400% of the poverty line right now is 84K for a couple and 128K for a family of four. Am I crazy or would it be very easy to keep your MAGI under those number while living off sold assets? We are hoping to fire in the next 5-8 years so I am very interested in this issue and now it might affect our plans.
We live in a MCOL area and are hoping to live off about 120K for our family of four, adjusted for inflation when we retire, and that will include a small mortgage payment of $1500. But that income number includes both the principal and gains we will be selling so we would be able to stay WELL under the 400% subsidy limit.
I keep seeing concern on this sub about the loss of the extended subsidies, so are fired folks who have huge increases just living in VHCOL area or more chubby fire scale? I do realize that premiums will go up even below that 400% line, but from the numbers I've run it doesn't seem nearly as catastrophic as what I'm hearing. What am I missing here and should I actually be worried about this?
Can someone help me understand the big negative impact the expiring of the enhanced ACA subsidies will have on people who have fired?
byu/BikesOrBeans infinancialindependence
Posted by BikesOrBeans
16 Comments
Because most people are 10-20 years out from FIRE and haven’t done the research yet. They just hear other WORKING people say their insurance is $700+/month and just assume that it applies to early retirement.
There are so many ways to manage MAGI, we are planning to spend $100K/yr:
Option A: Keep MAGI under 250% FPL by living off dividends and brokerage withdraws. Gold Plan is $160/months.
Option B: Do Option A but also do another $30K of Roth Conversion. My MAGI is like 390% FPL and Bronze Plan is $250/month.
I CHOSE Option B because I want to reduce RMD in the future. There are so many ways to optimize MAGI and take advantage of the subsidies.
Even people with subsidies under 400% are having their premiums go up substantially. Your state makes a big difference. Prices also go up considerably (again, even with subsidies) the older you get, so it’s a large budget line item. It can also be hard to do Roth conversions, and even more so if you are single and 400% is quite a bit lower.
There wasn’t any change for me. Living in Tennessee.
Living in a VHCOL.
House sale pushes us way over next year, plus we lose one dependent.
We still have a dependent for 2026-2028, but after that will only have the two of us.
The biggest cost for us is travel. And we want to do that while we still can. We meet plenty of folks in their 60s & 70s still traveling and enjoying it, but there is no guarantee that’ll be us. We’re mid-50s and already feeling it.
For chubby and fatfire they will be over 400% of poverty.
That said, when you have $5 million, $10 million and fire with $300k annual spends it’s perfectly reasonable that the government doesn’t subsidize your healthcare.
I have millions saved for fire and I don’t expect the government to subsidize my healthcare – I’ll just get a bronze plan and pay out of pocket.
The outcry are from people earning $300k incomes but have zero savings, so the loss of a $500 government subsidy is “catastrophic”. Which is….wow
There’s a few reasons I can think of off the bat. They might not apply to you, but I imagine each of them applies to a decent pool of people here in aggregate:
1) In many areas of the country, 84k is a tough number to live on. You could tell them to move to a MCOL or LCOL area, but that’s not a proposal that’s going to get much traction if people like where they live or have other reasons why they are tied to a specific area.
2) Many early retirees are trying to maximize their roth conversion ladders so that they have the money they need to survive until they hit 59 1/2, and having to reduce that to stay under the 400% limit decreases their conversion capability.
3) Some early retirees have created an early retirement pipeline that involves income-generating assets, like real estate rentals. All of that is going to count towards MAGI, and they don’t have much control over reducing that short of selling off some of their housing assets and changing their approach.
Single early retirees are in a tighter situation for the points above, because 400% of the poverty line for them is $62,600.
