April 7, 2025 • 19 mins
Healthcare costs shouldn't stop you from retiring early, especially when strategic planning can reduce those expenses from $1,000+ to as little as $50 per month. We explore how proper account structure and withdrawal strategies can save you tens of thousands in healthcare premiums during the critical pre-Medicare years.
• "Superhero accounts" (brokerage/taxable accounts) offer tremendous flexibility for controlling taxable income
• Capital gains from brokerage accounts are taxed more favorably than IRA withdrawals
• Strategic income planning can qualify you for ACA subsidies, potentially saving $70,000+ over five years
• Tax gain harvesting at 0% capital gains rate provides additional opportunities
• Balance healthcare optimization with other goals like Roth conversions
• Most valuable for those within 5 years of retirement
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Ari Taublieb, CFP ®, MBA is the Chief Growth Officer of Root Financial Partners and a Fiduciary Financial Planner specializing in helping clients retire early with confidence.
“Early Retirement – Financial Freedom” is a podcast produced by Root Financial Partners, an SEC-registered investment adviser. The content provided is for informational and educational purposes only. It should not be interpreted as investment, legal, or tax advice. I may reference planning situations based on real client experiences, but they’ve been simplified for clarity. Always consult your own financial advisor before making decisions.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
I would say healthcare costs are the number
one reason people don't retireearly.
It's hey, how am I going to beable to afford healthcare in
addition to travel and payingkids, college and a remodel?
Yeah, I'm just going to keepworking.
Now the reality is you'recheating yourself by saying that
, because I have clients thatpay $50 a month for healthcare
and I also have clients thatspend $1,000 a month in
(00:20):
healthcare, and it depends onyour plan and if you plan well
for it, you can minimize coststremendously.
I'm going to do a case studyfor you so you can see a real
client that I have who retiredat 60 and was worrying about
healthcare costs until 65.
And I said you don't need toworry about it, you should have
planned for it.
And let me show you how.
If you pull from the rightaccount, it can significantly
reduce your expenses.
(00:41):
And if you're interested inretiring early, then I please
invite you to subscribe.
If you're watching on YouTube,rate the show.
If you are listening on thepodcast app and you find this
helpful in any capacity.
I love what I get to do, whichis make videos and podcasts
around healthcare, tax strategy,withdrawal, long-term care,
(01:01):
insurance, estate planning.
This is, to me.
What allows people to feelconfident to retire early, which
is all I'm trying to do here isbuild that confidence so by the
time you retire, you don't haveany head trash of.
I should have considered this,and why didn't I do that one
thing.
So, healthcare the reason Isaid I think it's the number one
reason people are hesitant toretire early is because I put
(01:22):
out a video 10 months ago on myYouTube channel called Health
Insurance for an EarlyRetirement Everything you Need
to Know and 170,000 of youwatched that one video and you
were like, wow, this reallyhelped clarify my options.
Meaning do I go to Cobra?
Do I instead decide to?
A common thing is go to themarketplace.
Should I look for privateinsurance?
What about?
(01:42):
Do I stick with my company?
What about if I make my spousego work so that we have
healthcare and maybe they don'tlove their job, but at least
we're getting healthcarebenefits?
Like, there's a lot ofdifferent options.
Today is not me going througheach option.
Today is a case study so youcan better understand the
importance of good savings, andso I'm going to be going through
this.
It's going to be a little bitmore technical, a little bit
(02:04):
more of the financial weeds, ifI must say.
So.
The example I'm going to startwith before I kind of hit you
with it and I'll do this oftenfor any of my videos is and
there's a true story I went to adoctor it's not a long story,
but it's a true story and thiswas months ago.
And I said, hey, doc, what youjust said there, it sounded
great.
I think you think it soundedgreat.
And I told him I have no ideawhat you just said, so please
(02:25):
try explaining again.
And he said okay, so he startsexplaining to me the lab that
the pills are made in that he'sgoing to give me.
And he said, respectfully, doc,I don't care about the lab.
I don't want to be mean here,but I don't care about the lab.
No-transcript, thank you, I'mnow good.
(02:54):
He's like no, I have more totell you.
I'm like I don't need more.
So why do I tell you?
This?
Today is going to be going alittle deeper on certain things,
such as Medicare right, irma,surcharges.
We're going to talk abouthealthcare subsidies, and so
some of you might be like, hey,this sounds like a little bit
like the lab, like I just wantthe pill.
Tell me, what do I do, what doI not do?
Well, one, I wish it was thatsimple.
(03:14):
Two this is what we do for aliving.
So there's a lot of planningpoints around this, but my hope
is I can give you just theanswer, which I'm going to be
able to do in the next oneminute.
But then I'm going to give youa deeper analysis and I hope I
don't lose you, because I reallynever want this to feel like
I'm so in the lab.
But I also want you to go OK,it's the pill, but I know why
(03:35):
I'm taking the pill.
So a little longer story than Iwanted there.
But my point here is we'regoing to hop in.
So to hop in.
