Affordable Care Act: what counts as income for retiree

I am 62 and my husband passed away in April and I plan to retire in July. When searching for affordable health care in the market place I will have several sources of income: Social Security, pension, I will be working minimum hours as an independent contractor, and I will be drawing monthly from an IRA. Do all of these sources count towards income when searching for subsidized insurance?

Buckeye Stater

Dear Buckeye Stater,

I am sorry to hear of your loss. Your question is a good one and it has a short answer and a long answer.

The short answer is that your Modified Adjusted Gross Income (MAGI) is what sets how much subsidy you will get to buy your health insurance.  MAGI is defined as: “your adjusted gross income plus any tax-exempt Social Security, interest, or foreign income you have.”  See’s glossary for the whole low-down.   So your Social Security, pension, IRA withdrawals, and income from being an independent contractor will all count.

The long answer is that as a retiree, you have some flexibility on how much you take from your IRA and how much your work as an independent contractor.  (You won’t have a minimum IRA withdrawal until you turn 70 and a half.)  It’s worth sitting down with a good health insurance agent or financial planner to try different scenarios.  You might want to keep your income low for a few years until you reach 65 and can join Medicare.  With some planning, you can boost your subsidy and make your health insurance cheaper.  There are perfectly legal and legitimate ways to do this.

Best wishes for your retirement.

Linda Riddell

About Linda Riddell

A published author and health policy analyst with 25 years’ experience, Linda Riddell's goal is to alleviate the widespread ailment of not knowing what your health plan can do for you.