How Young Executive Retirees Lower Their Healthcare Premium

Transcript

So the thing that you need to be aware of is that the health care premiums, the insurance premiums are income based. Once you retire, so if you retire early, you may be eligible for the Affordable Care Act, because if you retire before 65, you really would have to go out and try to find some kind of private insurance, which can be very expensive.

Now, the client that I highlighted earlier, she is a multimillionaire. She has several million dollars, but because we set up those various accounts, I'm able to hide income. I'm able to show very little taxable income for her, and she actually qualified to be a part of the Affordable Care Act; for the subsidy.

So in the state of Maryland, if you make less than $58, 000, then you qualify for a subsidy for the Affordable Care Act. So despite the fact that she has several million dollars, we're able to qualify her for that program. Once you turn 65, you're eligible for Medicare and that's also based upon your income.

So what you need to know about the Affordable Care Act and Medicare is that it's based upon your modified adjusted gross income. All that means is- this is your income before you take your deduction, your standard deduction or your itemized deductions and if you have some tax free interest, they added back, etc.

But the main thing to know is that is based on your modified growth adjusted gross income. So when we're looking at opportunities for planning for clients, you're working, you're making a lot of money as a young retiree. There's typically an opportunity here where you're going to be in an artificially low tax bracket, so you have no more income coming in.

This is before your social security starts. You haven't started your required distributions from your retirement accounts yet. Your 401ks and your IRA accounts. So you're typically in a very low tax bracket right here. If we have these non retirement accounts set up, I'm able to keep you in this low tax bracket.

If all of your money is in a 401k account, every time I pull money out to give you money to live on, that's considered taxable income. So in this example, we said that she needs $10,000 a month. That's $120,000 a year, but I need to take more than that out of the 401k because we have to pay taxes on it, right?

If I have money outside the retirement account, There's no taxable income to show right? We have 2 years of cash in that bucket. I'm just giving you your money back. So you need $10,000 dollars. If you have $10,000 and savings, I'm just giving you that money. It's showing zero income. Despite the fact that she had- she has several million dollars available for retirement. We're showing almost no income for her besides any interest that we're generating and any dividends that we're generating. She qualifies for the Affordable Care Act here.