So this couple came to me andthey said, ari, I just want some
statistics Like what do mostpeople even pay when they are 60
for healthcare?
And I said, okay, let me, letme look like let's get the
statistics, cause I know whatmost of my clients pay.
(03:55):
But I said how much do you wantto spend in retirement?
And they said about $60,000 ayear.
I says that before or aftertaxes.
And they're like they thoughtabout it and like, oh,
definitely after taxes.
I go great, let's assume youwant to retire 60 years old and
you're just 60,000 a year.
That's what allow you to livethe life you want to live.
And they were like, yeah, thatsounds good.
Now, between us me and all ofyou out there that 60,000 for
(04:16):
most of my clients it's notenough.
That's like the basics.
Then there's travel, thenthere's home remodel or college
or things like that, but 60,000was the basics.
So, from a tax perspectivewhich is what I'm going to
really be kind of driving theconversation on the reality is
most healthcare costs.
I would say the average and Iwant to look up the average
(04:37):
after this because now I'mcurious.
But the average from my clientsit's about $950 a month.
That is before.
Like we analyze and optimizethe situation is they are coming
to me planning for about $950 amonth.
Now a lot of things dependbronze, silver, platinum what
kind of plan do you want?
That's that other episode I didwhere it's more on.
(04:58):
Okay, what are the differencesthere?
Today's going to be thefinancial side.
So let's assume someone's 60,they retire and they want to
spend $60,000 a year and $12,000, I'm going to keep it simple
$1,000 a month as their annualpremium, $12,000 a year.
Well, $12,000 a year.
I'm going to assume they'regoing to pay that for the next
five years.
(05:19):
Once again from 60 to 65.
So now it's like, okay, that'sa lot of money.
Can again from 60 to 65.
So now it's like, okay, that'sa lot of money.
Can we afford 60,000 a year?
Will that throw our plan off?
That's the first thing I'll dowith someone is I'll show them
if you had to pay it out ofpocket, would you still be okay?
And sometimes it makes a reallybig difference and I'm like you
should really work one moreyear because it's really going
to help.
Sometimes I'll go look, it's abig expense, but you have the
(05:42):
assets to support it.
So we're still going tooptimize.
But you see how, even if wedidn't, you'd be okay.
And then they're like, yeah,but it just feels so I feel like
I'm throwing money away.
I go it.
I get why it feels like that,because you're a human.
But think about what you'regetting.
You're getting I no longer haveto work, you're getting family
time, you're getting toprioritize your health.
So first I'll kind of take themout and go, hey, do you see why
(06:03):
that's the case then?
So what I'm going to do is I'mgoing to assume they have a
certain amount of money in acertain account.
Now, I'm going to do thisbecause it's going to apply to
all of you.
Let's assume this person hadI'm going to just make an
example up right now a milliondollars, a million bucks, and
it's all in an IRA.
If they needed to take $75,000from their IRA so they can pay
(06:27):
taxes, to end up with $60,000 tolive off of, well, what that's
doing is that's making yourincome too high that you don't
qualify for healthcare subsidies.
So the point here is what I'mtrying to do is optimize their
(06:48):
healthcare front and if theyhave all of their money in a
401k or an IRA and they want toretire at 60, they have no other
way to essentially decreasetheir income and qualify for a
healthcare subsidy becausethey're living off of their 401k
or their IRA, which is pre-taxmoney.
You put money in, you get adeduction, it grows tax deferred
(07:08):
and when you take the money outin the future, that's when you
pay taxes.
So here's where it getsinteresting.
I have a client, and this is theclient I'm thinking of now.
They had about $750,000 in anIRA and about $400,000 in a
brokerage account, which I calla superhero account, and I'm
always harping on.
What is this superhero account?
Why is this valuable?
(07:28):
The reason it's valuable issuperhero accounts called a
brokerage or taxable or joint orindividual after-tax account.
They're all the same exactthing.
Our industry just uses a bunchof words to try to confuse you.
What's really cool about thisaccount is you pay capital gains
taxes, which is lower and morepreferential than ordinary
(07:49):
income.
So with an IRA, when you take$70,000 or 75,000, as I said
before, that's as if you justmade more money.
So the first X amount ofdollars you take is taxed at 10%
, then 12, then 22, then 24.
Now those brackets are going tochange soon, but that's the way
it works.
The difference is with capitalgains, as long as you've held it
(08:10):
for over a year, you pay at 15%.
So it's not increasing yourincome from the traditional kind
of marginal scale.
So the reason that's important.
Let's assume you wanted to spend$60,000 a year.
Well, you could theoreticallygo sell.
Let's assume you bought Applestock.
(08:30):
Just keep it real simple.
You bought Apple stock for$40,000 and now it's worth $60.
Apple stock Just keep it realsimple.
You bought Apple stock for40,000 and now it's worth 60,000
.
Okay, well, if you wanted tosell that Apple stock so you
could live off of that money,you have $20,000 of gains that
you have to pay taxes on.
