Attention, young retirees! If you’re relying on Marketplace health insurance before you hit the big 6-5, there’s some good news and potential pitfalls you need to know about. Thanks to the American Rescue Plan Act, your health insurance premiums might be more wallet-friendly than ever before – but there’s a catch you’ll want to watch out for.
Here’s the deal: The government has put a temporary cap on health insurance premiums at 8.5% of your income, regardless of how much you make. This means many of you are seeing lower monthly bills for your coverage. Sounds great, right? Well, it is, but there’s a potential “phantom tax” lurking in the shadows that could catch you off guard if you’re not careful.
So, what’s this spooky-sounding tax all about? It’s not as mysterious as it sounds. Basically, if your income unexpectedly rises – say, from claiming Social Security benefits at 62 or converting your traditional IRA to a Roth – you might find yourself owing more in taxes than you bargained for. It’s like ordering a small coffee and getting charged for a venti because your income grew without you realizing it.
What’s a savvy pre-Medicare retiree to do? Financial experts suggest playing the long game. Consider holding off on claiming Social Security until you’re at least 65 if you’re currently enjoying those sweet premium tax credits. And before you make any big money moves, like Roth conversions, think about how they might affect your insurance costs. Remember, a little planning now can save you from a big headache (and an even bigger tax bill) later. Stay informed, stay proactive, and don’t be afraid to reach out to a financial advisor if you need help navigating these tricky waters!
