Optimizing Obamacare vs Minimizing Taxes presents a classic trade-off.
On the one hand, it would be nice to maximize Obamacare subsidies. Easy! Simply don’t generate a lot of income.
On the other hand, we want to minimize taxes. We do this by offsetting income with standard deductions and personal exemptions, and generating (a large amount of) income that has preferential tax treatment.
But for the ACA, there is no preferential tax treatment. There is no standard deduction, no personal exemptions.
In this post, I explore how to navigate this complex environment in order to optimize health insurance premiums, out of pocket medical expenses, and taxes. Can we find the balance?
In all likelihood, an early retiree in the United States is going to purchase ACA (Obamacare) compliant Health Insurance on the Federal or a State Health Insurance Marketplace.
Even though the ACA has provided common standards, Health Insurance is still a complex topic with numerous trade-offs. Coverage levels and premiums vary. Every insurance company has a different approach to cost sharing. Each State has a slightly different implementation, maybe a different website, and wildly different prices.
Subsidies may pay nearly all of your premium, or they may cover nothing. It isn’t always clear which will apply until after the fact. As a result, some will get an extra large tax bill at the end of the year, while others will pay too much each month. They may even provide a disincentive to earn a higher income.
But much like the Income Tax, those who understand the the system can optimize their income and investments. Knowledge is power. Optimizing Obamacare starts with understanding the system. Then we can make choices to minimize costs and maximize coverage.
I’ve spent my fair share of nights in 5-star hotels. Apparently I have Starwood Preferred Guest Lifetime Gold status due to my 307 nights spent in Sheraton, Westin, Le Meridian, and W hotels over the years. (More than 1 Year of work days!) They are wonderfully convenient and predictable.
Public spaces are warm and inviting, beautifully decorated with plenty of natural light and artwork you would expect to find in a museum. The interior designer is well known by those who know interior designers.
Rooms are spacious and comfortable, with large heavenly beds and lush pillows. The sheet thread count is at least 4 digits, and the complimentary bath robe is something you would happily wear all weekend. The shower experience is certain to make you consider a home bathroom redesign (and 10 million times better than our shower in San Pedro, Guatemala.)
The staff is friendly and remembers your name. “Welcome back, Mr. & Mrs. GCC.” When was the last time anybody called me Mister? Anything you need, they deliver with a smile.
Indeed, 5-star hotels are very nice. But I don’t love them. On our list of preferred places to stay, they are last.
Only 40 More Years of Working For That Bling Bling (photo credit – Achim Voss)
For somebody who has committed to building wealth through living well below their means and investing, how long will it take to become financially independent?
The stock market is a volatile and uncooperative beast, so our assumption of constant growth never materializes. How do real world investment returns impact our wealth accumulation?
Despite the data, not everybody is comfortable with a 4% withdrawal rate. Some require a 3% withdrawal rate, or even (gasp!) 2%. How much longer will it take to save 33x or 50x our annual spending?
To answer these questions, I used the same methodology as the Trinity Study… but this time, looking backwards.
“How long would it have taken to become financially independent throughout modern history?”
The train was near capacity as we shuffled aboard, stroller in tow.
I temporarily lost sight of Winnie as she and the baby slipped into the last possible seat to exclamations of “Ka-wa-ii!” (‘Cute’, in Japanese.) Everywhere we went the reaction was much the same, everybody wanting to touch his cheeks and exchange smiles.
But this time, something was different.
As the train left the station, the smiles were replaced with awkward sideways glances. That was the moment when GCCjr’s face glowed red as he filled his diaper with all that is unholy in this world.
30 minutes later everybody was more than happy to exit the train. So kawaii.
