Healthcare/Premium Credits, Dividends, TLH, RMDs...

[Roly]

Married Filing Joint in NC (Family of 3 with a minor child).

How is Tax Premium Credit for ACA (Healthcare Marketplace) affected by AGI, MAGI and 401K to Roth rollovers?

How do you estimate dividends on taxable?

Is it true that ACA doesn't allow emergency health coverage internationally? If true, what do people do when they travel... painful and expensive to buy this every year?

What do you plan/do about long term health care? I think I want to self insure, but also want to make sure I can have the most luxurious care available/desired. What are some options?

Emergency funds - We will take care of home and auto repairs before retiring.
50 to 80K for home and auto, it will be time to get a new roof, new HVAC, replace auto, etc. (@smitcat and other folks who question about emergency funds, as I have too in the past, I could use my Roth for this but I want to shield myself from the market downturn).
20K for Healthcare OOPs(Out of Pocket) maximum.
Sounds right? Is there a better way to keep your cash than in Money Market (MM) account? CD?

Interesting question that I am coming back to after a few years - do I rebalance portfolio every year or let a custodian do it for free? They do it for free due to a relationship but I don't really know how to verify this. My worries stem from possible health issues/mental agility at 80+ and spouse's unease to rebalance..

I have changed this post considerably. As I started writing this and looking to provide accurate information before asking my questions, some of the questions got answered. Thanks a ton, BHers, it gives me a lot of support knowing that I am not alone, having help where nobody is trying to sell me their wares. Any time I need help, this is what I turn to

[celia]

Roly,
Could you go back and edit your initial post so it is formatted in the way we are familiar with and use either rounded numbers or percentages for everything, with your entire portfolio adding up to 100%. Use the pencil icon at the top of your post when you are signed in.

Here's the template we recommend:
Asking Portfolio Questions

In particular, all these assets should total 100%, not 100% for each account:

Total portfolio 2.5M for retirement + 150K for college.

Our tax free accounts (Roth and HSA) have FSGGX (Global ex US Index). Taxable is 94% FSAIX (500 Index) and 6% FSGGX.
Roth 190K (15K contributions annually)
HSA 50K (9K contributions)
Retirement Health Plan 30K (can be used for Medical Premiums)
Taxable account 580K (no more contributions) ***
401K - 1M for older (55+K contributions), custodian managed
401k - 900K for younger (40+K contributions) - FZROX and FZILX (Fidelity Zero US and International funds) and bond index fund.

[FiveK]

My main question is on ACA (Marketplace Healthcare) and PTC (Primary Tax Credits).

Roth Conversion and Capital Gains On ACA Health Insurance is an excellent resource.

This will also affect RMD's to start in 2037, is it better to start converting to Roth earlier, in my situation?

See Whether, when, and how much to convert.

I am curious to learn how dividends change with the growing dollars. Also, I may not be able to TLH with current gains, right? Is there a way to set it more favorably for TLH? Probably not, since taxable holds a lot of gains...

Assuming dividend amount as a constant percentage of your dividend-paying investment is a reasonable (but not guaranteed) bet. Make sure your cost basis method is set to "specific lot ID" if you want to do TLH.

[Roly]

@celia - Thank you. I have modified my post considerably to keep what's relevant. I am fine with my overall portfolio.

@FiveK - Dividends - got it. TLH - got it. Thank you. MAGI, PTC and rollovers(401K to Roth) and how it affects taxes, I am working on it

My understanding is that MAGI over ~$103K (for a family of 3) reduces my PTC to 0 (assuming enhanced subsidies expire at the end of 2025, right when I retire). So, I can rollover just enough to stay under 400%FPL. Right?

I think the link calculates subsidies and taxes for current year (when enhanced subsidies are available). I don't understand all of it.... but is it in essence saying that if you rollover but don't go above your marginal income tax rate, you may pay a little extra in taxes but subsidies won't reduce much?

[retired@50]

My understanding is that MAGI over ~$103K (for a family of 3) reduces my PTC to 0. The post seems to suggest otherwise. This is where I need help. Is there an easier way?

Use tax software to model your situation. Change relevant inputs and see what happens to your tax liability, APTC, etc.

