/month. My subsidy at $66k income is only about $150/month. So if I go over the cliff, I thank the market gods for a good year, and go on with my life.
What state do you live in?
I’m in California. Without getting into politics, there are vast differences in how well or badly the different states have implemented the ACA, and what the resulting rates and plan selection are. California has some of the better ACA plans, but I think there are a few states that are better still.
Is that due to further subsidies though? I don't really know- that is why I am asking. I imagine small markets have it tougher (less competition). Beyond that, I would think it would have to be subsidies. And by subsidies I don't mean they have to be direct.
No. Not further subsidized, as far as I know. Health insurance is a stable competitive market in CA, apparently not so in NC. The reasons it’s so much cheaper have to do with matters that we can’t discuss on Bogleheads. The only point I was trying to make is that before considering moving to a foreign country for a few years, OP might just consider a different state.
I think the markets are stable most places after all this time. By something we cannot discuss, I think you mean politics. Politics is not allowed, but passed laws are. Laws like the ACA have hidden subsidies. For example, the fact that male and females get charged the same regardless of actual costs and older people and younger people premiums are limited to a proportion not consistent with actual costs.

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grabiner
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Re: ACA ... Asset Allocation backed in a corner

Post by grabiner » Tue Jan 14, 2020 10:49 pm

One way to manage your risk level is to buy out-of-the-money put options (on a broad index, not on the individual stocks in your diversified portfolio), say at a 20% decline from the market value. If the market doesn't crash, the put options expire worthless, and you have a capital loss (which can offset some gains if you need to take them). If the market does crash, you sell the put options for a gain, but you should be able to offset that gain because you will have stocks with capital losses. Buying the put options reduces your risk and expected return, just as selling stocks to buy bonds does, but it may be more tax-friendly.

This isn't perfect; if the market does crash, you may have larger capital gains on your options than you can offset with capital losses. But this will be a one-year effect, and the put options will do their job at moderating your losses. (If you had followed this strategy in the past, you might have gotten stuck with too much in capital gains in 2008.)
Wiki David Grabiner

Tanelorn
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Re: ACA ... Asset Allocation backed in a corner

Post by Tanelorn » Wed Jan 15, 2020 12:11 am

mrgeeze wrote:
Mon Jan 13, 2020 2:55 pm
I can take at most 5-10k per year in gain without risking going over.
I have some significantly appreciated shares (AAPLE, GE) I would take the cap gains
but the ACA penalty would be $20K+ additional.
You could consider hedging some of your risk rather than selling. For example, you could sell short some of a tech sector ETF such as XLK:

https://www.etf.com/stock/AAPL

XLI for industrials might work similarly for GE. With Apple having outperformed so dramatically, it’s unlikely that any market based hedge would necessarily protect the full downside if the stock did poorly (since it would probably do worse than the market on the way down), but hedging could give you less exposure overall and let you wait as you sell your appreciated gains over time to stay under the cliff.

Another idea would be to write covered calls on AAPL for the amount of shares you’re willing to sell at roughly the current price given your tax situation. If the stock rises, you’re happy since you’re gaining money on the rest of the position and you end up with some shares called away at a realized profit. If the stock stays the same or falls, you gain the extra call premium at least as partial compensation. If you’ve already met the 1 year holding period for lower tax rates, that’s great, but if you haven’t yet, you’d want check the rules on “qualified covered calls” to make sure you make it to a year before the calls expire and that they don’t screw up your holding period.

1130Super
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Re: ACA ... Asset Allocation backed in a corner

Post by 1130Super » Wed Jan 15, 2020 7:42 am

I’m all for finding every loophole possible and not complaining but this post really makes me wonder why they have income restrictions to qualify for ACA and not any asset restrictions. Someone with $2 million in assets should not be able to get subsidies.

michaeljc70
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Re: ACA ... Asset Allocation backed in a corner

Post by michaeljc70 » Wed Jan 15, 2020 8:27 am

1130Super wrote:
Wed Jan 15, 2020 7:42 am
I’m all for finding every loophole possible and not complaining but this post really makes me wonder why they have income restrictions to qualify for ACA and not any asset restrictions. Someone with $2 million in assets should not be able to get subsidies.
For the same reason most taxes are on income or transactions- it is quickly and easily determined. Valuing someone's private business, how much their homes, land, cars, coin collection, etc. is worth every year would be difficult/expensive for both the taxpayer and government enforcement.

The income test should catch most people if they don't have a lot of assets in retirement accounts or an expensive home. On top of that, the ACA covers only 4% of the population. Most people have employer plans, Medicare or Medicaid.

In some places (VHCOL) a $2 million home is not all that extravagant and maybe the owner bought it for $300k 25 years ago.

