Early Retirement - what to do about healthcare?

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sox2017
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Early Retirement - what to do about healthcare?

Postby sox2017 » Wed Mar 15, 2017 1:07 pm

Looking for some thoughts from those who have retired early.

We're currently in our late 30s and have saved approximately $2M+. We're young and live in a HCOL location. We're not looking to retire anytime soon, but have definitely started playing with the numbers to see what "my number" would be to retire. Our current expenses are around $75K - $100K per year (including mortgage). At a 4% withdrawal rate, this equals savings of $1.9M - $2.5M. If we were to move to a LCOL location, this number would come down.

My question is around healthcare costs and specifically, insurance. I entered our information into our state ACA exchange and the numbers are just off the charts. For a simple plan, the premiums are around $18K per year, with out of pocket deductibles around $10K. So by retiring early, I would need to pay potentially $28K additional in healthcare costs. At a 4% withdrawl rate, this means an additional savings of $700,000!

So my question....for those who retired early (say in your 40s or early 50s), how did you handle healthcare? Did you go through ACA? Get another job to get healthcare benefits (not really retired then)?

I'm stumped at how anyone retires early unless they have 3 or 4 million in the bank.

sox2017
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Re: Early Retirement - what to do about healthcare?

Postby sox2017 » Wed Mar 15, 2017 5:59 pm

No early retirees here?!

clip651
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Re: Early Retirement - what to do about healthcare?

Postby clip651 » Wed Mar 15, 2017 6:06 pm

I'm not targeting early retirement, so I don't have any specific info for you.

But health care and health insurance is in serious flux right now in the USA. It's possible the situation will become more clear and predictable in the coming years, but no one really knows. So it's very difficult to accurately predict future health care expenses at this point in time.

And yes, if you are going to retire early, and be completely responsible for your own health insurance and health expenses, you'll have to plan for many years of those expenses one way or another.

If you are currently employed and have good health insurance through your employer, you just got an idea of how valuable that benefit is by looking into the cost of replacing that benefit for yourself.

best wishes,
cj

cherijoh
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Re: Early Retirement - what to do about healthcare?

Postby cherijoh » Wed Mar 15, 2017 6:09 pm

sox2017 wrote:Looking for some thoughts from those who have retired early.

We're currently in our late 30s and have saved approximately $2M+. We're young and live in a HCOL location. We're not looking to retire anytime soon, but have definitely started playing with the numbers to see what "my number" would be to retire. Our current expenses are around $75K - $100K per year (including mortgage). At a 4% withdrawal rate, this equals savings of $1.9M - $2.5M. If we were to move to a LCOL location, this number would come down.

My question is around healthcare costs and specifically, insurance. I entered our information into our state ACA exchange and the numbers are just off the charts. For a simple plan, the premiums are around $18K per year, with out of pocket deductibles around $10K. So by retiring early, I would need to pay potentially $28K additional in healthcare costs. At a 4% withdrawl rate, this means an additional savings of $700,000!

So my question....for those who retired early (say in your 40s or early 50s), how did you handle healthcare? Did you go through ACA? Get another job to get healthcare benefits (not really retired then)?

I'm stumped at how anyone retires early unless they have 3 or 4 million in the bank.


The Boglehead rules prohibit speculation on pending legislation. However, I will say that with the healthcare rules in their current state of flux, I'm not sure how informative it would be to know how early retirees handled healthcare under the ACA.

MP123
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Re: Early Retirement - what to do about healthcare?

Postby MP123 » Wed Mar 15, 2017 6:19 pm

Healthcare insurance and College costs (if you have kids) are two big obstacles to early retirees.

Your numbers for ACA insurance above are about right but hopefully you wouldn't be maxing out the deductible every year.

Most part time jobs don't offer insurance and if they do there isn't typically an employer contribution so you're paying the whole premium.

You might also be surprised to learn that Medicare isn't free, at least not parts B and D. So qualifying for it at 65 doesn't mean you're home free with regards to healthcare.

As mentioned above we're not to speculate about legislation here.

sox2017
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Re: Early Retirement - what to do about healthcare?

Postby sox2017 » Wed Mar 15, 2017 6:22 pm

cherijoh wrote:
sox2017 wrote:Looking for some thoughts from those who have retired early.

We're currently in our late 30s and have saved approximately $2M+. We're young and live in a HCOL location. We're not looking to retire anytime soon, but have definitely started playing with the numbers to see what "my number" would be to retire. Our current expenses are around $75K - $100K per year (including mortgage). At a 4% withdrawal rate, this equals savings of $1.9M - $2.5M. If we were to move to a LCOL location, this number would come down.

