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Covered California and Obamacare related questions from consumers, employers and agents are answered by Phil Daigle with the best information available at the time. Archived entries may no longer be accurate as the Covered California and Obamacare knowledge-base is evolving quickly. TO REQUEST A PERSONAL RESPONSE INCLUDE EMAIL ADDRESS.

Retirement Income and Subsidies?

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Question: I am retiring at 62 and want to use my income from my retirement accounts. if i draw social security will this count as income and will the money i draw out from my ira’s count as income? i plan to sell 66k from my ira’s each year till 65. is this 66k considered income and thus will disallow me from a subsidy? i would augment this 66k from my ira stock sales with 20k from social security. thanks for your help

Answer: This is a correction. I answered this question incorrectly previously. Your IRA withdrawals are taxable and if the amount withdrawn is $66,000, then at least some of your social security income will be taxable as well. All of this income will be considered thus may disallow you from a subsidy depending on the size of your family.


My husband and I are both laid off and have been unable to find jobs for over a year. We’ve had to prematurely liquidate his 401K to live off of when unemployment ran out. The only money we have is this account and it’s running out. Covered CA estimated income was based on us getting jobs. Now we get a letter telling us we might have to pay all the subsidy back. We’re barely getting by now. Is this premature 401k money rightly considered income by the state for purposes of receiving this subsidy? If it is, we’ll just be running out of money faster.

can you please tell me if or which of the following are included in the magi calculation, as over the next 2 or 3 years I will have all of them

  1. SEPP distribution from traditional roll over IRA (72t account) with no tax basis (all pre-tax)

  2. roth conversion

  3. long term capital loss carryover

  4. regular withdrawl from roll over IRA (after age 59.5)

  5. withdrawl from a roth IRA

Under Covered California, would the amount converted from an IRA to a Roth be counted as income for Covered California. I did pay tax on it but did not have use of the money since it was rolled to a Roth.

Under MAGI, I believe the whole social security (SSA) income should be included, not based only on the calculated taxable social security as reported in Form 1040. For example, SSA receipt is $10,000, and the taxable amount is between $1,500 to $8,500 in average taxpayer’s form 1040 tax return, the amount $10,000 is used in MAGI calculation.

You are right. I will make the correction.

Perhaps I am misinterpreting the question but it seems to me that this person was asking whether withdrawals from his IRA and his Social Security income will reduce a government medical insurance subsidy. I believe that the answer to this question is yes. Both types of income will reduce his subsidy and unless he has a wife and at least two children, at a total of $66,000 for IRA withdrawals and $20,000 of Social Security income, he will not be eligible for any subsidy. One possible exception would be if his IRA contributions were after tax, or a Roth IRA. Except for this possibility, at the level of income that the questioner describes, his Social Security income will be partially taxable. The exact amount of taxation will depend on his marital status. For determining the amount of medical insurance subsidy reduction, all Social Security income counts whether or not it is taxed.

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