I think you read a good amount about ACA subsidies for people with substantial assets due to the nature of this board. I don't think the actual numbers are that great.

quantAndHold
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Re: ACA ... Asset Allocation backed in a corner

Post by quantAndHold » Wed Jan 15, 2020 11:29 am

michaeljc70 wrote:
Tue Jan 14, 2020 10:04 pm
quantAndHold wrote:
Tue Jan 14, 2020 9:37 pm
michaeljc70 wrote:
Tue Jan 14, 2020 8:35 pm
quantAndHold wrote:
Tue Jan 14, 2020 8:28 pm
Hockey10 wrote:
Tue Jan 14, 2020 10:21 am


What state do you live in?
I’m in California. Without getting into politics, there are vast differences in how well or badly the different states have implemented the ACA, and what the resulting rates and plan selection are. California has some of the better ACA plans, but I think there are a few states that are better still.
Is that due to further subsidies though? I don't really know- that is why I am asking. I imagine small markets have it tougher (less competition). Beyond that, I would think it would have to be subsidies. And by subsidies I don't mean they have to be direct.
No. Not further subsidized, as far as I know. Health insurance is a stable competitive market in CA, apparently not so in NC. The reasons it’s so much cheaper have to do with matters that we can’t discuss on Bogleheads. The only point I was trying to make is that before considering moving to a foreign country for a few years, OP might just consider a different state.
I think the markets are stable most places after all this time. By something we cannot discuss, I think you mean politics. Politics is not allowed, but passed laws are. Laws like the ACA have hidden subsidies. For example, the fact that male and females get charged the same regardless of actual costs and older people and younger people premiums are limited to a proportion not consistent with actual costs.
Discussions of *why* ACA policies are so much cheaper in some states than other states would quickly get into politics, but there are plenty of articles in the googlesphere about which state is which, and it’s easy enough to go onto a state’s exchange and enter some personal data and get numbers. When I googled, I found articles that said California is one of the cheapest states, and North Carolina is in the worst third for ACA costs. I’m not linking to the articles, because everything I found either had 50 links to click through, or were from sources that had a lot of political bias one way or the other. This is, of course, a hot topic.

michaeljc70
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Re: ACA ... Asset Allocation backed in a corner

Post by michaeljc70 » Wed Jan 15, 2020 12:14 pm

quantAndHold wrote:
Wed Jan 15, 2020 11:29 am
michaeljc70 wrote:
Tue Jan 14, 2020 10:04 pm
quantAndHold wrote:
Tue Jan 14, 2020 9:37 pm
michaeljc70 wrote:
Tue Jan 14, 2020 8:35 pm
quantAndHold wrote:
Tue Jan 14, 2020 8:28 pm


I’m in California. Without getting into politics, there are vast differences in how well or badly the different states have implemented the ACA, and what the resulting rates and plan selection are. California has some of the better ACA plans, but I think there are a few states that are better still.
Is that due to further subsidies though? I don't really know- that is why I am asking. I imagine small markets have it tougher (less competition). Beyond that, I would think it would have to be subsidies. And by subsidies I don't mean they have to be direct.
No. Not further subsidized, as far as I know. Health insurance is a stable competitive market in CA, apparently not so in NC. The reasons it’s so much cheaper have to do with matters that we can’t discuss on Bogleheads. The only point I was trying to make is that before considering moving to a foreign country for a few years, OP might just consider a different state.
I think the markets are stable most places after all this time. By something we cannot discuss, I think you mean politics. Politics is not allowed, but passed laws are. Laws like the ACA have hidden subsidies. For example, the fact that male and females get charged the same regardless of actual costs and older people and younger people premiums are limited to a proportion not consistent with actual costs.
Discussions of *why* ACA policies are so much cheaper in some states than other states would quickly get into politics, but there are plenty of articles in the googlesphere about which state is which, and it’s easy enough to go onto a state’s exchange and enter some personal data and get numbers. When I googled, I found articles that said California is one of the cheapest states, and North Carolina is in the worst third for ACA costs. I’m not linking to the articles, because everything I found either had 50 links to click through, or were from sources that had a lot of political bias one way or the other. This is, of course, a hot topic.
This summary from a study on its face makes sense to me (I don't know what their slant or biases are):

State policies and insurance regulations were key factors affecting the number of issuers participating in the marketplaces in 2017. Marketplaces run by states had more issuers than states that rely on the federally facilitated marketplace. States with fewer than four issuers tended to have policies in place that could have been destabilizing — for example, permitting the sale of plans not compliant with the Affordable Care Act’s requirements regarding essential health benefits or guaranteed issue. Consumers in states that did not take steps to enforce these insurance market reforms still benefited from their protections, however; they were just enforced at the federal level. States with more issuers were also more likely to have expanded Medicaid. States with fewer issuers tended to be rural and have smaller populations, more concentrated hospital markets, and lower physician-to-population ratios.


https://www.commonwealthfund.org/public ... ing-others

I am sure there are other reasons like the state actively marketing and extensively helping people sign up.