My question is around healthcare costs and specifically, insurance. I entered our information into our state ACA exchange and the numbers are just off the charts. For a simple plan, the premiums are around $18K per year, with out of pocket deductibles around $10K. So by retiring early, I would need to pay potentially $28K additional in healthcare costs. At a 4% withdrawl rate, this means an additional savings of $700,000!

So my question....for those who retired early (say in your 40s or early 50s), how did you handle healthcare? Did you go through ACA? Get another job to get healthcare benefits (not really retired then)?

I'm stumped at how anyone retires early unless they have 3 or 4 million in the bank.


The Boglehead rules prohibit speculation on pending legislation. However, I will say that with the healthcare rules in their current state of flux, I'm not sure how informative it would be to know how early retirees handled healthcare under the ACA.


Definitely not looking to speculate or turn this into a political debate. I realize this area is one of the most politically charged and that's not what I want this to turn into.

The purpose of my original question was to see how people are actually handling this today if they have a decade plus until Medicare kicks in. I honestly look at it as being prohibitory too expensive for most to ever retire early simply based on healthcare costs.

Again, just trying to see people's experiences who are dealing with these costs today while early retired.

Mike Scott
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Re: Early Retirement - what to do about healthcare?

Postby Mike Scott » Wed Mar 15, 2017 6:24 pm

Health care is probably the biggest single unknowable cost going into the future. It's been fairly predictable a year in advance but even my employer subsidized health insurance is not really stable. I'm not in line for retirement anytime soon but if I was I would think long and hard about health care.

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dodecahedron
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Re: Early Retirement - what to do about healthcare?

Postby dodecahedron » Wed Mar 15, 2017 6:25 pm

cherijoh wrote:The Boglehead rules prohibit speculation on pending legislation. However, I will say that with the healthcare rules in their current state of flux, I'm not sure how informative it would be to know how early retirees handled healthcare under the ACA.


That said, this is not exactly a new problem. Long before ACA started in 2014, early retirees had to deal with the same problem you are considering.

In some cases (e.g., military retirees and employees of NYS government, to take cases with which I am personally familiar due to friends and family), a former employer provided lifetime health care to their early retirees. Some private corporations also offered lifetime health benefits as part of severance package sweeteners to encourage early retirements of some employees when the companies wanted to downsize. In other cases, one member of a couple retired early while the other maintained a job to provide health insurance for both of them. In NY, individual (nongroup) health insurance policies were relatively affordable in the mid 1990s, but when the infamous "death spiral" hit a decade later, some early retirees returned to work primarily motivated by health insurance benefits.

Really, there are no guarantees that prices for health insurance (or any other good that is important to your future quality of life and priorities, e.g., your children's education or home health care or air conditioning) will remain as affordable in the future as it is now. (I mention air conditioning because I knew someone who delayed retiring in part because he had a personal horror of someday not being able to afford air conditioning for his home.)
Last edited by dodecahedron on Wed Mar 15, 2017 6:26 pm, edited 1 time in total.

adamthesmythe
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Re: Early Retirement - what to do about healthcare?

Postby adamthesmythe » Wed Mar 15, 2017 6:26 pm

> it's very difficult to accurately predict future health care expenses

I would go further and say that it is impossible to predict, especially in the individual market over a multi-decade time frame.

Health care is a far bigger concern for early retirees than sequence of return risk.

Now at regular retirement age...you will be part of a very large cadre of people in the same situation with the same concerns and significant political and economic power.
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Constant Chaos
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Re: Early Retirement - what to do about healthcare?

Postby Constant Chaos » Wed Mar 15, 2017 6:27 pm

The blogger at Root of Good is an Early Retiree who discusses his family's healthcare costs in great detail. Here is a recent post:
http://rootofgood.com/december-2016-financial-update/
Basically, they control their income to be just over the poverty line for maximum ACA subsidies so they pay very little.

Saving$
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Re: Early Retirement - what to do about healthcare?

Postby Saving$ » Wed Mar 15, 2017 6:32 pm

One of the most underrated benefits is retiree healthcare. I know of two who have taken advantage of this:
- Friend and spouse who worked for fed gov for 30+ years. Retired in his late 50's. Gets to purchase group healthcare at group rates from retirement until retiree is 65. Retired fed worker is younger than spouse, so spouse will go on Medicare, and fed worker stays on fed policy until 65.
- Family member who retired from a county job after 30+ years. He gets free health insurance until he is 65, then the county pays for a Medicare Supplemental plan for the rest of his life. Along with this, he gets 80% of his pre-retirement income for life. Once he turns 70.5 his income will be more than it was while he was working...

