Great article on the ACA. My question is, “How do live off the greatly reduced income one you have put everything into your corporate 401(k)?”

In the article, “How To Bilk Obamacare” we described how a family of four could hide $109,000 in the family business 401k and qualify for a full subsidy of their $10,825 Obamacare health insurance. This leaves the household taxable income at just $31,000 a year (before deductions).

You are among many who asked about what the family would live off of in the meantime.

We work with a number of small business owners. My experience with small business owners is that most of the them have not fully utilized the company’s 401k as a tax planning strategy. Or if they have it was not sufficient. Most of our small business owners have much of their wealth in taxable accounts. Entrepreneurs often keep large sums of cash in taxable accounts so that they have cash readily available for expansion, ventures and real estate investments. I alluded to this in the article when I said,

They have lived well below their means, saving and investing diligently. They could retire at any time and live comfortably.

I was assuming that like many of our small business owners they had $500,000 to $1 million dollars in a taxable account.

Having sufficient assets in a taxable account can allow for this type of tax management. It also provides the ability for smart tax planning for the gap years between retirement and age 70 1/2.