CFM300
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Re: ACA ... Asset Allocation backed in a corner

Post by CFM300 » Wed Jan 15, 2020 12:36 pm

Ron Ronnerson wrote:
Tue Jan 14, 2020 8:10 pm
Here are the numbers for 2020 in California for two 60-year-olds in my zip code (in the Bay Area):

With an income of $67,640 (at the cliff) – PTC is $2093/month – monthly premium for a silver plan is $2/month and a gold plan is $164/month
Wow. PTC and premiums really vary by location even within California, and it looks like you're in a very favorable market.

I ran the same scenario (two 60-year-olds, $67k income) for 90405 (Santa Monica) and 94122 (west side of S.F.) and got the following:

90405
PTC - $1,001.26
Least expensive Silver plan - $537.64/month AFTER PTC

94122
PTC - $1,899.50
Least expensive Silver plan - $295.76/month (Kaiser HMO)
After that, next least expensive Silver plan - $538.82/month

Ron Ronnerson
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Location: Bay Area

Re: ACA ... Asset Allocation backed in a corner

Post by Ron Ronnerson » Wed Jan 15, 2020 3:35 pm

CFM300 wrote:
Wed Jan 15, 2020 12:36 pm
Ron Ronnerson wrote:
Tue Jan 14, 2020 8:10 pm
Here are the numbers for 2020 in California for two 60-year-olds in my zip code (in the Bay Area):

With an income of $67,640 (at the cliff) – PTC is $2093/month – monthly premium for a silver plan is $2/month and a gold plan is $164/month
Wow. PTC and premiums really vary by location even within California, and it looks like you're in a very favorable market.

I ran the same scenario (two 60-year-olds, $67k income) for 90405 (Santa Monica) and 94122 (west side of S.F.) and got the following:

90405
PTC - $1,001.26
Least expensive Silver plan - $537.64/month AFTER PTC

94122
PTC - $1,899.50
Least expensive Silver plan - $295.76/month (Kaiser HMO)
After that, next least expensive Silver plan - $538.82/month
Yes, the difference in cost between states is talked about often but they can be significant in different areas within a state too. The OP was looking for options and mentioned the possibility of moving out of the country. It may be worth considering other locations within the United States also. Here are the numbers for two sixty-year olds in Walnut Creek, CA (zip code 94598) for a silver plan on Kaiser that has a cost of $1985/month if not subsidized:

Income: $67,640 (at the cliff) – Premium: $2; Subsidy: $2092
Income: $77,640 ($10k over the cliff) – Premium: $277; Subsidy: $1709
Income: $87,640 ($20k over the cliff) – Premium: $543; Subsidy: $1443
Income: $97,640 ($30k over the cliff) – Premium: $775; Subsidy: $1211

Due to the state subsidy, this couple would want to keep income below $101,460 rather than worry about the federal cliff that is at $67,640.

I picked an area near me just as an example. The housing cost is high here so moving to the Bay Area may not be the best option for everyone. However, it could be worthwhile to check out the numbers at different locations since rates can vary so much.

scrabbler1
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Re: ACA ... Asset Allocation backed in a corner

Post by scrabbler1 » Wed Jan 15, 2020 6:44 pm

mrgeeze wrote:
Mon Jan 13, 2020 2:55 pm
File this under the "I never thought about this" category.

Wife and I currently on ACA with zero monthly premium. Bronze catastrophic plan.
This will be the 4th year of our participation.

Every year we struggle to maintain our MAGI under the ceiling.
So far so good.

The stock market has been strong and powerful.
As a result Our equity positions are dominating our asset allocation.

But dividends and distribution income render us unable to do any real trading less we go over the cliff.
I can take at most 5-10k per year in gain without risking going over.
I have some significantly appreciated shares (AAPLE, GE) I would take the cap gains
but the ACA penalty would be $20K+ additional.

So I'm hesitant to do anything

Anybody else dealing with this clearly first world problem?

Thanks
From 2014-2016, I managed to avoid going over the subsidy cliff. Like you, I had a decent sized but not huge cushion to keep me off the cliff. Cap gain distributions from a stock fund I have owned since 1996 were always small enough to keep me safe. But in 2017, I went over the cliff. And again in 2018. I thought about liquidating in 2018 but remember how the market tanked at the end of 2018 so I would have taken a huge cap loss just to be able to qualify for a fairly small (but growing) ACA subsidy, still under $2,000 a year. So I stayed put and hoped I would not go over the cliff again in 2019.

In 2019, it looked like I could barely stay off the cliff. But the cap gain estimates were a little low and I'd go over and couldn't make any more spec-ID sales to pull me back. So, if I had to go over again, I decided it was time to liquidate the stock fund and buy into a similar index fund. Cap gain distributions will be tiny, dividends a little lower, and with the subsidy growing to between $4k and $5k for 2020, I'll recover most of the added taxes and lost subsidies in 2020.

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