Now don't forget because, yeah,you have to pay taxes on that,
but that's federal and state andmost people forget that the
(08:51):
state is involved in this, notevery state, but you have to pay
taxes on those gains, not onall of the money.
So, of the $20,000, that'sgains.
Once again, bought it for$40,000, worth $60,000.
You take the full $60,000 to golive.
$20,000 of that is gains.
You pay 15% federally on thatincome.
Technically speaking, a lot ofit would be taxed at 0% because
(09:15):
of something called tax gainharvesting, but I'm going to
skip that for today's topic.
But if that's of interest, lookup 0% or retail bleep it'll
come up on YouTube or thepodcast app.
You would pay $3,000 in taxesand you'd have a $20,000.
It's called capital gain.
So why is that important?
Well, let's assume that youwant to once again retire early
at 60.
Well, if your capital gain is$20,000 and you'd be paying
(09:38):
3,000 in taxes, your income is20,000 plus, once again, there's
a standard deduction.
Your income might be really,really low on paper which
qualifies you for what's calleda healthcare subsidy.
Now that healthcare subsidy forthis client it would be between
seven to $10,000 per year,which means instead of a $12,000
(09:59):
of annual healthcare cost, itwould be between two to $3,000,
which means their five-yeartotal cost of healthcare would
be between 20 to $30,000, asopposed to if someone had an IRA
couldn't do anything.
I'm talking about Once again,we were looking at 12,000 a year
for five years, $60,000.
So the point here the averageannual savings could range from
(10:24):
14,000 to 16,000 a year and thenover five years, 70 to 80,000.
Why is that?
Why is this brokerage accountsuperior?
Well, your cost basis isn'ttaxed.
When you withdraw that money,you don't pay taxes on it.
It's already been taxed.
So you're basically saying I'mhappy to pay taxes today to put
money into a brokerage account,so it grows and I don't pay
(10:45):
taxes on it.
You have what's called a 0%capital gains rate for single
people.
As long as your income is below$44,000, you pay 0% taxes.
What does that mean?
Let's assume I bought Applestock for literally $1 and now
it's worth $50,000.
If I were to go sell, the first44,000 would be taxed at 0% and
(11:07):
from 50 to 44,000, that $6,000that's taxed at 15%.
Why is that so cool?
Well, you can go harvest gains,so sell companies that have
done really well and get healthcare subsidy because your income
is low, so it's almost likeyou're getting a win-win there.
Now you want to make sure fromwhat's called a cliff avoidance
(11:30):
perspective, which is an ACA,which stands for Affordable Care
Act, you need to keep yourmodified adjusted gross income
under four per hundred percentof the federal poverty level,
which is $58,000, to maintainsubsidy eligibility.
You also don't want your incomeso low that now you're in
Medicaid, and that's anotherissue of its own.
So, ultimately, what I'm tryingto say here is, if you are
(11:51):
trying to optimize, for somepeople it will honestly make a
lot of sense to do a combination, because if you have so much in
your IRA, you're going to wantto lower that what's called
pre-tax balance so that in thefuture, your required minimum
distributions which is theamount of money you'll be forced
to take, whether you want to ornot isn't too high.
(12:12):
But at the same time, we wantto kind of limit how much, once
again, healthcare cost you haveto pay, and the point here is
this example I'm giving there'ssignificant, like the overall
savings.
You know it's significant$10,000 plus we can save for a
client over five years withreally high quality advice.
(12:35):
But let's assume this personsaid you know, yes, I have a
$400,000 brokerage account, so Iknow I could sell $60,000 worth
of stock, pay some gains.
We do some cool healthcarestuff, but I'd actually really
rather retire early because Iwant to travel and I'd love to
help out my son buy a new home.
Let's assume they told me thatright.
Well, let's assume they want togive $200,000 to their home,
(12:57):
for to their child, for a downpayment, and 60,000 to live, and
another $50,000 for travel.
That'd be $310,000, whichleaves me $90,000 left.
And so what people say is oh, Iscrewed up your healthcare plan
.
I'm like, no, you didn't, youlived your dream life.
Now, maybe we don't do allthese things at once, maybe we
don't give $200,000, which wouldbe.
My recommendation is to not dothat because this brokerage
(13:19):
account is so important.
But I hope what you're seeinghere and this is my overall
message without going too deepin the lab, the brokerage
account allows for flexibility.
It is your superhero account.
It allows you to control yourincome.
If you only have a 401k, if youonly have an IRA, if you only
have pre-tax money, then youdon't get to massage your income
.
You don't get to control this.
(13:40):
Think about this.
Then you don't get to massageyour income.
You don't get to control this.
Think about this.
What if you're like Ari I have abrokerage account.
There's some gains in there,but there's some big gains.
I don't want to sell.
I have to pay a ton of taxes onit.
I don't want to diversify yetthe gains are too big.
I'd go.
I totally get it.
It makes sense.
We got to live off of something.
And you're like yeah, I alreadyhave 100,000 that I'm going to
get as a bonus.
I'm going to live off of thatfor next year.