So if you have a job with generous retiree health insurance, or even one that allows you to buy into the group policy after retirement, it is quite possible.

sox2017
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Re: Early Retirement - what to do about healthcare?

Postby sox2017 » Wed Mar 15, 2017 6:35 pm

adamthesmythe wrote:> it's very difficult to accurately predict future health care expenses

I would go further and say that it is impossible to predict, especially in the individual market over a multi-decade time frame.

Health care is a far bigger concern for early retirees than sequence of return risk.

Now at regular retirement age...you will be part of a very large cadre of people in the same situation with the same concerns and significant political and economic power.


Completely agree about predicting future costs, but even before that, I really don't understand how anyone in this country will be able to early retire unless you're saved a ton of money. And by a ton, I mean 3-4m+.

If families have to pay $20k+ privately, that is $500k of extra savings at 4% withdrawal. Such a huge issue. I know this isn't new, but the numbers are so significant today that I'm just curious how people are actually dealing with this.

sox2017
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Re: Early Retirement - what to do about healthcare?

Postby sox2017 » Wed Mar 15, 2017 6:38 pm

Constant Chaos wrote:The blogger at Root of Good is an Early Retiree who discusses his family's healthcare costs in great detail. Here is a recent post:
http://rootofgood.com/december-2016-financial-update/
Basically, they control their income to be just over the poverty line for maximum ACA subsidies so they pay very little.


No asset considerations on those subsidies?

MP123
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Re: Early Retirement - what to do about healthcare?

Postby MP123 » Wed Mar 15, 2017 6:40 pm

sox2017 wrote:
Constant Chaos wrote:The blogger at Root of Good is an Early Retiree who discusses his family's healthcare costs in great detail. Here is a recent post:
http://rootofgood.com/december-2016-financial-update/
Basically, they control their income to be just over the poverty line for maximum ACA subsidies so they pay very little.


No asset considerations on those subsidies?


Not currently.

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bligh
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Re: Early Retirement - what to do about healthcare?

Postby bligh » Wed Mar 15, 2017 6:42 pm

My current plan, if I do end up retiring early, is to be living in a country with affordable healthcare. :)

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Mlm
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Re: Early Retirement - what to do about healthcare?

Postby Mlm » Wed Mar 15, 2017 6:43 pm

Everyone I know who retired early either worked for a government entity or a mega corp that offered retiree health coverage.
The rest live off of after tax savings and qualify for ACA subsidies.
Reality has a way of catching up with you

KlangFool
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Re: Early Retirement - what to do about healthcare?

Postby KlangFool » Wed Mar 15, 2017 6:46 pm

sox2017 wrote:
adamthesmythe wrote:> it's very difficult to accurately predict future health care expenses

I would go further and say that it is impossible to predict, especially in the individual market over a multi-decade time frame.

Health care is a far bigger concern for early retirees than sequence of return risk.

Now at regular retirement age...you will be part of a very large cadre of people in the same situation with the same concerns and significant political and economic power.


Completely agree about predicting future costs, but even before that, I really don't understand how anyone in this country will be able to early retire unless you're saved a ton of money. And by a ton, I mean 3-4m+.

If families have to pay $20k+ privately, that is $500k of extra savings at 4% withdrawal. Such a huge issue. I know this isn't new, but the numbers are so significant today that I'm just curious how people are actually dealing with this.


sox2017,

<< If families have to pay $20k+ privately, that is $500k of extra savings at 4% withdrawal. Such a huge issue. >>

Why? The question should be what are the cost of living beside the medical part. For example, in many places, a family can live on 40K per year. Then, the total number is not as huge.

KlangFool

sox2017
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Re: Early Retirement - what to do about healthcare?

Postby sox2017 » Wed Mar 15, 2017 6:48 pm

bligh wrote:My current plan, if I do end up retiring early, is to be living in a country with affordable healthcare. :)


Not a bad idea, any countries in the Caribbean with affordable plans? :D

samsmith
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Re: Early Retirement - what to do about healthcare?

