The Affordable Care Act and Retirement

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Our school district had a retirement incentive of 85% of our final salary spread over five years, so 17% of our salary per year.  This  can be used to pay health insurance premium or put in a 403b retirement plan.  While we were working, I had family coverage and my wife didn’t take health insurance benefits.  When we retired, we dropped family coverage and my wife and I each took individual policies.  If we hadn’t, my wife would have had to withdraw money from her 403b and then pay taxes on it before using it to pay for our family health insurance premium.  Our older daughter graduated from college and is no longer on our health insurance policy.  We took out a private individual health insurance policy for our daughter who just started college.

My wife and I each currently have a monthly health insurance premiums of $467.48.  Our daughter’s health insurance premium is $160 a month, but is scheduled to rise to $230 a month next calendar year.  That means we will be paying a total health insurance premium of $1,164.96 starting in January.  Since we are paying with pre-tax dollars and we are in the 15% marginal tax bracket, it means we would have to find an equivalent family policy with a premium of $1,025 a month or less.  The cheapest bronze policy comes in above that, so it doesn’t pay for us to take out a family policy through the health insurance exchange, unless we get a subsidy.

If my wife and I have no income besides our pensions next year, that will be a total of $72,306.  We estimate our daughter will earn $4,080.  The earnings cap for receiving a health insurance subsidy for a family of three is $80,360.  At our estimated level of earning, we would get a $701 a month subsidy toward health insurance.

The insurance policy on the exchange that is predicted to have the lowest total health costs for us (premium and out of pocket), is a bronze policy that would cost us $351 a month, after the subsidy.   We’re estimating $3,600 in out of pocket expenses.  That would be a $50 a month increase over our current budget.  If we don’t use our early retirement incentive toward health insurance, it will go into our retirement accounts.  That would increase our combined retirement accounts by $11,220 a year. We would have to find $351 a month in our budget to pay for health insurance and $50 more for out of pocket expenses.  We also need to earn enough for clothing and personal expenses, or about $200 a month each.  If we earn $801 a month more or withdraw from our retirement account to cover those expenses, our subsidy would disappear and our parent contribution for college would increase, as determined by FAFSA.

We could make up $801 out of current expenses.  We already are paying $160 a month for our daughter’s insurance.  That would leave a balance of $641.  We could eliminate our vacation budget of $167 a month, that we just added.  That brings the balance down to $474 a month.  We could take that out of our charity budget of $564, leaving a balance of $90.  We will get a combined raise of $179 a month next July, which we could put toward charity.  We could also do more volunteer hours.


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