(14:01):
I'd say amazing.
So you already have cash thatwe can live off of.
You're not worried about healthcare costs because we've
already planned for that.
You know what might be a waymore efficient than me trying to
save you $10,000 plus in healthcare?
And you're like this better begood, that sounds like a lot.
I said wait.
So like do I have to pick?
I go kind of you want to pick.
(14:23):
Should I do a Roth conversion,moving money pre-tax to Roth,
and will that make me more moneyover the course of my lifetime,
or is it healthcare savings?
Let's go back to this examplehere.
For this person, let's assumethey don't have this superhero
account and they have an IRA.
Well, they're spending $12,000a year on healthcare costs.
So if they're spending $12,000a year, well, once again they're
(14:45):
not really optimizing.
They're just having to pay thatbecause they have an IRA.
So they have to once again sell$75,000 to end up with $60,000
to go live.
Then maybe they have to go sellanother $15,000 or $16,000 so
they can pay for this healthcarecost.
So that's a lot of money.
Versus, if someone has abrokerage account, they can go.
You know what?
Why don't we only go to thisspecific bracket?
(15:08):
Let me pick my exact subsidy.
Let me determine if I should dothis amount to the subsidy,
this amount for that 0% taxthing and this amount to the
Roth conversion.
You can almost do a balance ofall of this.
And you what the best part is?
Imagine you retire really early, like 50.
Okay, if you retire at 50, youcan almost get all of the best
of both worlds, because best ofthree worlds, because what you
(15:30):
could do is you could go.
I'm going to prioritize healthcare subsidies the first five
years.
Then I'm going to pay zeropercent taxes the next five
years because I've got reallyhealthy gains.
Then I'm going to do rothconversions from 60 to 65 five
years, because I've got reallyhealthy gains.
Then I'm going to do Rothconversions from 60 to 65.
So in that 15 year period youcould do a ton of tax strategy
to optimize.
I don't want to go too deep andlose you guys here, but I hope
you what you can see.
What's just so cool is and Ihave a few just kind of basic
(15:54):
examples here that I wanted toshare here.
This is a real world example,but it's not my client.
It says John here, retired at60.
Real world example, but it'snot my client.
It says John here, retired at60.
He had a silver plan and hispremium at first was $1,250 a
month.
But because he's a brokerageaccount he could optimize where
he pulled income from.
So now it's $175 a month.
That decreases deductible from$5,000 to $800.
(16:18):
His out of pocket maxdecreased8,700 to $2,500.
And over five years John savedapproximately $65,000 in
premiums and another $12,000 inout-of-pocket costs for a total
healthcare savings of $77,000.
That's a lot of money, $77,000.
But what if you bought Applestock for $100 and now it's
(16:39):
worth $100,000?
Well, you could, over thecourse of two, three years, go
sell Apple stock only a certainamount that allows you to pay 0%
in taxes, which once again, isup to $44,000, plus you get your
standard deduction, so about$60,000.
You could go intentionally sellApple stock, pay no taxes on a
lot of those gains and you couldqualify for a healthcare
(17:03):
subsidy and you could considerif it makes sense to also do a
Roth conversion.
I just don't want any of youguys doing any of this stuff too
quick.
And this is where it makessense to hire an advisor.
There's a lot of times whereI'll say it doesn't make sense
to hire an advisor and thatsounds weird because I'm a
financial advisor.
But let's assume you're 40 andyou're like I'm just adding
money to my 401k, I'm justadding money to my IRA.
(17:24):
Okay, I don't really know ifyou need to pay an advisor.
If you're 40 years old and youneed to max out your 401k, I'd
want to give you guidance.
Hey, put this amount to your401k, this amount to Roth, this
amount to a superhero account,save for kids college.
Okay, like, pick the rightinvestments.
Don't use super high fee funds.
You're good Kind of more of theVanguard approach.
The difference is when you're afew years out from retirement
(17:47):
and you're trying to go.
I really need to optimize herebecause of the importance of
this.
That's when I'd start to gookay, probably makes sense to
hire an advisor, because theycan add enough value to justify
all of this and you wouldn'thave to do it.
So I know this was a little bitmore in depth, but I hopefully
brought it in a way that madeyou go wow, now I see the value
of this Once again.
Please let me know if you'relike hey, this was a little
(18:09):
technical for me.
No worries, I have other videos.
By the way, if you search AriTaublieb Healthcare on YouTube
or in the podcast app, I haveway more examples and you might
find visually getting to seethis would be more efficient.
So, once again, I do all ofthis on YouTube and that's it.
Thanks, guys.
See you next time.
Thank you all, as always, forlistening to the Early
(18:31):
Retirement Podcast.
I love getting to host theseshows and make different content
for you guys every single week.
I've not missed a single weekin years and that is because I
love getting to do this Now,please be smart about this.
Before you actually execute anystrategy that you see me talk
about or hear me talk about,should I say Please talk to your
financial advisor, your taxpreparer, your estate attorney,
(18:53):
please be smart about this.