Postby samsmith » Wed Mar 15, 2017 6:53 pm

I posted almost the exact same question about 10 days ago. And got about the same answers - or lack thereof.
In my case, I am closer to retirement - maybe 18 months out and at that time will be about 60. So cobra gets me 18 months of the way to Medicare, but then I have a gap. And the ACA plans in my state currently have a very limited network of providers. So for me, its not so much the cost - but rather an inability to buy a comparable produce in the individual market to what I have with employer sponsored plan.

I was hoping to get insight from the Bogelhead community, but (beyond saying things may change in next 1-2 years), I did not get the sense that there were any food answers for retiring early.

downshiftme
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Re: Early Retirement - what to do about healthcare?

Postby downshiftme » Wed Mar 15, 2017 6:58 pm

Before ACA, one common strategy for early retirees was to find some kind of affiliation group or professional society with a group health plan and join that. Alternatively, people ran small companies to form their own small group plan, which was a lot of work and complicated. With the advent of ACA, these plans more or less went away as ACA was the obvious solution for early retirees if COBRA health care plans weren't long enough to bridge to Medicare age. Some brave early retirees went for COBRA, banking on the ACA getting up an running before their COBRA time an out.

With the current uncertain climate around health insurance, people I know are just staying employed until the dust settles. At your young age, there's nothing to do now and things might easily change more than once before you need to buy health insurance outside of your employer plan.

Caligal
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Re: Early Retirement - what to do about healthcare?

Postby Caligal » Wed Mar 15, 2017 7:02 pm

Move to Panama or another country where you can get healthcare at a lower cost than in the US - we know someone who actually did this.

I doubt there is a number at this point that you can use to calculate future health care expenses. Prior to the ACA - insurance companies could deny you coverage based on a pre-existing condition so many people wound up delaying retirement or running into financial problems (bankruptcy) by going without insurance. Or they could charge you whatever they wanted to, no matter how exorbitant. No one knows if things could go back to these constraints at this point.

I would hesitate to use any information from bloggers or even the ACA websites to try to come up with a number that you can rely on decades from now. Just keep saving (or plan to work longer) and reassess as you get closer to an actual retirement date.

I imagine there are a number of people on the board who are holding their collective breath to see what the landscape will look like in the upcoming years. My DH and I are of normal retirement age and we are holding off a planned retirement until we have a better idea of what we will be able to purchase until we hit traditional medicare age. We didn't have a clue to plan for this 20 years ago - we both worked for large corporations that promised retiree medical. Only one of those corporations have retiree medical plans in 2017. We are qualified for a smallish subsidy through a retiree medical plan but that could be discontinued at any time (medical benefits are not vested or guaranteed like a pension), so we don't count on it.

cpumechanic
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Re: Early Retirement - what to do about healthcare?

Postby cpumechanic » Wed Mar 15, 2017 7:04 pm

Mim.. you provided an exact answer to the question for those who retired since the ACA was enacted.
I agree.. until things change.. that is the approach... based on your work history....

Current laws have no ""means test".. IE.. you can have $10E6 in the bank.. and still qualify for subsidy.

As of today.. that is the answer.. if you can predict the future... :sharebeer

[quote]Everyone I know who retired early either worked for a government entity or a mega corp that offered retiree health coverage.
The rest live off of after tax savings and qualify for ACA subsidies.

That answers the question.. for today.... let me know when you can predict the future.. and share some stock tips... :beer

Regards

CPU
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bligh
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Re: Early Retirement - what to do about healthcare?

Postby bligh » Wed Mar 15, 2017 7:05 pm

sox2017 wrote:
bligh wrote:My current plan, if I do end up retiring early, is to be living in a country with affordable healthcare. :)


Not a bad idea, any countries in the Caribbean with affordable plans? :D


Most countries in the world have affordable health care, I imagine the Caribbean is no different.

EVERY country in the world has cheaper health care than the US... by a significant margin.

https://en.wikipedia.org/wiki/List_of_countries_by_total_health_expenditure_per_capita

The ones in Europe that make up the remainder of the top 10 have some kind of universal healthcare or socialized medical care system.

It is up to the individual to decide if they want to spend another 5 to 10 years of their lives (ie. ~10% of their entire life) working to save enough to pay for their health care in the US. :)

Lynette
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Re: Early Retirement - what to do about healthcare?

