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.
ACA Renewal
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 Our current insurer, Anthem, has withdrawn from the market due to uncertainty surrounding subsidies.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.
I’ll let NerdWallet defend the numbers, but this really says it all (even if exaggerated)
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.
Taxes
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.
Thanks for the shout-out Maarten!
The ACA had us baffled. Our renewal notice put us in a plan that doesn’t exist! However, we managed to sign up without any trouble on Friday although we’re quite fortunate to be able to get a subsidy. There does’t seem to be consistency in how participants are contacted. Our notice came in the mail from Blue Cross but we also got a voicemail from the DSS on behalf of Healthcare.gov.
I know it’s been a tough year for you and I thought of you when I read about the proposed cut to the deduction for medical expenses. All I can say is hang in there! And brainstorm with other folks who may have thought of additional creative ways to deal with the tax burden — i.e. Financial Samurai and the Bogelheads forum.
Thank you! The weirdest part of it all is that our monthly credits seems to have gone up (way up) from this year, even though the “income” has remained the same. Either I chose only partial use of credit signing up last year (which I can’t imagine having done) and I’m getting a bunch back come tax time or a mistake has been made and I will owe them a lot in 2019.
Initially we’ve been moved over to a new plan/provider that doesn’t cover any of our doctors and hospitals. Luckily we get to choose our own. Just have to make a lot of calls to figure out who suits our needs the best.
Regarding the possible upcoming tax reform (or possible upcoming anything): Ignore it. I know, it’s tough. You’ll feel ignorant and emotionless about all the possible changes you don’t know about. And that is, as counter intuitive as it seems, a great place to be in our loud yelling (and stress inducing) world. If you can’t or won’t change it, ignore it until it’s real and impacts you. When you do pay attention to the what ifs there is zero benefit, besides scratching the “media drama itch” we all might get. Once it’s real, then invest the time and energy (and emotional drain) into it. Never mind political view points and finger pointing, never mind the “what ifs”, never mind how it -might- impact you. It’s all imaginary until it’s not.
This took me a long time accept, but after spending about a year checking cnn.com 2x a week instead of 2x a day I can promise you I am no worse off. Confession: I “scratched the itch” recently with the tax reform stuff and found the information a)outdated, b)confusing, and c)outright wrong. Because it’s not real yet. Just a bunch of people pointing and yelling “RABBLE! RABBLE!” 99% of the time.
Thx, That’s a nice way of going through life; not going to worry about a thing till it hits you in the face. It’s not how I live my life. Financial independence, reaching it and maintaining it, is a constant game of what-ifs. I tend to not worry too much about things coming my way but I certainly want to prepare for them when they do come our way.
I got 2 texts and 3 emails on Wednesday (which is when we did our ACA paperwork). But it does concern me that we haven’t gotten an email asking us to pay our premium yet, since I don’t feel confident that everything’s official until we pay the bill. Until then, anything and everything can change.
The question about your kids being married or having their own dependents is a tax return question. It may be weird, but it’s part of the “Qualifying Child” guidelines (when applied to teens or college kids, it makes more sense) and therefore part of the framework for the subsidies.
I haven’t seen any changes to the capital gains/qualified dividend rules discussed at all. Personally, I think it would make sense to adjust the rates upward, although it would hurt our tax situation, because you have to have investible assets to be affected. I doubt, though, that this round of tax reform will disturb them at all.
I had the same concern the first time signing up: waiting for the bill, to make it official. It did come eventually. I’ve been calling around and it seems one of the new plans has a good coverage for our situation. What is scary is that when I asked if our son’s Continuous Glucose monitoring was covered, the answer was, it looks like its covered.. but you won’t know for sure until the claim is submitted. One might say that’s unacceptable but I’ve experienced it first hand: Being told by 4 people up the chain we’d be covered, to be told at the Pharmacy: coverage is declined.
Hey, Maarten. Is it possible to get diabetic supplies and insulin from Canada or Europe? Or is that illegal? I wish we had some formula that allowed Americans to purchase foreign drugs and medical supplies if domestic suppliers became too costly. That’s one way to keep Big Medicine in check. Another thing I would like to see is insurers (both public and private) take advantage of medical tourism where feasible. After all, why pay a surgeon in San Diego $20K to replace a knee when a competent surgeon in Tijuana will do it for $5K? I’m afraid that competition is the only thing that will subdue the ravenous appetite of Big Medicine. But since Big Medicine has Congress in its back pocket, I don’t see price transparency and competition coming to the medical arena anytime soon. Sigh. I wish I could offer something more hopeful, Maarten, but I can’t. That chart on medical bankruptcies is very sobering. Americans deserve better.
Getting insulin from Canada is a grey area. Technically I believe it is not legal and if your shipment is caught at customs it’s send back (after which the pharmacy will try shipping it again). It certainly is something I keep in mind. From Europe would be out of the question due to the temperature sensitivity of the drugs. The other thing to keep in mind is that when ordering from Canada, it would not apply to the deductible. Given other possible complications trying to keep it cheap can cost you more in the end.
I’m all for competition and market driven forces but NOT when it comes to medicine and healthcare. When you talk about consumer goods, you have choice whether to buy expensive, cheap and more importantly not-at-all. With life saving medicine there is no true question/demand, there is no choice. I’ll catch a lot of flak for this but medicine/healthcare in my opinion is a human right and governments SHOULD be involved making it accessible to all.
Everywhere in western the western world, governments ARE involved. In most western countries it’s government for the people, in America it’s government for the corporations. The insulin we pay $450 for, here in the US is sold in Canada for $100 and in Europe for $50 (exact same packages, exact same sellers). Guess what, Eli Lilly is still making profit selling it for $50 in Europe (or else they wouldn’t). The ability to sell it for $450 in the US (all three producers of insulin do). Like you stated it nicely, its the ravenous appetite of Big Medicine. American’s do deserve better.