Regards,

[FiveK]

@FiveK - Dividends - got it. TLH - got it. Thank you. MAGI, PTC and rollovers(401K to Roth) and how it affects taxes, I am working on it

My understanding is that MAGI over ~$103K (for a family of 3) reduces my PTC to 0 (assuming enhanced subsidies expire at the end of 2025, right when I retire). So, I can rollover just enough to stay under 400%FPL. Right?

Yes, if you are happy with the reduced (not eliminated, but it will be reduced) subsidy amount due to the extra income. And who knows what the actual law will be for TY2026....

I think the link calculates subsidies and taxes for current year (when enhanced subsidies are available). I don't understand all of it.... but is it in essence saying that if you rollover but don't go above your marginal income tax rate, you may pay a little extra in taxes but subsidies won't reduce much?

Depends on your definition of "much".

Yes, the spreadsheet used in the Finance Buff's article does (for the examples I've seen) do an accurate federal tax calculation including ACA effects. This annotated chart is a good example of what it can show. Does your situation look similar?

[Roly]

Right, for 2026 (my first year of ACA as planned), PTC will be eliminated for income in excess of MAGI, if enhanced subsidies expire. Right?

I agree, have to calculate to get the exact effect on taxes and PTC

I agree I haven't read all the long articles, but can you summarize here how to get the future(?) marginal rate to decide on rollover amount?

Spouse is simply in bliss thinking about retirement, so I must do some work

[FiveK]

Right, for 2026 (my first year of ACA as planned), PTC will be eliminated for income in excess of MAGI, if enhanced subsidies expire. Right?

...for MAGI for Affordable Care Act purposes in excess of 400% FPL. As current tax law stands.

I agree I haven't read all the long articles, but can you summarize here how to get the future(?) marginal rate to decide on rollover amount?

1. (Current traditional balance) * (1 + assumed rate of return)^(assumed number of years before withdrawing) * (assumed withdrawal rate)
2. Add expected interest + non-qualified dividends, qualified dividends, pension, SS, and any other "unavoidable" income
3. Put those numbers into a Tax estimation tool that fits your situation
4. If using the Excel personal finance toolbox, see its marginal rate chart. Otherwise do several different estimates, increasing the assumed traditional withdrawal/conversion amount and hand-calculating the marginal rates for each amount.

[Roly]

Just realizing you wrote the wiki page... very impressive, thank you.

[FiveK]

Just realizing you wrote the wiki page... very impressive, thank you.

On behalf of all the wiki editors and admins, you're welcome! It's a group effort.

[Roly]

Hello - I need help thinking out loud and planning to make sure I am not missing something major. Can you review and let me know? @FiveK/Anybody?

Planned retirement Dec 2025 @ 64, 53 and 11.

I think we have a plan. I need to keep it simple and efficient.


401K (Age 63) - 1M - Spouse 1
401K (Age 52) - 900K - Spouse 2
Roth (Spouse 1+2) - 200K
HSA/Other - 80K
Taxable - 500K - Mostly in FXAIX (500 Index fund)


Taxable - TLH - Don't worry about TLH. If I have a little more to sock away until retirement, it goes to FXAIX; I am happy with its low yield and tax efficiency. After retirement, we turn off auto investment of dividends and leave it alone. This will likely go to our only heir.

HSA - Use it up, part of it can be used for premiums as well. It's good to let it grow tax free but I worry I may not remember to use it later. It feels like a burden to me.

401K to Roth and ACA -

First year ACA credit equals $18K. Then Spouse 1 turns 65, it will reduce to $5K, and will gradually go up to $10K over the next 10 years when Spouse 2 turns 65. This is based on income a little under 400%FPL. Maybe worth taking it first year and a year or two before Spouse 2 turns 65.

So probably not making a Roth conversion for those 2 or 3 years of retirement, but for all other years, I am thinking that converting 401K to Roth early is better, mainly to avoid passing the 401k to the second living spouse or our heir. For Roth conversion, maybe aim for a 12% marginal tax, or as high as maybe 22%. Figure out the number based on this table. What do you think?
https://www.bogleheads.org/wiki/Taxatio ... _taxpayers

I am better friends with tables like these than Excel

I am thinking we will have enough income for monthly expenses, travel and healthcare, from our fixed income sources, and won't need to withdraw much, if any, from retirement accounts. Any extra needs will be for healthcare Out Of Pocket maximum, and it can come from HSA.

Emergency funds - $40K for home repairs/auto.

I want to ask if my overall plan looks good. Also if my ACA premiums and Roth conversion plan seems good.