Postby Lynette » Wed Mar 15, 2017 7:12 pm

Don't think that problems are solved once you are on Medicare. There are Medicare premiums and additional costs for coverage that Medicare does not cover. For me, Medicare is far more expensive than when working. I have not been to a doctor in the three months I have been retired but I am paying about $600 a month. I am fortunate in that I get supplements from two former employers. If I had taken an early retirement according to my employer's rules, I could have continued on the same medical plans as employees till I turned 65. Many of my former colleagues who want to retire early wait until they are eligible for this package.

tibbitts
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Re: Early Retirement - what to do about healthcare?

Postby tibbitts » Wed Mar 15, 2017 7:20 pm

Just my personal experience but a high percentage of current early retirees have private employer-paid healthcare (might have been offered it as part of a buyout package in many cases) or have military or other types of government-provided retirement healthcare. In the future the number of people qualifying for at least for the former will probably dwindle.

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vitaflo
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Re: Early Retirement - what to do about healthcare?

Postby vitaflo » Wed Mar 15, 2017 7:26 pm

The options are basically thus:

1) Save more
2) Reduce income to qualify for subsidies to bring the costs down
3) Work part time to either make enough to pay for healthcare or at one that has healthcare
4) Move to a country that has universal coverage, or more realistic, a state that has lower HC costs.

There aren't many ways around it. It's an expense and part of what you are saving for retirement is to pay for expenses, the problem of course is it's anyone guess as to what the actual expenses will be moving forward.

For myself, who also plans on retiring early it's probably going to be a combo of #1 and #3. I am a contractor so if I knew my health bills would be $28k per year I'd have to do 8 weeks worth of contract work. Or, I could just work a few more years and not worry about it. Either way, there's no magic bullet. Just be happy that when you retire early you won't really have to pay anything in the way of taxes. In some ways that almost makes up for it.

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Re: Early Retirement - what to do about healthcare?

Postby 2Birds1Stone » Wed Mar 15, 2017 7:45 pm

Geographical arbitrage, medical tourism, self insuring + a catastrophic insurance plan, non means tested subsidies, etc......there are PLENTY of ways people tackle this issue right now. Google "early retirement forums" and you will find other communities where this is addressed ad nauseum.

2Birds1Stone
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Re: Early Retirement - what to do about healthcare?

Postby 2Birds1Stone » Wed Mar 15, 2017 7:45 pm

Geographical arbitrage, medical tourism, self insuring + a catastrophic insurance plan, non means tested subsidies, etc......there are PLENTY of ways people tackle this issue right now. Google "early retirement forums" and you will find other communities where this is addressed ad nauseum.

NYC_Guy
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Re: Early Retirement - what to do about healthcare?

Postby NYC_Guy » Wed Mar 15, 2017 7:53 pm

The US currently spends about $10k per year per person on healthcare. That number won't be going down. And it's been growing at a rate in excess of the CPI. So I think early retirees should assume at least $10k per year per person in 2017 $ as an expense. I plan on a fair amount more, to be honest. Of course, government subsidies may help...but my plan doesn't depend on them.

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vitaflo
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Re: Early Retirement - what to do about healthcare?

Postby vitaflo » Wed Mar 15, 2017 8:11 pm

Also keep in mind, if you're retiring early you are most likely pulling from taxable accounts. Even if you need $100k to cover normal expenses, much of that should be covered by basis. So for example that $100k stock sale could be $60k in basis and $40k in returns. Only the $40k would apply to MAGI, which is low enough to qualify for subsidies currently.

It's a simplified example but you get the idea.

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Watty
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Re: Early Retirement - what to do about healthcare?

Postby Watty » Wed Mar 15, 2017 8:22 pm

There are two separate issues, being able to get any insurance and being able to pay for it.

Prior to the ACA several states had decent state run health care plans, as I recall Hawaii and Massachusetts were two.

The ACA passed well before I retired but one the things on my lists of contingencies was to move to Hawaii for a few years until I could get on Medicare. It never got to the point where I researched just how practical it that would be.

My state also had a state run plan for small businesses so I could have also done something like a dog walking business to get into that but I suspect the coverage was not all that good.

I also know several people who took jobs a school bus drivers as a bridge job to retirement because it came with benefits and they got summers and school holidays off.

mnaspbh
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Re: Early Retirement - what to do about healthcare?

Postby mnaspbh » Wed Mar 15, 2017 8:24 pm

We're assuming about $14K/yr per person, increasing at up to 5% over the CPI. That covers premiums plus OOP max plus a bit that's not covered (dental/vision). We wouldn't plan on hitting the OOP max most years, but we can't risk an early retirement unless we could afford that. There are too many chronic manageable conditions that'll push you right to the OOP max every year, for life. By the time we're in our late 60's, that projection shows that the majority of families in the US will not be able to afford coverage. Sort of puts a damper on prospects for early retirement.

