Being "poor on paper" is how you qualify for subsidies. Setting aside cash during your working years will allow you to be poor on paper when you retire. I know a couple who saved enough cash in savings to allow them to pull from to supplement his pension after both retired at 61. They do not pull funds from deferred tax accounts as that would increase their taxable income. No Social Security taken. Keeping their income low and pulling from savings only keeps their MAGI low and allows them to get subsidies to afford healthcare until Medicare starts!
I and my wife plan to retire in roughly 5 years at 59 and 57 respectively. Our intention is to use a small state pension, modest monthly cash withdrawals, and principal roth distributions to implement the "poor on paper" strategy for ACA insurance during our bridge years between leaving employment and Medicare eligibility. I would love to find someone with a channel who is either currently using or has used a similar strategy just to check my work and to here of any possible pitfalls.
@@rogerwilliams4493 If you’d like, I’d be happy to look at your specifics and make another video as a case study. You’d get the info and verification of your plans that you are looking for, and I’d get to make another video to help other early retirees and grow my channel.
Great content man. I have been phasing my way into retirement over the past year and a half. Will finish up at 62 in February 2025. I have been doing a lot of checking, looking, etc. Your content confirms what I was planning on. Thanks so much. I appreciate it.
Thank you for the video ! I am in my 40s and trying to learn all the tips for early retirement. I have to look for a video that teach me about the capital gain tax. We have invested in index funds and that might hurt us later on.
You are very welcome! As far as having to deal with capital gains once you retire, I wouldn’t worry too much about it now. There are some pretty straight forward ways of managing capital gains to minimize taxes paid and still qualify for ACA subsidies. I think I’ll make a capital gains video specifically for early retirement. 🤛
Please do! It will be a great resource. I in a FIRE group on fb and some said they had to sell their high dividend stocks before they retire to qualify for ACA. Would be great to learn some tips from you !
Another example that you may want to use in a futher video when you talk about, wanting to put on paper that your income will be 100k but you are actually going to spend 200k I am guessing that people can not only spend cash on hand, that you can also spend money pulled out of a ROTH account? is that a proper assumption? and how early can a person pull funds from an 401k ROTH account tax free?
Great questions and awesome suggestion for another video! And to answer your question, yes, you could pull from a Roth IRA or Roth 401k as another way of getting extra money to spend without it showing up as income on your taxes. Roth money is tax and penalty free after 59.5. However, Roth accounts are unique because you can take out your contributions ANYTIME tax free and penalty free. There are some other nuances around Roth accounts but in most cases, yes they are a great source to pull money from to facilitate qualifying for ACA subsidies.
This is a great video - especially explaining details like verification of income in the first year of early retirement, as well as how to set up taxable income, and going thru what counts as "income" for ACA. Do you know what to do to bridge the gap for a high out of pocket plan? For 2 people I see that if we go over 39K or 40K then all plans that are reasonably priced have huge Max OOP and huge deductible (18K for Max OOP) - is it possible to get a 10K or 15K "bridge" that will cover most of that huge amount? If there is how much more per mo are we looking at and when would that trigger - any illness or only after we paid 10-15K out of pocket? Like what is we paid 8K that year...will the bridge policy pay that???
Thanks for this.. that is a lot of hoops to jump thru for such crappy insurance, but I guess it's our only option right now. I tried to do this three years ago but wanted to work some. Since I had no idea how much I would work, it scared me to think I would have to 'pay back' all the premiums.. Especially since its pretty crappy coverage to begin with. In the area that I live, very few doctors accept this. Maybe do a video about the HMO vs PPO options. And what the thresholds are for the income for various situations. I am single. Will be on SS and maybe a part time job that keeps me below the level where my SS will get 'taken back". Can you address those things? Of course I am going to the site and play around with the numbers.
I totally hear you on this, Thank you for your great comments! Qualifying for ACA credits is definitely more difficult for a single person since the income thresholds are so much lower. And the plans and options that are available definitely vary depending on where you live. I will make some videos looking at this stuff from a single person's vantage point as well!
The Affordable Care Act is on the list to be terminated by one political party. Look it up. If it is taken away, "retiring early" will no longer be an option for most people. We will be working until 67-70.