As an anecdote for a reason that’s entirely separate from the ones above, I’m getting hit by it but hopefully only for a single year. I resigned from my job a few months ago and retired at the end of September, but I have one more deferred payment of about $90k coming next year from when the company I worked at was acquired. That combined with my normal capital gains from assets etc… pushes me above the 400% limit next year, and I have no control over that despite the fact that my spending is considerably under $90k per year. I’ll be fine from 2027 onwards, but I was not anticipating this curveball when I handed in my resignation and it’s going to make my expenses significantly more than I was anticipating in the coming year.
The implementation stinks. A $1 overage and you’ll be paying X more. You couldn’t have planned any better but a fund issues capital gains and suddenly your insurance is substantially more.
I was on ACA from 2014 to 2022, I’ve seen how it works.
If you have a lot in taxable accounts or Roth accounts…sure…you can spend a lot more than the $84k.
People who have the bulk of their retirement savings in a trad 401k would have it harder though… right?
I’m personally slightly worried about my retirement account mix… but I have 10 years to rectify it/build a buffer in a brokerage account.
Look at the numbers for yourself. For my household, the cost increase is not significant so long as we keep MAGI below 400% FPL.
Sometimes, managing your MAGI is harder than you think, especially if you have investments that are not tax-sheltered.
For example, the first year after I retired, I thought my MAGI was solidly below the threshold. Then, in December, some of my taxable accounts re-balanced and put me over 400% FPL. Capital gains on the re-balancing were almost three times what they’d been in previous years, so it was kind of unexpected.
I was able to max out a traditional IRA that year, since I had W-2 income from my severance payment, and that dropped me back below the cliff.
It’s very highly nuanced and that’s the biggest problem in many ways. It’s going to change dramatically from one household to the next based on income, household size, your age(s) and residential state. It’s both a problem and not: large, sweeping answers don’t do much in the way of advice. And philosophical arguments about the politics of distributed healthcare costs conflate baseline arguments about figuring out how much you might plan on specific to your situation. The fact is there’s a lot of people here who won’t be impacted much at all, and there’s a lot of other people dramatically effected because of their circumstances and locale. None of that nuance is avoidable from one household to the next without large, encompassing federal policy changes, so advice is going to be difficult.
Op you should probably just price out thr coverage cost. I’ve heard of costs of 2k a month with frankly terrible coverage.
No, you’re not crazy. There are plenty of FIREd people who are still using the ACA successfully (including me), despite what the news channels would have you believe.
Please visit the weekly ACA threads on r/Fire, such as this one for the current week. You will find a wealth of useful information there. [https://www.reddit.com/r/Fire/comments/1phblhj/weekly_aca_2026_open_enrollment_faqmegathread/](https://www.reddit.com/r/Fire/comments/1phblhj/weekly_aca_2026_open_enrollment_faqmegathread/)
In nevada the difference between under 128k and over is 1300 vs 1800.
For early retirees we have a lot of options to structure our income level, but this just means we likely have a cap for ourselves at 128k of MAGI.
This has implications for how much you can roth convert 401Ks, as well as obviously people with less ability to structure their income like those heavy in real estate.
1. Not everybody is married.
2. Not everyone was able to utilize tax sheltered accounts because that option is dependent on your sources of income along the way. I’m FIRE’d, with around 90% of my portfolio is in taxable brokerage. I can’t avoid a certain level of distributions.
3. If you have kids who have a job, *their income* is counted in your household. My college kid has a paid internship in the sciences, they are incredibly lucky because the grant money for the research was funded at the end of 2024. However because of their internship, that stipend of $13k for 12 months has pushed our “household” over the limit.
The difference in healthcare costs to me is now far north of my kid’s $13k in earnings, and obviously I’m not taking their internship money—that’s their money and they earned it and need it!
We’ve been able to keep our MAGI under the subsidy cliff most years with help from a wealth management firm, although I don’t think it’d be that hard to do on one’s own.
Even without the enhanced ACA subsidies the cost of our health insurance will go down next year
In ’24 we paid $568 per month for health insurance for a family of 3 in Ohio. This year we are paying ~$250 per month. Next year we will pay ~$170 per month.