Money Scenarios

A worked example

The years before Medicare

Sam and Robin, 55 and 54, retire this year with $1.5M pre-tax and $400k in a brokerage account. They spend $60k and buy a marketplace health plan for $20k a year until Medicare at 65.

“How much can I convert to Roth in these low-income years without wrecking my health-insurance subsidy?”

What the projection shows

The conversion has two prices, not one. Beyond the bracket it fills, each conversion size moves household income relative to the federal poverty level, and starting in 2026 there's a hard cliff at 400% where the entire premium tax credit disappears at once, not gradually. The year table shows the credit, the net premium and the FPL multiple, and flags any year that crosses the line.

What else the projection found

Nothing was missing from the inputs. These follow directly from the numbers above, under the assumptions this example uses.

  • The $40,000 converted this year pushes income past the top of the 0% band, so $4,026 of gains and dividends that would have been tax-free are now taxed $268. Your ordinary bracket didn't change, so a bracket table wouldn't show this.
  • Converting $40,000 puts income at 5.87x the poverty level. That's past the cliff, so the credit disappears entirely and the full $23,774 premium comes out of pocket.
  • Converting $100,000 puts income at 5.02x the poverty level. That's past the cliff, so the credit disappears entirely and the full $20,000 premium comes out of pocket.
  • The $100,000 converted this year pushes income past the top of the 0% band, so $3,745 of gains and dividends that would have been tax-free are now taxed $300. Your ordinary bracket didn't change, so a bracket table wouldn't show this.
  • The $100,000 converted this year pushes income past the top of the 0% band, so $3,697 of gains and dividends that would have been tax-free are now taxed $296. Your ordinary bracket didn't change, so a bracket table wouldn't show this.
Open this in the planner

The planner opens with this household already filled in. Change the balances, the ages or the assumptions to match your own situation, then run it.

A projection based on stated assumptions. Not financial or tax advice.