Early Retirement - what to do about healthcare?

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

Post by msk » Thu Mar 16, 2017 1:54 am

Surely there are a number of countries where one has had wonderful vacation experiences and also have decent low-cost health cover for its residents? E.g. almost anywhere in the European Union, Australia, Canada, New Zealand, etc. Might be quite attractive to establish residency in such a place between early retirement age and medicare age... No such country for the aspirant early retiree? Perhaps he ought to travel the world a bit more while he is still healthy enough :? And indeed the international health insurance policies mentioned higher up in this thread warrant examining. I am rather lucky to have resided in a number of countries over my working life and have always been covered by universal health care funded by taxes (including mine!). Issue with most insurance policies are that most will not cover pre-existing conditions. At age 70+ almost any health issue you get will be related to a pre-existing condition. At 55 you may be unlucky and already have pre-existing health issues :annoyed

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

Post by Pajamas » Thu Mar 16, 2017 2:20 am

AlohaJoe wrote:
Bacchus01 wrote: 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.


I don't count on any Social Security and do assume that health care costs under Medicare will be much greater than they are now when I am 65. I also think that Social Security benefits are more likely to be subjected to a needs test in the future than Medicare (or whatever coverage is available then) will be.

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

Post by sox2017 » Thu Mar 16, 2017 8:39 am

Thanks for the replies.....not an easy topic to factor into LT planning. Things will probably look drastically different in 5 or 10 years from now, so in my situation, the best advice is probably similar to other personal finance advice.....save more, spend less, invest for the LT

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

Post by JDCarpenter » Thu Mar 16, 2017 8:53 am

OP, you have tons of time. Things will change. Save, LBYM, and enjoy your lives!

We are retiring this year at 57/56, sort of early.

Currently "budget" has been adjusted up to 3K a month for health expenditures, mainly insurance, but the number isn't really even sound enough to constitute SWAG. (Especially after the first 18 months, when we have COBRA)

If the market were the same as 10 years ago, we'd go with catastrophic coverage. Given the current rules, and our state, if we were not eligible for COBRA this year, we would go with non-compliant plan and ensure that our withholding was on target. (Bringing income in at anything close to subsidy level conflicts with desire to smooth tax bills and avoid noticeable tax issues when we hit 70 years old--plus we strongly prefer to avoid being limited to the compliant plan's network of providers.) If there are no legislative changes before the end of 2018, we will see how much more the insurance "market" in our state deteriorates, and if our current robust health continues.

We've built a lot of wiggle room into our spending, which will assist with this and other essentially uncontrollable variables. With sufficient assets, you have options.
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wrl
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Re: Early Retirement - what to do about healthcare?

Post by wrl » Thu Mar 16, 2017 8:58 am

I pay exactly what you said for a family of 5 (early retired at 48). I don't qualify for ACA subsidies because ACA looks at total income, not just taxable income and our tax free income from muni's is over the 97k max for a family. I could sell all my dividend stocks and shift my bonds to short term bonds that earn next to nothing in order to get a subsidy, but that would hurt my net after tax cash flows more, so I suck it up, invest as I think I should and pay the taxes/lack of subsidies.

J295
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Re: Early Retirement - what to do about healthcare?

Post by J295 » Thu Mar 16, 2017 11:49 am

We went part time 5 years ago at age 53. Here are some random observations for OP.

Yes, health insurance is expensive. We have been fortunate to be able to manage our adjusted gross income to qualify for subsidies. Whether that will continue in the future, or in what form, is to be determined. It doesn't matter though, life is full of surprises and unexpected costs, so we plan to just deal with it as it presents itself.

When we transitioned we knew healthcare was an unknown. However, we were not going to let the tail wag the dog by continuing work to work just to have group health insurance.

We think it's a huge plus to have the ability to obtain insurance without regard to pre-existing conditions. Well that could change also, I believe it is a feature that will remain in place in most plans. If it does change, however, we will find a way to adapt.

You noted the 4% withdrawal rate in your post. Keep in mind that this is typically applied to someone at age 65, and if retiring early you will want to modify your withdrawal rate assumptions accordingly. You might take a look at firecalc and other sites

Best of luck. We can heartily recommend early retirement

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

Post by WhiteMaxima » Thu Mar 16, 2017 11:57 am

Move overseas until you reach 65 and come back. Healthcare cost is too high in the US. We spend more but get less. Many developed nation has good healthcare and lower cost. You can buy priviate insurance and get much better care in other developed world. If you retire eralier, be sure to do Roth conversion before 70.5.

Hug401k
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Re: Early Retirement - what to do about healthcare?

Post by Hug401k » Thu Mar 16, 2017 2:29 pm

I'm not sure how this will all fall out, but Massachusetts has had some form of universal health care since 2006. Perhaps retire to Cape Cod?

