Do IRA or 401(k) Withdrawals Count as Income for Marketplace Health Insurance in South Carolina?

Quick answers

Do IRA withdrawals count as income for Obamacare?

Yes. Most withdrawals from traditional IRAs and 401(k)s count as income for Marketplace savings, so include them in your estimated household income. Qualified distributions from a designated Roth account are not included.

Is Marketplace insurance based on net or gross income?

Marketplace savings are based on modified adjusted gross income (MAGI). It starts with the adjusted gross income on your tax return, and most retirement withdrawals are part of it. The Marketplace counts the combined income of everyone on your tax return.

What happens if I leave retirement withdrawals off my Marketplace application?

The Marketplace might give you more savings than you're eligible for, and you could have to pay some back when you file your federal taxes. Include planned withdrawals up front, and update your application if you take one you didn't plan.

What income doesn't count for Marketplace health insurance?

Child support, gifts, veterans disability payments and Supplemental Security Income (SSI) don't count as income for Marketplace savings. Most withdrawals from traditional IRAs and 401(k)s do count. A licensed agent at The Jordan Insurance Agency can review this with you by phone or video.

In this episode

Learn how IRA and 401(k) withdrawals affect your income for ACA Marketplace health insurance in South Carolina, and what to include on your application.

• Find out which retirement withdrawals count as income for Marketplace plans in SC
• Learn what to include—and not include—on your Marketplace application
• Discover the most common mistakes people make with retirement income reporting

Source: Count income & household size (healthcare.gov)

Billy Jordan is a licensed insurance agent (NPN 8699876) with The Jordan Insurance Agency, based in Charlotte, North Carolina. Voices in this episode are AI-generated, including Billy's, from a script reviewed and approved by Billy Jordan, a licensed insurance agent. General education only, not advice for your specific situation.

Tanya (AI host): Do IRA or 401(k) withdrawals count as income for Marketplace health insurance savings in South Carolina? If you’re planning your budget for the year, you’ll want to know how those withdrawals affect what you pay.

Tanya (AI host): Welcome to Smart Coverage. Real Advice., the insurance podcast from The Jordan Insurance Agency. I'm Tanya, your host, and I'm here with Billy Jordan from The Jordan Insurance Agency.

Billy Jordan: Glad to be here, Tanya. Let’s dig into how the Marketplace counts income, especially when it comes to IRAs and 401(k)s.

Tanya (AI host): So, Billy, straight up—do withdrawals from IRAs or 401(k)s get counted as income when someone applies for health insurance through the Marketplace?

Billy Jordan: Yes, they do. According to healthcare.gov, most withdrawals from traditional IRAs and 401(k)s count as income when you’re applying for Marketplace savings. That means, if you take money out of those accounts, you’ll need to include it in your estimated household income for the year on your application.

Tanya (AI host): That’s good to know. What about Roth accounts? Are those withdrawals treated differently?

Billy Jordan: The source spells it out: qualified distributions from a designated Roth account aren’t included in the income calculation. But most other withdrawals from traditional IRAs or 401(k)s do count.

Tanya (AI host): So, for most people, if they’re taking money out of a regular IRA or 401(k), that increases the income the Marketplace looks at?

Billy Jordan: Exactly. The Marketplace bases your eligibility for savings on what’s called your modified adjusted gross income, or MAGI. That includes your adjusted gross income from your tax return, and most retirement withdrawals are part of that.

Tanya (AI host): Can you give me an example of how this might look for someone in South Carolina?

Billy Jordan: Sure. Let’s say you’re retired and taking twenty thousand dollars from your traditional IRA to cover living expenses. That twenty thousand gets added to your other income when you fill out your Marketplace application.

Tanya (AI host): And if someone forgets to include those withdrawals, what could happen?

Billy Jordan: If you leave out your IRA or 401(k) withdrawals, the Marketplace might give you more savings than you’re really eligible for. When you file your federal taxes, you could have to pay some of that back. So it’s important to give your best estimate up front and include those withdrawals if you plan to take them.

Tanya (AI host): What about people whose income changes during the year? Maybe they weren’t planning on a withdrawal, but then something comes up.

Billy Jordan: The Marketplace expects that life changes happen. If you end up taking a withdrawal you didn’t plan for, you can update your Marketplace application. According to healthcare.gov, it’s important to report any income changes as soon as possible.

Tanya (AI host): I like that you can update things as you go. What if someone’s income is hard to predict, maybe because they work seasonally or their hours change a lot?

Billy Jordan: If your income is up and down, the Marketplace says to report your current income, and they’ll give you a yearly estimate. If your income changes, you should update your application.

Tanya (AI host): Does the Marketplace only count the person applying, or do they look at the whole household?

Billy Jordan: They look at the whole household. That means your spouse and any dependents you claim on your taxes.

Tanya (AI host): So if my spouse takes money out of their IRA, that’s included too, right?

Billy Jordan: That’s right. The Marketplace wants the combined income of everyone listed on your tax return.

Tanya (AI host): Are there any types of income that don’t count at all, that people might think do?

Billy Jordan: Yes. For example, child support, gifts, veterans disability payments, and Supplemental Security Income—SSI—don’t count as income for Marketplace purposes.

Tanya (AI host): Is there a way to lower your income for Marketplace calculations? Any deductions people can take?

Billy Jordan: The Marketplace does allow for certain deductions. You can find out about these deductions and how to report them at healthcare.gov.

Tanya (AI host): What’s one mistake you see people make with this part of the application?

Billy Jordan: The most common mistake is either forgetting to include retirement withdrawals or not updating their application if they take a withdrawal later in the year. When you file your federal taxes, you could have to pay money back if your income was higher than you reported.

Tanya (AI host): Three things to remember. One, most IRA and 401(k) withdrawals do count as income for Marketplace health insurance in South Carolina. Two, qualified distributions from a designated Roth account don’t count. Three, always update your Marketplace application if your income changes, especially if you take a retirement withdrawal.

Tanya (AI host): For a personalized look at your situation, book a free thirty-minute chat with Billy and his team at thejordaninsuranceagency.com/podcast.

Billy Jordan: I'm Billy Jordan with The Jordan Insurance Agency. Until next time, take care.

Tanya (AI host): Thanks for listening to Smart Coverage. Real Advice. from The Jordan Insurance Agency.