A big caveat about "early retirement forums"--participants who fail don't usually go back to those forums and brag about how badly things went. Anyone can "self-insure" for health care costs if they don't have any health care costs. If they suddenly need $1M in treatment or surgeries to deal with cancer, or develop a manageable chronic condition, odds are they won't go back to the boards and post about how they've totally bankrupted their families.

If the bulk of one's assets are in taxable accounts, dividends and other earnings can push one right out of being eligible for subsidies. If you need $100K to cover normal expenses and retired early enough that you're using a 3% SWR, having the >$3M needed in taxable accounts will throw off over $60K/yr in interest and dividends alone even in this low rate environment. $60K/yr will just about push a couple out of ACA subsidy range, and that's not counting any capital gains realized by selling assets to get that $100K/yr.

HIinvestor
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Re: Early Retirement - what to do about healthcare?

Postby HIinvestor » Wed Mar 15, 2017 8:32 pm

I agree that this is a huge issue and hitting out-of-pocket maximums has already happened for us several times, including for our D when she was a teen and for me a few times because though I am mostly in good health, I do have some chronic health issues. There is talk of having premiums for older adults up to 5x that of younger people, and that is not yet currently reflected in most premiums so they could easily increase for adults until they can switch to Medicare and not carry supplemental coverage (or continue to have it, whichever they can afford and prefer).]

I agree with @vitaflo about the options for coverage of medical treatment if one retires early.

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vitaflo
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Re: Early Retirement - what to do about healthcare?

Postby vitaflo » Wed Mar 15, 2017 8:56 pm

mnaspbh wrote:If the bulk of one's assets are in taxable accounts, dividends and other earnings can push one right out of being eligible for subsidies. If you need $100K to cover normal expenses and retired early enough that you're using a 3% SWR, having the >$3M needed in taxable accounts will throw off over $60K/yr in interest and dividends alone even in this low rate environment. $60K/yr will just about push a couple out of ACA subsidy range, and that's not counting any capital gains realized by selling assets to get that $100K/yr.


While I agree with you on dividend considerations, if you retire early you don't need your entire portfolio in taxable. You only need enough to cover until you're 59 1/2. You could have half the $3m in taxable and half in tax-advantaged, retire at 50 and still take $100k out every year and be fine. And you'd have half the dividend income to worry about.

I think anyone wanting to play with the ACA subsidy range has to do a good amount of work planning their income year to year. That probably starts even before you retire.

HIinvestor
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Re: Early Retirement - what to do about healthcare?

Postby HIinvestor » Wed Mar 15, 2017 9:02 pm

I'm not sure it is very financially sound to even count on ANY subsidy going forward. The healthcare landscape is definitely under intense scrutiny presently and may well change quite a bit sooner than later. Future subsidies (if any) may also consider all assets of the individual(s), more like financial aid for colleges.

Nick341981
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Re: Early Retirement - what to do about healthcare?

Postby Nick341981 » Wed Mar 15, 2017 9:19 pm

Play it safe, keep working and see how things pan out in a year, especially if you have kids.

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John151
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Re: Early Retirement - what to do about healthcare?

Postby John151 » Wed Mar 15, 2017 9:28 pm

I was able to retire at fifty-five from a government job with health insurance for life. My cousin retired at the same age from a private-sector job with no health insurance at all. She was able to buy private medical coverage, beginning at around $450 a month, but the premiums skyrocketed before she finally qualified for Medicare at sixty-five.

I wouldn’t recommend early retirement if you have to pay for medical coverage entirely out of your own pocket.

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BrandonBogle
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Re: Early Retirement - what to do about healthcare?

Postby BrandonBogle » Wed Mar 15, 2017 9:38 pm

In another thread a poster tapped me on the shoulder and suggested I look into the full cost of my employer medical plan vs. what is deducted from my paycheck to form as a baseline for medical costs, and assume that I could never find a plan as "cheap" as my employer. So I did that and was shocked at the true cost of my plan. It was north of $12k for 2017. That would be a huge change to my planned retirement income even at that amount.