None of this should beconstrued as financial advice.
This is for fun, educational,informational purposes only.
Once again, just quickdisclaimer here, guys.
Educational informationalpurposes only.
Once again, just quickdisclaimer here.
Guys, please be smart aboutthis.
Appreciate you listening, asalways, and you can, of course,
submit a question on my website,earlyretirementpodcastcom.
If you, of course, want me toaddress a specific case study or
(19:20):
topic.
I will not promise I can get toit, but I respond to every
single person and if I find itwill be helpful for a lot of
people, I will absolutely makean episode on it, at the very
least give you some insight.
That's it, thanks, guys.
I would say healthcare costs are the number
one reason people don't retireearly.
It's hey, how am I going to beable to afford healthcare in
addition to travel and payingkids, college and a remodel?
Yeah, I'm just going to keepworking.
Now the reality is you'recheating yourself by saying that
, because I have clients thatpay $50 a month for healthcare
and I also have clients thatspend $1,000 a month in
(00:20):
healthcare, and it depends onyour plan and if you plan well
for it, you can minimize coststremendously.
I'm going to do a case studyfor you so you can see a real
client that I have who retiredat 60 and was worrying about
healthcare costs until 65.
And I said you don't need toworry about it, you should have
planned for it.
And let me show you how.
If you pull from the rightaccount, it can significantly
reduce your expenses.
(00:41):
And if you're interested inretiring early, then I please
invite you to subscribe.
If you're watching on YouTube,rate the show.
If you are listening on thepodcast app and you find this
helpful in any capacity.
I love what I get to do, whichis make videos and podcasts
around healthcare, tax strategy,withdrawal, long-term care,
(01:01):
insurance, estate planning.
This is, to me.
What allows people to feelconfident to retire early, which
is all I'm trying to do here isbuild that confidence so by the
time you retire, you don't haveany head trash of.
I should have considered this,and why didn't I do that one
thing.
So, healthcare the reason Isaid I think it's the number one
reason people are hesitant toretire early is because I put
(01:22):
out a video 10 months ago on myYouTube channel called Health
Insurance for an EarlyRetirement Everything you Need
to Know and 170,000 of youwatched that one video and you
were like, wow, this reallyhelped clarify my options.
Meaning do I go to Cobra?
Do I instead decide to?
A common thing is go to themarketplace.
Should I look for privateinsurance?
What about?
(01:42):
Do I stick with my company?
What about if I make my spousego work so that we have
healthcare and maybe they don'tlove their job, but at least
we're getting healthcarebenefits?
Like, there's a lot ofdifferent options.
Today is not me going througheach option.
Today is a case study so youcan better understand the
importance of good savings, andso I'm going to be going through
this.
It's going to be a little bitmore technical, a little bit
(02:04):
more of the financial weeds, ifI must say.
So.
The example I'm going to startwith before I kind of hit you
with it and I'll do this oftenfor any of my videos is and
there's a true story I went to adoctor it's not a long story,
but it's a true story and thiswas months ago.
And I said, hey, doc, what youjust said there, it sounded
great.
I think you think it soundedgreat.
And I told him I have no ideawhat you just said, so please
(02:25):
try explaining again.
And he said okay, so he startsexplaining to me the lab that
the pills are made in that he'sgoing to give me.
And he said, respectfully, doc,I don't care about the lab.
I don't want to be mean here,but I don't care about the lab.
No-transcript, thank you, I'mnow good.
(02:54):
He's like no, I have more totell you.
I'm like I don't need more.
So why do I tell you?
This?
Today is going to be going alittle deeper on certain things,
such as Medicare right, irma,surcharges.
We're going to talk abouthealthcare subsidies, and so
some of you might be like, hey,this sounds like a little bit
like the lab, like I just wantthe pill.
Tell me, what do I do, what doI not do?
Well, one, I wish it was thatsimple.
(03:14):
Two this is what we do for aliving.
So there's a lot of planningpoints around this, but my hope
is I can give you just theanswer, which I'm going to be
able to do in the next oneminute.
But then I'm going to give youa deeper analysis and I hope I
don't lose you, because I reallynever want this to feel like
I'm so in the lab.
But I also want you to go OK,it's the pill, but I know why
(03:35):
I'm taking the pill.
So a little longer story than Iwanted there.
But my point here is we'regoing to hop in.
So to hop in.
So this couple came to me andthey said, ari, I just want some
statistics Like what do mostpeople even pay when they are 60
for healthcare?
And I said, okay, let me, letme look like let's get the
statistics, cause I know whatmost of my clients pay.
(03:55):
But I said how much do you wantto spend in retirement?
And they said about $60,000 ayear.
I says that before or aftertaxes.
And they're like they thoughtabout it and like, oh,
definitely after taxes.
I go great, let's assume youwant to retire 60 years old and
you're just 60,000 a year.
That's what allow you to livethe life you want to live.
And they were like, yeah, thatsounds good.
Now, between us me and all ofyou out there that 60,000 for
(04:16):
most of my clients it's notenough.
