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Retirement is a time to enjoy the fruits of your labor, but securing affordable health insurance before Medicare eligibility is critical. James explores how one couple saved $15,000 annually on health insurance subsidies and avoided a costly mistake.

Finding the Right Health Insurance Plan
Our clients, retiring before Medicare age, evaluated COBRA, private insurance, and marketplace plans. Using the Kaiser Family Foundation's online tool, I estimated their subsidies by entering their state, zip code, projected income, and household information. The tool projected a $1,252 monthly subsidy, saving $15,000 annually.

Understanding Subsidies and Income Calculations
Subsidies are based on your Modified Adjusted Gross Income (MAGI). Our clients’ projected MAGI included:

$20,000 salary from PTO
$8,000 interest income
$3,000 nonqualified dividends
$20,000 IRA withdrawals

With a MAGI of $51,000 and the standard deduction, their taxable income kept them in the 10% tax bracket.

The Pitfall of Capital Gain Harvesting
They considered realizing $65,000 in longterm capital gains. While it kept federal taxes low, it increased their MAGI to $116,000, drastically reducing their subsidy by over $6,000 per year.

Strategic Planning to Maximize Benefits
To avoid losing subsidies, monitor your MAGI, balance income sources, and consult professionals. Your subsidy is based on MAGI, not just taxable income, so plan holistically to save thousands annually and ensure a secure retirement.

Key Takeaways
Subsidies Depend on MAGI: Your health insurance subsidy is based on your MAGI, not just taxable income.
Capital Gains Impact Subsidies: Realizing significant capital gains can increase your MAGI and reduce your subsidy.
Plan Holistically: Consider both tax implications and subsidy eligibility when making financial decisions.

Navigating health insurance subsidies in retirement requires careful planning and a clear understanding of how different income sources affect your MAGI. By working closely with financial and tax professionals, you can maximize your benefits and avoid costly mistakes.

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⏱Timestamps:⏱
0:00 Health insurance before Medicare
1:58 Capital gain harvesting vs healthcare subsidies
3:29 Taxable income sources
5:26 Modified adjusted gross income
7:36 Tax planning
9:00 Takeaways

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