Now, I was looking for early retirement at 52 and maybe moving that into my 40s. However, healthcare costs are severely unaccounted for in my current projections and will need to change. My current annual expenses doesn't do justice as an estimate of retirement expenses. However, in doing the research of what it costs at my employer for healthcare, I found that if I retire at 55 or later, I can remain on my employer's plan (though I pay the full cost). Now, that can change in the next 20 years, but it is making me rethink my plan. If I want to "retire" early, I would likely end up switching to part time (we provide full benefits to part timers) so I can remain on the insurance. That would also significantly alter my projects by lowering expenses (I would still have employer paying a large part of my insurance cost) and I would be bringing in income. Decisions, decisions!

AlohaJoe
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Re: Early Retirement - what to do about healthcare?

Postby AlohaJoe » Wed Mar 15, 2017 9:40 pm

sox2017 wrote:I'm stumped at how anyone retires early unless they have 3 or 4 million in the bank.


I don't live in America. I'm a citizen of Australia, which has national health care.

Also: the 4% rule was for people who are 65 years old. Since you are substantially younger you should be using a smaller number (maybe something between 3% and 3.5%, people don't entirely agree) which makes things look even worse than what you posted!

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Re: Early Retirement - what to do about healthcare?

Postby mnnice » Wed Mar 15, 2017 9:52 pm

I sent you a PM.

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ClevrChico
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Re: Early Retirement - what to do about healthcare?

Postby ClevrChico » Wed Mar 15, 2017 9:53 pm

Constant Chaos wrote:The blogger at Root of Good is an Early Retiree who discusses his family's healthcare costs in great detail. Here is a recent post:
http://rootofgood.com/december-2016-financial-update/
Basically, they control their income to be just over the poverty line for maximum ACA subsidies so they pay very little.


+1 to this. Search for "What will we do" in the article which applies to your situation. This blog gives some of the best practical advice on early retirement and great financial planning tips even if you're still working.

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Re: Early Retirement - what to do about healthcare?

Postby bluejello » Wed Mar 15, 2017 9:57 pm

Has anyone run the numbers on buying a full-fledged healthcare plan ($12k - $18k a year or even more) vs. only buying catastrophic health insurance and paying for regular checkups and other routine healthcare costs out of pocket?

Obviously this will differ a huge amount by person depending on whether you take prescription meds and the overall state of your health. But I wonder if this could be a good solution for some people. Especially if you retire early and you are in good health, it's very likely that your out-of-pocket healthcare costs could be very low for many years.

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wander
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Re: Early Retirement - what to do about healthcare?

Postby wander » Wed Mar 15, 2017 10:11 pm

I am in the same boat with posters who advise to retire in countries that have affordable healthcare. I do not plan to retire early but that seems like a better solution.

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Re: Early Retirement - what to do about healthcare?

Postby MP123 » Wed Mar 15, 2017 10:27 pm

bluejello wrote:Has anyone run the numbers on buying a full-fledged healthcare plan ($12k - $18k a year or even more) vs. only buying catastrophic health insurance and paying for regular checkups and other routine healthcare costs out of pocket?

Obviously this will differ a huge amount by person depending on whether you take prescription meds and the overall state of your health. But I wonder if this could be a good solution for some people. Especially if you retire early and you are in good health, it's very likely that your out-of-pocket healthcare costs could be very low for many years.


Unfortunately the ACA (Obamacare) essentially got rid of catastrophic health care plans.

The closest equivalent for most people are the Bronze level plans which are sometimes HSA compatible but still in the $12k+ range for a couple.

I'd love to see them back though and you're right that paying out of pocket for regular stuff can be a great solution as long as a "worst case" scenario is covered by a catastrophic plan.

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Re: Early Retirement - what to do about healthcare?

Postby Nick341981 » Wed Mar 15, 2017 10:27 pm

ClevrChico wrote:
Constant Chaos wrote:The blogger at Root of Good is an Early Retiree who discusses his family's healthcare costs in great detail. Here is a recent post:
http://rootofgood.com/december-2016-financial-update/
Basically, they control their income to be just over the poverty line for maximum ACA subsidies so they pay very little.


+1 to this. Search for "What will we do" in the article which applies to your situation. This blog gives some of the best practical advice on early retirement and great financial planning tips even if you're still working.


This guys entire health care plan revolves around having other people subsidize him, his wife and 3 kids health insurance for him because if he had to pay the true cost for it he would never be able to afford it. In order to pull this off you better be able to live on less than 30k a year and pray the subsidies don't change significantly in the future because if they change to the numbers that are floating around in the new plan you will be in the same boat as root of good, screwed

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Pajamas
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Re: Early Retirement - what to do about healthcare?