That's like the basics.
Then there's travel, thenthere's home remodel or college
or things like that, but 60,000was the basics.
So, from a tax perspectivewhich is what I'm going to
really be kind of driving theconversation on the reality is
most healthcare costs.
I would say the average and Iwant to look up the average
(04:37):
after this because now I'mcurious.
But the average from my clientsit's about $950 a month.
That is before.
Like we analyze and optimizethe situation is they are coming
to me planning for about $950 amonth.
Now a lot of things dependbronze, silver, platinum what
kind of plan do you want?
That's that other episode I didwhere it's more on.
(04:58):
Okay, what are the differencesthere?
Today's going to be thefinancial side.
So let's assume someone's 60,they retire and they want to
spend $60,000 a year and $12,000, I'm going to keep it simple
$1,000 a month as their annualpremium, $12,000 a year.
Well, $12,000 a year.
I'm going to assume they'regoing to pay that for the next
five years.
(05:19):
Once again from 60 to 65.
So now it's like, okay, that'sa lot of money.
Can again from 60 to 65.
So now it's like, okay, that'sa lot of money.
Can we afford 60,000 a year?
Will that throw our plan off?
That's the first thing I'll dowith someone is I'll show them
if you had to pay it out ofpocket, would you still be okay?
And sometimes it makes a reallybig difference and I'm like you
should really work one moreyear because it's really going
to help.
Sometimes I'll go look, it's abig expense, but you have the
(05:42):
assets to support it.
So we're still going tooptimize.
But you see how, even if wedidn't, you'd be okay.
And then they're like, yeah,but it just feels so I feel like
I'm throwing money away.
I go it.
I get why it feels like that,because you're a human.
But think about what you'regetting.
You're getting I no longer haveto work, you're getting family
time, you're getting toprioritize your health.
So first I'll kind of take themout and go, hey, do you see why
(06:03):
that's the case then?
So what I'm going to do is I'mgoing to assume they have a
certain amount of money in acertain account.
Now, I'm going to do thisbecause it's going to apply to
all of you.
Let's assume this person hadI'm going to just make an
example up right now a milliondollars, a million bucks, and
it's all in an IRA.
If they needed to take $75,000from their IRA so they can pay
(06:27):
taxes, to end up with $60,000 tolive off of, well, what that's
doing is that's making yourincome too high that you don't
qualify for healthcare subsidies.
So the point here is what I'mtrying to do is optimize their
(06:48):
healthcare front and if theyhave all of their money in a
401k or an IRA and they want toretire at 60, they have no other
way to essentially decreasetheir income and qualify for a
healthcare subsidy becausethey're living off of their 401k
or their IRA, which is pre-taxmoney.
You put money in, you get adeduction, it grows tax deferred
(07:08):
and when you take the money outin the future, that's when you
pay taxes.
So here's where it getsinteresting.
I have a client, and this is theclient I'm thinking of now.
They had about $750,000 in anIRA and about $400,000 in a
brokerage account, which I calla superhero account, and I'm
always harping on.
What is this superhero account?
Why is this valuable?
(07:28):
The reason it's valuable issuperhero accounts called a
brokerage or taxable or joint orindividual after-tax account.
They're all the same exactthing.
Our industry just uses a bunchof words to try to confuse you.
What's really cool about thisaccount is you pay capital gains
taxes, which is lower and morepreferential than ordinary
(07:49):
income.
So with an IRA, when you take$70,000 or 75,000, as I said
before, that's as if you justmade more money.
So the first X amount ofdollars you take is taxed at 10%
, then 12, then 22, then 24.
Now those brackets are going tochange soon, but that's the way
it works.
The difference is with capitalgains, as long as you've held it
(08:10):
for over a year, you pay at 15%.
So it's not increasing yourincome from the traditional kind
of marginal scale.
So the reason that's important.
Let's assume you wanted to spend$60,000 a year.
Well, you could theoreticallygo sell.
Let's assume you bought Applestock.
(08:30):
Just keep it real simple.
You bought Apple stock for$40,000 and now it's worth $60.
Apple stock Just keep it realsimple.
You bought Apple stock for40,000 and now it's worth 60,000
.
Okay, well, if you wanted tosell that Apple stock so you
could live off of that money,you have $20,000 of gains that
you have to pay taxes on.
Now don't forget because, yeah,you have to pay taxes on that,
but that's federal and state andmost people forget that the
(08:51):
state is involved in this, notevery state, but you have to pay
taxes on those gains, not onall of the money.
So, of the $20,000, that'sgains.
Once again, bought it for$40,000, worth $60,000.
You take the full $60,000 to golive.
$20,000 of that is gains.
You pay 15% federally on thatincome.
Technically speaking, a lot ofit would be taxed at 0% because
(09:15):
of something called tax gainharvesting, but I'm going to
skip that for today's topic.
But if that's of interest, lookup 0% or retail bleep it'll
come up on YouTube or thepodcast app.
