u/MrAntMan90

I am 36 years old with about $1M invested, and I'm hoping to retire with about $3.5M around age 45. About $350k of that is in a taxable brokerage - mostly VTSAX.

I have been purely focused on simple accumulation up to this point. However, now that I am within ~10 years of potential retirement, I am beginning to think about more nuanced things such as taxes, and more importantly, health insurance before medicare.

That has had me learning about MAGI with respect to affordable care act subsidies.

From what I can tell, funds in taxable accounts that pay out dividends (e.g. VTSAX) count those dividends as income towards MAGI. In my hypothetical portfolio at age 45, those dividends being paid out from VTSAX could be as much as $20k-$25k/year, which would contribute significantly to MAGI. A blessing and a curse!

So, I am beginning to wonder if I should perhaps be considering funds that pay out less in dividends to be the primary stake held in taxable accounts, while using tax efficient retirement accounts for assets paying out higher dividends.

But, I have always kept loyal to the 3-fund portfolio. I don't own a single stock outside of that strategy. So, naturally this feels a bit off. However, I do believe that optimizing for health insurance costs for my early retirement situation and taking steps now to minimize my AGI could pay off big time. After all, I'd be looking at nearly 20 years of being on the hook for health insurance.

Has anyone else had similar concerns with holding large balances in funds like VTSAX in taxable accounts and its impact on MAGI? Are there recommended strategies for other assets to hold in these taxable accounts that can help reduce the hit made by dividends to one's MAGI? Thank you for your time.