Key Takeaways
- James Conole said on the Ready For Retirement podcast that a $2 million portfolio can support $94,000 of spending a year, a 4.7% withdrawal rate.
- A single 60-year-old who draws that $94,000 from a traditional 401(k) is $30,160 over the $63,840 income limit for the Premium Tax Credit on 2027 Marketplace coverage.
- Congress lifted that limit only for 2021 through 2025. Income over it now means no credit at all, and that can last five years, until Medicare at 65.
- On a brokerage sale, only the gain counts as income. Qualified Roth withdrawals and cash don’t count at all. So a retiree with money outside the 401(k) can spend the same $94,000 and stay under the line.
If you’re planning to retire before 65 and buy your own health insurance, you should know about this before you decide how much to spend. Open enrollment for 2027 Marketplace coverage started Nov. 1. Congress lifted the Premium Tax Credit’s income limit for tax years 2021 through 2025, and it hasn’t done so again. So the limit is back: earn more than 400% of the federal poverty line, and you get no credit at all.
That’s bad news for a good saver, because a perfectly safe withdrawal rate can put you right over it.
6 safe dividend stocks paying retirees 6%+ yields
There are over 100 stocks paying 6%+ annual dividends today.
But after an extensive investment review leveraging TIKR’s proprietary data, we now believe only six of them are truly safe for retirees.
They’re all yours for free as part of our new investment report, which you can access right here.
A safe $94,000 a year
On the Nov. 7 episode of Ready For Retirement, James Conole of Root Financial said a $2 million portfolio can support $94,000 of spending a year for 30 years, with the spending raised for inflation. That’s a 4.7% withdrawal rate. It comes from Bill Bengen’s research on nearly a century of market data, tested against the worst years a retiree could have started in. Conole’s simulated retiree was 60, with Social Security left out of the plan. He had a 100% probability of success and was projected to die with $5.7 million. Conole’s own point is that people who stick to a number like this end up “leaving, and this is not an exaggeration, millions of dollars on the table.”
So let’s take a hypothetical single 60-year-old with the same $2 million, all of it in a traditional 401(k). He retires, draws the $94,000 and buys coverage on the Marketplace until Medicare.
No credit above $63,840
The Premium Tax Credit goes to households with income of at least 100% and no more than 400% of the federal poverty line for their size. For 2027 coverage, the line comes from the poverty guidelines HHS published in January 2026. That’s because the credit uses the guidelines most recently out on the first day of open enrollment. For a household of one in the contiguous states and D.C., the guideline is $15,960. Four times that is the limit: $63,840.
Traditional 401(k) withdrawals count toward that income, and HealthCare.gov tells applicants to include them in their estimate.
$30,160 over, five years running
Our 60-year-old’s $94,000 is $30,160 over the $63,840 line, so he gets no credit at all for 2027. The same thing happens at 61, 62, 63 and 64: the same draw from the same 401(k) lands over that year’s line again. That lasts until Medicare at 65, whose first sign-up window opens three months before the 65th birthday. That’s five years of full-price coverage.
To keep the credit, he’d have to cut his 401(k) draw to $63,840 or less, about 3.2% of $2 million. That’s $30,160 a year cut from a plan that Conole’s own numbers show is already conservative. Which, ouch.
And you can’t get around it by guessing low. For tax years after 2025, there’s no cap on paying back credits that were too big. So a retiree who estimates income under the line and takes the credit in advance, then ends the year over it, pays back every dollar at tax time.
You can spend $94,000 and stay under the line
Our 60-year-old can’t, since every dollar he has sits in the 401(k). But a retiree with money in other accounts can, because what counts as income depends on where the money comes from. Sell shares in a taxable brokerage account, and only the gain counts as income. Qualified distributions from a Roth account don’t count at all, and neither does spending from cash in the bank.
So a retiree can keep the 401(k) draw at $63,840 or less, cover the rest from those accounts and still spend the full $94,000. He keeps the credit as long as his brokerage gains don’t push his income over. Either way, estimate carefully on the application, and update it if your income changes during the year.
Plan the five years around the line
The way I see it, a 4.7% draw is a fine plan for the portfolio. It can be a costly one for health insurance if every dollar is in a 401(k). If I were a few years from retiring at 60 with everything in a 401(k), I’d start putting new savings in a brokerage account now. Then I’d have something to spend from in those five years that doesn’t count against the line. At the very least, I’d price five years of full-price coverage before settling on 4.7%.
Of course, the line could still change. The House passed a three-year bill to bring back the expanded credits in January, but the Senate hasn’t. And the next poverty guidelines, due early next year, will set the line for 2028 coverage.
Enjoy your retirement in style with these safe 6%+ dividend yields
Dividends can hold the key to enormous wealth. But only if you buy the right ones.
Picking the right high-yield dividend stock can be the difference between a dream retirement…and scraping by every month, waiting for the next Social Security check to clear.
We’ve identified six stocks yielding 6%+ that we believe every retiree should know about right now.
Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