You would pay $3,000 in taxesand you'd have a $20,000.
It's called capital gain.
So why is that important?
Well, let's assume that youwant to once again retire early
at 60.
Well, if your capital gain is$20,000 and you'd be paying
(09:38):
3,000 in taxes, your income is20,000 plus, once again, there's
a standard deduction.
Your income might be really,really low on paper which
qualifies you for what's calleda healthcare subsidy.
Now that healthcare subsidy forthis client it would be between
seven to $10,000 per year,which means instead of a $12,000
(09:59):
of annual healthcare cost, itwould be between two to $3,000,
which means their five-yeartotal cost of healthcare would
be between 20 to $30,000, asopposed to if someone had an IRA
couldn't do anything.
I'm talking about Once again,we were looking at 12,000 a year
for five years, $60,000.
So the point here the averageannual savings could range from
(10:24):
14,000 to 16,000 a year and thenover five years, 70 to 80,000.
Why is that?
Why is this brokerage accountsuperior?
Well, your cost basis isn'ttaxed.
When you withdraw that money,you don't pay taxes on it.
It's already been taxed.
So you're basically saying I'mhappy to pay taxes today to put
money into a brokerage account,so it grows and I don't pay
(10:45):
taxes on it.
You have what's called a 0%capital gains rate for single
people.
As long as your income is below$44,000, you pay 0% taxes.
What does that mean?
Let's assume I bought Applestock for literally $1 and now
it's worth $50,000.
If I were to go sell, the first44,000 would be taxed at 0% and
(11:07):
from 50 to 44,000, that $6,000that's taxed at 15%.
Why is that so cool?
Well, you can go harvest gains,so sell companies that have
done really well and get healthcare subsidy because your income
is low, so it's almost likeyou're getting a win-win there.
Now you want to make sure fromwhat's called a cliff avoidance
(11:30):
perspective, which is an ACA,which stands for Affordable Care
Act, you need to keep yourmodified adjusted gross income
under four per hundred percentof the federal poverty level,
which is $58,000, to maintainsubsidy eligibility.
You also don't want your incomeso low that now you're in
Medicaid, and that's anotherissue of its own.
So, ultimately, what I'm tryingto say here is, if you are
(11:51):
trying to optimize, for somepeople it will honestly make a
lot of sense to do a combination, because if you have so much in
your IRA, you're going to wantto lower that what's called
pre-tax balance so that in thefuture, your required minimum
distributions which is theamount of money you'll be forced
to take, whether you want to ornot isn't too high.
(12:12):
But at the same time, we wantto kind of limit how much, once
again, healthcare cost you haveto pay, and the point here is
this example I'm giving there'ssignificant, like the overall
savings.
You know it's significant$10,000 plus we can save for a
client over five years withreally high quality advice.
(12:35):
But let's assume this personsaid you know, yes, I have a
$400,000 brokerage account, so Iknow I could sell $60,000 worth
of stock, pay some gains.
We do some cool healthcarestuff, but I'd actually really
rather retire early because Iwant to travel and I'd love to
help out my son buy a new home.
Let's assume they told me thatright.
Well, let's assume they want togive $200,000 to their home,
(12:57):
for to their child, for a downpayment, and 60,000 to live, and
another $50,000 for travel.
That'd be $310,000, whichleaves me $90,000 left.
And so what people say is oh, Iscrewed up your healthcare plan
.
I'm like, no, you didn't, youlived your dream life.
Now, maybe we don't do allthese things at once, maybe we
don't give $200,000, which wouldbe.
My recommendation is to not dothat because this brokerage
(13:19):
account is so important.
But I hope what you're seeinghere and this is my overall
message without going too deepin the lab, the brokerage
account allows for flexibility.
It is your superhero account.
It allows you to control yourincome.
If you only have a 401k, if youonly have an IRA, if you only
have pre-tax money, then youdon't get to massage your income
.
You don't get to control this.
(13:40):
Think about this.
Then you don't get to massageyour income.
You don't get to control this.
Think about this.
What if you're like Ari I have abrokerage account.
There's some gains in there,but there's some big gains.
I don't want to sell.
I have to pay a ton of taxes onit.
I don't want to diversify yetthe gains are too big.
I'd go.
I totally get it.
It makes sense.
We got to live off of something.
And you're like yeah, I alreadyhave 100,000 that I'm going to
get as a bonus.
I'm going to live off of thatfor next year.
(14:01):
I'd say amazing.
So you already have cash thatwe can live off of.
You're not worried about healthcare costs because we've
already planned for that.
You know what might be a waymore efficient than me trying to
save you $10,000 plus in healthcare?
And you're like this better begood, that sounds like a lot.
I said wait.
So like do I have to pick?
I go kind of you want to pick.
(14:23):
Should I do a Roth conversion,moving money pre-tax to Roth,
and will that make me more moneyover the course of my lifetime,
or is it healthcare savings?
Let's go back to this examplehere.
For this person, let's assumethey don't have this superhero
account and they have an IRA.