Postby Pajamas » Wed Mar 15, 2017 10:39 pm

I used COBRA for 18 months and am on my second year of ACA. I wish I had gone to the ACA right away.

I have no idea what insurance I will have next year and am not very happy about it as it will likely be much, much more expensive and not as good as what I have now. It is worrisome as I am not healthy enough to forgo coverage.

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Re: Early Retirement - what to do about healthcare?

Postby Bacchus01 » Wed Mar 15, 2017 10:53 pm

sox2017 wrote:
adamthesmythe wrote:> it's very difficult to accurately predict future health care expenses

I would go further and say that it is impossible to predict, especially in the individual market over a multi-decade time frame.

Health care is a far bigger concern for early retirees than sequence of return risk.

Now at regular retirement age...you will be part of a very large cadre of people in the same situation with the same concerns and significant political and economic power.


Completely agree about predicting future costs, but even before that, I really don't understand how anyone in this country will be able to early retire unless you're saved a ton of money. And by a ton, I mean 3-4m+.

If families have to pay $20k+ privately, that is $500k of extra savings at 4% withdrawal. Such a huge issue. I know this isn't new, but the numbers are so significant today that I'm just curious how people are actually dealing with this.


The 4% withdraw you keep mentioning assume sperpetuity. In reality, you need only bridge to Medicare. That is your $20K X years to Medicare.

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Watty
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Re: Early Retirement - what to do about healthcare?

Postby Watty » Wed Mar 15, 2017 11:27 pm

Something to keep in mind when you are looking at the early retirement healthcare premiums is that they do not go to zero when you turn 65. With the Part B premium, Part D drug coverage, and a good medicare supplement it is running us a bit less than $300 a month for one person and you need to plan for that as a lifelong expense.

For example in early retirement if you are paying $800 a month for one person's premium then that is $500 more than you will eventually be paying not $800. That is still a lot over the years but a less than you might have been thinking.

The pre-retirement deductibles and co-pays are will also be a lot higher but that is a separate factor.

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Re: Early Retirement - what to do about healthcare?

Postby kramer » Thu Mar 16, 2017 12:52 am

I retired early in 2007 at age 41 and acquired a private health insurance plan in the US, $5000 domestic deductible, $10,000 international deductible. The premiums went up quickly but were never that bad by today's standards...I started living abroad (because I wanted to, nothing related to health insurance) and around 2012 I realized my health insurance was invalid because I was spending more than half my time abroad (in fact, I found the clause in my health insurance contract). So at that point I cancelled my $250/month US health insurance and that company (Aetna) pulled out of my state a year or two later anyway. I was also able to build up an HSA during this short window which is now around $30K.

I am now a resident of the Philippines and have minimal government health insurance here (at least by US standards). I live very well but my withdraw rate is very low (under 2%) and I could afford almost any level of care in Southeast Asia. Even though I am no longer a US resident, I still pay US taxes since I am a citizen, however, that allows me under the ACA to move back to the US at anytime and reestablish health insurance, even outside of an open enrollment period. I am also a short flight away from world class health services in Thailand and I can easily afford them in almost any eventuality.

Currently, I am looking at getting international health insurance that covers me throughout SE Asia ... You really cannot get "true" insurance from any of these countries (pricing based on a pool of people and not just you, guaranteed renewal) but you can get an international plan with these sorts of guarantees (BUPA, Cigna, etc.) which I can easily afford ...for now, I get travel health insurance when traveling to the USA. I know this is not a perfect situation ... I have won the game and this risk overwhelms my other financial risks. I do plan to fully participate in Medicare after I turn 65 which I would utilize during visits to the US.

I realize this is not for everyone ... but sharing my experience of "How I Did It" according to the OP's question.

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Re: Early Retirement - what to do about healthcare?

Postby AlohaJoe » Thu Mar 16, 2017 1:51 am

Bacchus01 wrote:In reality, you need only bridge to Medicare. That is your $20K X years to Medicare.


Not saying this is Bacchus01 or the OP (since they haven't said anything on the topic) but the same people who assume Social Security won't be around in 20 years when they retire ("if it is I'll treat it as a bonus" is a common refrain) are usually very quick to assume that Medicare will exist in exactly the same form as it does today.

If you think Social Security won't be around in 20 years (or the benefit age will be increased or it will have benefits cut dramatically or it will be means tested) then you should apply the same reasoning to Medicare and assume you'll need $10,000-$30,000 to cover that even once you reach age 65 or 75.


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