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Being "poor on paper" is how you qualify for subsidies. Setting aside cash during your working years will allow you to be poor on paper when you retire. I know a couple who saved enough cash in savings to allow them to pull from to supplement his pension after both retired at 61. They do not pull funds from deferred tax accounts as that would increase their taxable income. No Social Security taken. Keeping their income low and pulling from savings only keeps their MAGI low and allows them to get subsidies to afford healthcare until Medicare starts!
Well said, I love how you articulated how to apply this strategy! Set aside cash while you're working so you can retire and be poor on paper, So good!
I and my wife plan to retire in roughly 5 years at 59 and 57 respectively. Our intention is to use a small state pension, modest monthly cash withdrawals, and principal roth distributions to implement the "poor on paper" strategy for ACA insurance during our bridge years between leaving employment and Medicare eligibility. I would love to find someone with a channel who is either currently using or has used a similar strategy just to check my work and to here of any possible pitfalls.
@@rogerwilliams4493 If you’d like, I’d be happy to look at your specifics and make another video as a case study. You’d get the info and verification of your plans that you are looking for, and I’d get to make another video to help other early retirees and grow my channel.
Great content man. I have been phasing my way into retirement over the past year and a half. Will finish up at 62 in February 2025. I have been doing a lot of checking, looking, etc. Your content confirms what I was planning on. Thanks so much. I appreciate it.
Right on! Let me know if there’s a specific topic you’d like me to make a video on.
Great Great video. Exactly the information was looking for. Really appreciate it.
@franki55 I'm glad you found it to be helpful! Let me know if there are other topics you think I should cover.
Thank you for the video ! I am in my 40s and trying to learn all the tips for early retirement. I have to look for a video that teach me about the capital gain tax. We have invested in index funds and that might hurt us later on.
You are very welcome! As far as having to deal with capital gains once you retire, I wouldn’t worry too much about it now. There are some pretty straight forward ways of managing capital gains to minimize taxes paid and still qualify for ACA subsidies. I think I’ll make a capital gains video specifically for early retirement. 🤛
Please do! It will be a great resource. I in a FIRE group on fb and some said they had to sell their high dividend stocks before they retire to qualify for ACA. Would be great to learn some tips from you !
Another example that you may want to use in a futher video when you talk about, wanting to put on paper that your income will be 100k but you are actually going to spend 200k I am guessing that people can not only spend cash on hand, that you can also spend money pulled out of a ROTH account? is that a proper assumption? and how early can a person pull funds from an 401k ROTH account tax free?
Great questions and awesome suggestion for another video! And to answer your question, yes, you could pull from a Roth IRA or Roth 401k as another way of getting extra money to spend without it showing up as income on your taxes. Roth money is tax and penalty free after 59.5. However, Roth accounts are unique because you can take out your contributions ANYTIME tax free and penalty free. There are some other nuances around Roth accounts but in most cases, yes they are a great source to pull money from to facilitate qualifying for ACA subsidies.
This is a great video - especially explaining details like verification of income in the first year of early retirement, as well as how to set up taxable income, and going thru what counts as "income" for ACA.
Do you know what to do to bridge the gap for a high out of pocket plan? For 2 people I see that if we go over 39K or 40K then all plans that are reasonably priced have huge Max OOP and huge deductible (18K for Max OOP) - is it possible to get a 10K or 15K "bridge" that will cover most of that huge amount? If there is how much more per mo are we looking at and when would that trigger - any illness or only after we paid 10-15K out of pocket? Like what is we paid 8K that year...will the bridge policy pay that???
Thanks for this.. that is a lot of hoops to jump thru for such crappy insurance, but I guess it's our only option right now. I tried to do this three years ago but wanted to work some. Since I had no idea how much I would work, it scared me to think I would have to 'pay back' all the premiums.. Especially since its pretty crappy coverage to begin with. In the area that I live, very few doctors accept this. Maybe do a video about the HMO vs PPO options. And what the thresholds are for the income for various situations. I am single. Will be on SS and maybe a part time job that keeps me below the level where my SS will get 'taken back". Can you address those things? Of course I am going to the site and play around with the numbers.
I totally hear you on this, Thank you for your great comments! Qualifying for ACA credits is definitely more difficult for a single person since the income thresholds are so much lower. And the plans and options that are available definitely vary depending on where you live. I will make some videos looking at this stuff from a single person's vantage point as well!
The Affordable Care Act is on the list to be terminated by one political party. Look it up. If it is taken away, "retiring early" will no longer be an option for most people. We will be working until 67-70.
They were so incompetent last time getting rid of it. No reason to think they are any smarter now.