Personal Finance (Not Investing) • Another COBRA vs ACA question

Good to know. Even with 4-6 months of unemployment we will probably be well in excess of the limit this year as both of our careers (hers more than mine) will likely a modest signing bonus

In my opinion, plan for not working the rest of the year when thinking about premium tax credits, or having some small amount of income. Then when if/when you start working, ACA premiums stop and you go onto a new employer plan. At tax time next year, you end up paying back whatever premium tax credits apply for your particular situation/MAGI for the entire year. It's what I did the first year of the ACA.

I retired middle of last year and just went onto COBRA for the remainder of the year. Switched to ACA this year. We were in the middle of some things and wanted to make 100% sure we kept our providers, plus we had fully met the deductible for the year. It gave us more time to really look at all of the ACA plans for this year before choosing one.

Cheers.

What's the advantage of over claiming on ACA tax credits? Less up front cost and paying more later?

To be clear, I'm not suggesting that one tries to game the system. Instead, if one is unemployed, concerns about cash flow can quickly become paramount and I found it best to be very conservative about one's immediate job prospects.

In my case, I actually didn't know if I would be re-employed in the year I was previously on an ACA plan. In my estimates for that year's MAGI, I even made a assumption that I might be doing some consulting work and made my MAGI estimate accordingly. In the end, no consulting work was forthcoming and it was beginning to look like I had overestimated my MAGI. Instead, employment came along mid year and the opposite happened and I ended up paying back all of my premium tax credits at tax time. Before I went back to work, we lived only on unemployment, while it lasted, my severance package and whatever was in the checking account. We pretty much emptied all of that out about a week before I started working and had to dip into the portfolio a little bit to tide us over.

We're on an ACA plan this year and despite my best efforts at estimating MAGI, it does seem that I might have overestimated this time. I retired last year (and did COBRA till December) and didn't start withdrawing from the portfolio until this year, so it's something of a test case...

Cheers. 

Gotcha! thanks for clarifying. We're fortunate to have an ample emergency fund and can tap other cash reserves we had set aside for upcoming purchases such that we shouldn't run into any issues for a long time.

Statistics: Posted by dcabler — Tue Apr 02, 2024 1:05 pm — Replies 15 — Views 935