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Retiring Before Age 65? Tips for Saving Money on “Obamacare”

We’ve all seen how medical expenses, including health insurance, go up with age. If you’re not yet age 65, where you can have Medicare, The Affordable Care Act (ACA) has made finding health care that corresponds to your budget easier, in some circumstances. However, understanding how tax credits and subsidies affect your options is not always easy.

You might find that getting insurance under the Affordable Health Care Act requires some planning:

  1. Start by assessing your income and find out what the poverty level is in your state. These numbers will determine the subsidies you qualify for.
  2. Find out if you qualify for Medicaid. Income requirements vary from one state to another:
    • In some states, you can qualify for Medicaid if your income corresponds to the poverty level or is below this level.
    • Some states have expanded Medicaid, which means this option is available if your income corresponds to or is below 138% of the poverty level.
  3. You might qualify for tax credits that would help you pay for health care coverage. You can qualify for tax credits as long as your income corresponds to or is lower than 400% of the poverty level in your state.
  4. Consider a silver level plan. You can qualify for one of these health care plans as long as your income does not exceed 250% of the poverty level in your state. This type of plan includes a special tax credit known as cost sharing which will help cover your deductibles.

Another Option: Use Non-Taxable Income to Reduce Your ACA Health Insurance Costs

Keeping your income under certain levels makes it easier to qualify for the ACA subsidized plans. Since your taxable income is taken into consideration, you might be able to rely on non-taxable income to meet your monthly expenses during retirement, thus reducing your health insurance costs

Money that is withdrawn from a 401(k) or an IRA account is taxable income, which means withdrawing over a certain limit would cause the cost of health care to go up. However, you can withdraw non-taxable income from a Roth IRA or a Roth 401(k) account.

Choosing a Roth IRA or Roth 401(k) retirement account means you’ll have to pay income taxes on this money before it goes into the account. However, the withdrawals are tax free and could allow you to meet all your monthly expenses while still qualifying for subsidies that would make your health care more affordable.

Rolling your retirement savings over into a Roth IRA can sound troublesome, but this is an option to consider if there are no affordable policies available on the marketplace.

There are other sources of tax-free income also, such as the income received from municipal bonds. Talk with your accountant or investment advisor about sources of tax-free income that might be available to you in your situation.

Find out more about the different plans offered on the healthcare marketplace and compare the prices for the plans that correspond to your needs.Assess your taxable income, determine what subsidies you could qualify for, and consider using tax-free income to cover your living expenses. You might find that you can save thousands of dollars!


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