A client approaching early retirement came to us, as she was concerned about her ability to manage future healthcare costs once employer-sponsored coverage ended.
Based on initial estimates, the client (who we will call Jeanette) had a high enough projected income to limit or eliminate her eligibility for healthcare premium subsidies, potentially resulting in healthcare costs exceeding $2,000 per month.
Evidently, paying $2,000 each month for healthcare is not ideal, especially during retirement when living on a fixed income. Here’s how we helped Jeanette:
Our process began with a detailed review of her prior-year tax return and overall financial picture. From there, we developed a comprehensive projection of Jeanette's 2026 income. This projection incorporated all anticipated income sources, including unemployment compensation, interest income, inherited IRA distributions, and investment income. By building a forward-looking tax projection, we were able to identify the specific factors driving adjusted gross income and affecting healthcare subsidy eligibility.
We also analyzed Jeanette's inherited IRA accounts and future required minimum distribution (RMD) obligations. During this, we discovered an opportunity to accelerate distributions from certain inherited retirement accounts. This would help Jeanette eliminate future RMD requirements that would otherwise increase taxable income during the years when healthcare subsidy eligibility was most important.
Our analysis revealed that the issue was not just the current year's income, but the long-term impact of mandatory retirement distributions on future tax returns. Through proactive planning, we helped Jeanette gain greater control over future taxable income and create a strategy designed to keep her income within healthcare subsidy guidelines during retirement.
By projecting future income, identifying hidden sources of taxable income, and restructuring inherited IRA withdrawal plans, we created a plan to reduce her projected healthcare costs by more than $2,000 per month while simultaneously creating a more tax-efficient retirement income strategy.
This engagement serves as an example of how proactive tax planning can deliver benefits that extend far beyond tax savings alone, helping retirees lower major living expenses and improve long-term financial security.
Send me an email (Madison@swrpteam.com) or book a time on my calendar (https://calendly.com/madison-swrpteam/30min) if you’re dealing with a similar situation and need a trusted Advisor that can help.
This material is purely intended to be general and educational in nature, and should not be construed as specifically-tailored investment, financial planning, tax, legal, or other professional advice. Information and data contained herein is as-of the date of publication, and may be subject to change in the future without notice. Any investment performance referenced is purely past performance, which is no guarantee of any future performance. Nothing contained herein should be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation of any security or other financial product or investment strategy. All investment, tax, and financial planning strategies involve risk that you should be prepared to bear. You are highly encouraged to consult with professionals of your choosing before taking any action based on this material
