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Others have pointed out using ACA subsidies as a potential bridge for health insurance premiums in the years between employer-provided health insurance and Medicare eligibility.

Let's say DeLay Gratification, age 56, has his eye on retiring in 2-3 years. As part of his retirement portfolio, he has a $600,000 taxable portfolio that he wants to draw down $50K/year. (We're ignoring his other assets, Social Security etc etc for the moment)

Let's say the portfolio is split at $250K basis and $350K long-term capital gains.

If by selling his $50K he thus realizes around $35K/year in capital gains each year, that puts he and his wife (Gwen Gigwork, a year younger) well over halfway to the ACA cliff (now just under $69K). In other words, if her part-time gig brings in $20K and he wants to do a part-time thing that ends up netting $14K then...uh-oh...their household income is now $40 over the cliff and they have to immediately pay back their $19K subsidy for that year. Nineteen thousand taxable dollars.


In the two years before retiring, DeLay and Gwen could realize most or all of their long-term capital gains of $350K, pay their (probably) 15% tax (around $50K) and immediately reinvest the remaining $300K. When they then go to tap their now-$550K account in a few years, the $50K annual withdrawal is nearly all basis.

Thus, he and Gwen can both do their thing (each year until Medicare) with a lot more wiggle room, as the ACA cliff is now twice as far off.

Three notes: a) yes, capital gains count in ACA determination of household income; b) the wash rule doesn't apply to stocks sold at a gain; and c) YMMV. I am not a financial professional and this approach should be checked with a reliable source.

Finally, this all presupposes the ACA and its cliff will be around and unchanged for the next x years (in this example, x = 10 for the 55 year-old Gwen)


"Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes." - Judge Learned Hand Gregory v. Helvering, 69 F.2d 809, 810 (2d Cir. 1934)
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