The Advanced Premium Tax Credit Can Help Early Retirees Afford Health Insurance: The advanced premium tax credit (APTC) is a key provision of the Affordable Care Act that can help early retirees afford health insurance before they qualify for Medicare, according to experts.
In an interview on finStream.tv, Robert Powell, editor of Retirement Daily, spoke with Dana Anspach, president of Sensible Money, about how the APTC works and who is eligible.
The APTC is a refundable tax credit that helps lower the cost of monthly premiums for health insurance purchased through the ACA marketplaces, Anspach explained. To qualify, individuals must have an income between 100-400% of the federal poverty level and not have access to other affordable coverage options like employer plans or Medicare.
The credit amount is calculated based on income, with people earning less getting a larger credit. For 2023, the credit caps premium contributions at 8.5% of income for everyone, even over 400% of poverty, due to temporary expansions under the American Rescue Plan Act.
This helps many early retirees who may have too much income to qualify for Medicaid but can’t afford high unsubsidized premiums. “With the way it’s structured right now, your expected premium contribution is 8.5% of your adjusted gross income. And that means a lot more people could qualify than maybe think,” said Anspach.
The experts offered tips like optimizing cash flow sources and making HSA contributions to lower taxable income and increase APTC eligibility. But they warned against actions like Roth conversions that could reduce subsidies more than the tax savings are worth.
Overall, the APTC can provide significant savings on premiums for pre-Medicare retirees. “I have seen people that had credits of 20. In one case, it was close to $30,000 a year of credit,” noted Anspach.
With expanded eligibility through 2025, the APTC offers a valuable opportunity for many 50-64 year-olds facing high health insurance costs. Checking eligibility and applying through Healthcare.gov is key to accessing this financial assistance. If you’d like to watch more videos on finStream TV featuring Dana Anspach, please click this link: https://www.finstream.tv/featured/dana-anspach/