Social Security mistake I almost claimed early for health costs.
I retired last spring at 62. My wife had already stepped back from her job the year before. We had saved, we had a plan, but the number that kept me awake was $1,280. That was the monthly quote for a benchmark plan for us both on the Marketplace, unsubsidized, in the gap before Medicare at 65. Three years of that felt like a hole we might fall into.
So I did what felt like the responsible thing. I filed for Social Security at 62. The checks would start in July. I had run the comparison a dozen times: the breakeven on waiting sits somewhere past 80, and my father did not make it that far. I told myself I was being practical. Really, I was scared.
Our neighbor came over in June, right in the middle of me trying to fix a stuck screen door. She had been through the same gap a few years earlier, and she asked what our modified adjusted gross income was going to be. I had not thought about it as one number. I had thought about Social Security as income, the brokerage as income, the IRA as income. Three separate buckets. She explained that for the subsidy, they all pour into the same measuring cup. Social Security counts dollar for dollar toward MAGI. Then she said something about the subsidy phasing out as income rises, and how every extra dollar of MAGI costs you a slice of the help. She was not sure of the exact brackets but she knew the shape of it. I looked it up later. She was right.
Claiming early would have added about $14,200 a year to our countable income. That would have pushed us up the phaseout slope, shrinking our subsidy and raising our net premium. The insurance I was claiming Social Security to afford would have cost more because I claimed it. I sat there on the porch step holding a screwdriver and felt like an idiot.
I called the Social Security office that afternoon and withdrew my application. We had enough in our taxable brokerage, mostly long held shares that were mostly cost basis, so the taxable gain was small, plus small measured IRA withdrawals, to live on. We kept our MAGI in the sweet spot. Our premium for a similar plan dropped to under $500 a month. Over three years, that difference is real money. And from full retirement age to 70 the benefit grows about 8 percent a year.
I had been treating retirement like a row of separate levers. The day I finally saw all three numbers on one sheet of paper, I sat there with the calculator and felt stupid, then relieved. I almost pulled the wrong one because I couldn't see how they were wired together.