With all the support and extra traffic coming from my friends at FreedomIsGroovy.com, I feel compelled to put down some thoughts. I tend to not write about politics, but never has politics hit home as hard as this year. The first effects are already felt and potential upcoming changes may hit even harder.
It’s ObamaCare renewal time. Last year, I received probably 50 timely emails/messages letting us know it was coming up. This year I received a single text.
I’m personally aware of what’s happening but it makes you wonder, how many will miss this year’s enrollment due to a 90% advertising budget cut.
This year, we’re directly impacted with all the turbulence surrounding ACA. Our current insurer, Anthem, has withdrawn from the market due to uncertainty surrounding subsidies. I’m not saying Anthem is great but we’ve been with them for almost 10 years. There was some feeling of continuity to that. This means I need to figure out what company to go with next. Pickings are slim; there’s only 5 insurers left on our market and I never heard of any of them.
The enrollment is painful on many fronts for me. As a software architect, it makes me cringe every time I have to answer the question whether my 7 and 9 year old are married (or have dependents of their own). With our son’s Type 1 Diabetes, things get more complicated. With the current deductible ($6,700 per individual), Currently we pay most medical expenses out of pocket, so it’s not costing the insurance companies a lot (certainly nowhere near the premiums they get for our coverage). Without insurance though, prices would triple, thanks to the under-the-table deals between pharma and insurance. Deals, us consumers don’t “enjoy” without coverage. Furthermore not all medical necessities needed for our son are covered by every insurer.
Medical Insurance and medical expenses are now the single threat posed to our early retirement. It shouldn’t be that way.
Roth IRA Conversion Ladder
Directly tied to the insurance issues, is the Roth IRA Conversion Ladder I initiated this year. I’ve converted $40,000 this year and, even though I won’t be able to touch one penny, it does count as income. It also requires I pay taxes and it also impacts the credits we get when paying health insurance.
I still have some latent capital losses I can invoke if needed and I may need them this year, as $40,000 along with the capital gains, incurred for living expenses, we may hop over into one bracket too many.
Be aware of this when you consider the Roth IRA Conversion ladder. The money converted counts towards your AGI and therefor can impact social benefits.
Or should I say tax reform? Based on all we’ve heard, it’s another one that hits close to home this year. Back to health care costs. One of the items on the chopping block in the new tax reform is medical expense deductions. In past years, we far exceeded the newly proposed standard deduction of $24,000, mainly due to medical expenses. Without this deductible, we won’t.
Then there is the newly proposed tax brackets. From what I understand the new 12% tax bracket will be for an income of up to $90,000 for joint filers. I’m fine with that but what I can’t find anything on is, what will happen to the long term capital gains. Since retiring I’ve paid 0% long term capital gains, since I’ve remained in the 10%/15% tax bracket (i.e. 0% on all my income).
At the moment I don’t know if this 0% long term capital gains will apply to the new 12% bracket, or if it will go away entirely. Considering it only impacts “lower” income families, I have a feeling it will.
What we know and don’t
For now, I know I’m directly impacted by the turbulence (systematic and deliberate tare-down) surrounding ACA. The newly proposed tax reform might not happen or might not happen this year. With all the shit being thrown at the wall in Washington, at some point something will stick.
Good luck reaching your financial goals.