Well, they're spending $12,000a year on healthcare costs.
So if they're spending $12,000a year, well, once again they're
(14:45):
not really optimizing.
They're just having to pay thatbecause they have an IRA.
So they have to once again sell$75,000 to end up with $60,000
to go live.
Then maybe they have to go sellanother $15,000 or $16,000 so
they can pay for this healthcarecost.
So that's a lot of money.
Versus, if someone has abrokerage account, they can go.
You know what?
Why don't we only go to thisspecific bracket?
(15:08):
Let me pick my exact subsidy.
Let me determine if I should dothis amount to the subsidy,
this amount for that 0% taxthing and this amount to the
Roth conversion.
You can almost do a balance ofall of this.
And you what the best part is?
Imagine you retire really early, like 50.
Okay, if you retire at 50, youcan almost get all of the best
of both worlds, because best ofthree worlds, because what you
(15:30):
could do is you could go.
I'm going to prioritize healthcare subsidies the first five
years.
Then I'm going to pay zeropercent taxes the next five
years because I've got reallyhealthy gains.
Then I'm going to do rothconversions from 60 to 65 five
years, because I've got reallyhealthy gains.
Then I'm going to do Rothconversions from 60 to 65.
So in that 15 year period youcould do a ton of tax strategy
to optimize.
I don't want to go too deep andlose you guys here, but I hope
you what you can see.
What's just so cool is and Ihave a few just kind of basic
(15:54):
examples here that I wanted toshare here.
This is a real world example,but it's not my client.
It says John here, retired at60.
Real world example, but it'snot my client.
It says John here, retired at60.
He had a silver plan and hispremium at first was $1,250 a
month.
But because he's a brokerageaccount he could optimize where
he pulled income from.
So now it's $175 a month.
That decreases deductible from$5,000 to $800.
(16:18):
His out of pocket maxdecreased8,700 to $2,500.
And over five years John savedapproximately $65,000 in
premiums and another $12,000 inout-of-pocket costs for a total
healthcare savings of $77,000.
That's a lot of money, $77,000.
But what if you bought Applestock for $100 and now it's
(16:39):
worth $100,000?
Well, you could, over thecourse of two, three years, go
sell Apple stock only a certainamount that allows you to pay 0%
in taxes, which once again, isup to $44,000, plus you get your
standard deduction, so about$60,000.
You could go intentionally sellApple stock, pay no taxes on a
lot of those gains and you couldqualify for a healthcare
(17:03):
subsidy and you could considerif it makes sense to also do a
Roth conversion.
I just don't want any of youguys doing any of this stuff too
quick.
And this is where it makessense to hire an advisor.
There's a lot of times whereI'll say it doesn't make sense
to hire an advisor and thatsounds weird because I'm a
financial advisor.
But let's assume you're 40 andyou're like I'm just adding
money to my 401k, I'm justadding money to my IRA.
(17:24):
Okay, I don't really know ifyou need to pay an advisor.
If you're 40 years old and youneed to max out your 401k, I'd
want to give you guidance.
Hey, put this amount to your401k, this amount to Roth, this
amount to a superhero account,save for kids college.
Okay, like, pick the rightinvestments.
Don't use super high fee funds.
You're good Kind of more of theVanguard approach.
The difference is when you're afew years out from retirement
(17:47):
and you're trying to go.
I really need to optimize herebecause of the importance of
this.
That's when I'd start to gookay, probably makes sense to
hire an advisor, because theycan add enough value to justify
all of this and you wouldn'thave to do it.
So I know this was a little bitmore in depth, but I hopefully
brought it in a way that madeyou go wow, now I see the value
of this Once again.
Please let me know if you'relike hey, this was a little
(18:09):
technical for me.
No worries, I have other videos.
By the way, if you search AriTaublieb Healthcare on YouTube
or in the podcast app, I haveway more examples and you might
find visually getting to seethis would be more efficient.
So, once again, I do all ofthis on YouTube and that's it.
Thanks, guys.
See you next time.
Thank you all, as always, forlistening to the Early
(18:31):
Retirement Podcast.
I love getting to host theseshows and make different content
for you guys every single week.
I've not missed a single weekin years and that is because I
love getting to do this Now,please be smart about this.
Before you actually execute anystrategy that you see me talk
about or hear me talk about,should I say Please talk to your
financial advisor, your taxpreparer, your estate attorney,
(18:53):
please be smart about this.
None of this should beconstrued as financial advice.
This is for fun, educational,informational purposes only.
Once again, just quickdisclaimer here, guys.
Educational informationalpurposes only.
Once again, just quickdisclaimer here.
Guys, please be smart aboutthis.
Appreciate you listening, asalways, and you can, of course,
submit a question on my website,earlyretirementpodcastcom.
If you, of course, want me toaddress a specific case study or
(19:20):
topic.
I will not promise I can get toit, but I respond to every
single person and if I find itwill be helpful for a lot of
people, I will absolutely makean episode on it, at the very
least give you some insight.
That's it, thanks, guys.
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