Hello, PFR Nation and Happy 4th of July, and Happy Birthday, America!  What a great country we live in, I’m so proud to be an American.  My Dad being a (legal) immigrant has given me great appreciation for the opportunities we have relative to the rest of the world.  

I’m feeling extremely blessed for the clients we are serving in our financial planning firm, and I’m so grateful to serve all of you with this podcast.  I hope you continue to find value.  

We have a fair amount of new listeners, plus the legacy listeners, and I just want to say how excited I am to deliver this weekly content to all of you.  Thank you for the support, and welcome to the 84th episode of the PFR Podcast and 7th edition of the ‘Whiteboard Retirement Plan.’  

Leo and Lisa are looking to retire in 2 years, at 61 and 58 respectively.  They have done quite well accumulating approximately $3 million for retirement with the majority being inside of traditional tax deferred IRA’s and a 401k.  

 Leo is on Long Term Disability and was forced to ‘retire earlier’ than planned, and is receiving tax free income until 65.  Lisa plans to fully retire at 58.  However, this will result in losing employer-sponsored healthcare and ultimately needing to shop around in the open market.  One option will be to consider the Affordable Care Act policies on Healthcare.gov.  Furthermore, Roth Conversions are of interest during their “Roth Conversion Window” from Lisa’s age 58 until she turns 75.  In this episode, we will help them decide whether or not to aggressively pursue a ‘low income’ to reduce healthcare costs in early retirement…or, to begin converting some of the tax-deferred accounts right away to reduce the ‘Tax Trap of 401ks.’  

Drop a comment and let me know what you plan to do if you retire before 65!  Will you aggressively pursue ACA Premium Tax Credits?  Aggressively convert to Roth?  Or potentially a hybrid between the two?  

I hope you enjoy the 7th edition of the “Whiteboard Retirement Plan.”


***Additional Disclaimer***  So much about these rules are up in the air.  From 2021-2025, there has been a “gradual slope” downwards of ACA premium tax credits even AFTER you exceed 400% of the Federal Poverty Level.  However, that is set to revert back to the “Cliff” at 400% after 2025.  With that said, there is a LOT on the table with the “One Big Beautiful Bill” which will likely include further changes to these rules.  I guess what I’m saying is…continue to follow the “OBBB” and of course follow the PFR Pod!

-Kevin


Takeaways:

  • Many of the families we serve are overachievers looking to retire early.
  • Healthcare costs are a significant concern for early retirees prior to reaching Medicare eligibility.
  • Budgeting for lifestyle and healthcare is crucial in retirement planning.
  • Roth conversions can optimize tax liabilities over time.
  • Monte Carlo simulations can help stress test the plan, but is by no means the be all end all retirement metric.
  • Understanding the Affordable Care Act and their premium tax credits are important, but should NOT be the sole basis for tax planning opportunities.  
  • Tax traps in traditional retirement accounts can impact long-term wealth during a retiree’s lifetime, and for the next generation.  
  • Income stability is key for a successful retirement.
  • Adjusting retirement plans can provide more flexibility and security.



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This is for general education purposes only and should not be considered as tax, legal or investment advice.