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

Post by hicabob » Thu Mar 16, 2017 2:37 pm

I saved a lot of money, fully fund an HSA and put a lot of effort into staying healthy. Unsubsidized ACA is still quite an impressive yearly total and I expect it will increase by another 40% for the typical early retiree soon.

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

Post by Carefreeap » Thu Mar 16, 2017 3:52 pm

I predicted it would be our new mortgage payment in retirement. I was right!

DH retired in 2012 from a private employer at age 53, I was 50. Our current monthly premiums are approximately$650/$600 per month. We might have gotten some partial ACA subsidies for one or two years but nothing significant and DH really didn't want to game the system. Like an earlier poster said we didn't want the healthcare tail wag the retirement dog. We have done ROTH conversions and have sold appreciated real estate during the low income years. That seemed more important than trying to squeeze out a small subsidy through the ACA. We have significant assets and think it's just a matter of time before that loophole gets (rightfully) closed.

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Re: Early Retirement - what to do about healthcare?

Post by furikake » Thu Mar 16, 2017 4:05 pm

This is what makes me feel like I need to keep my business for a few more years so I can stay on my group plan to see what's going to happen in the future on health insurance. If this AHCA gets passed, it'll be a death spiral and the next administration will sure come in and replace it with Universal Health Care. If we get Universal Health Care, there is no way to get out, I can retire then. :D

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

Post by burt » Thu Mar 16, 2017 5:28 pm

I could not have retired at age 60 without retiree health insurance provided by my employer (mega corp).
This benefit could go away at anytime as decided by the employer.
If that's the case, I will have to go back to work part time... just to pay for health insurance.
The system cannot be fixed until medical "COSTS" are addressed.

Our Medical System is broken.

burt

michaeljc70
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Re: Early Retirement - what to do about healthcare?

Post by michaeljc70 » Thu Mar 16, 2017 5:30 pm

MP123 wrote:
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.


This works if you can control your income. If you have money distributed in the right places, it is easier (where you can make tax free withdrawals to keep your income down). It can get tricky as if you have too much in taxable accounts (which allow for tax free withdrawals), the cap gains and dividends could mess you up.

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

Post by bligh » Thu Mar 16, 2017 5:42 pm

kramer wrote: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.


Thank you Kramer! I'm not the OP but this was helpful to me.

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

Post by dsronfire » Thu Mar 16, 2017 6:26 pm

One potential solution is Health Care Sharing Ministries. Suggest you perform a web search to learn more for yourself.

There a great many criteria to meet and these plans can reject you (unlike current ACA). However, if you are "healthy", etc., you may find an affordable, workable criteria. :happy

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Re: Early Retirement - what to do about healthcare?

Post by duckcalldan » Fri Mar 17, 2017 9:47 pm

J295 wrote:We went part time 5 years ago at age 53. Here are some random observations for OP.

Yes, health insurance is expensive. We have been fortunate to be able to manage our adjusted gross income to qualify for subsidies. Whether that will continue in the future, or in what form, is to be determined. It doesn't matter though, life is full of surprises and unexpected costs, so we plan to just deal with it as it presents itself.

When we transitioned we knew healthcare was an unknown. However, we were not going to let the tail wag the dog by continuing work to work just to have group health insurance.

We think it's a huge plus to have the ability to obtain insurance without regard to pre-existing conditions. Well that could change also, I believe it is a feature that will remain in place in most plans. If it does change, however, we will find a way to adapt.

You noted the 4% withdrawal rate in your post. Keep in mind that this is typically applied to someone at age 65, and if retiring early you will want to modify your withdrawal rate assumptions accordingly. You might take a look at firecalc and other sites

Best of luck. We can heartily recommend early retirement

I retired last month at age 53, and your thinking meshes almost exactly with mine. We will be on ACA April 1, bronze with HSA and a healthy subsidy. We should be ok until 2019. If things change, and they will, we will deal with it. Either here or abroad.

There was none chance I'd work til 65. At some point I'd need a bridge to Medicare. Might as well be sooner, so I have more job-free time to enjoy life, right?

Jackson12
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Re: Early Retirement - what to do about healthcare?

Post by Jackson12 » Fri Mar 17, 2017 10:09 pm

While the OP has some time before this is likely to become an issue, how are people factoring in long-term health care costs, especially if longevity runs in the family?

My parents had sufficient assets to self insure but long- term expenses were shockingly high and took a huge chunk of their savings and investments.

Medicare covers only a small period of time in nursing homes and ( as I understand it) not even that unless there is a 3 day stay in the hospital first ( observation time, even if for a whole day or night) doesn't count - only full admission for 3 days.

Currently, annual nursing home costs here are $90,000 a year, for a decent and basic nursing home. That's for a semi-private room.

michaeljc70
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Re: Early Retirement - what to do about healthcare?

Post by michaeljc70 » Fri Mar 17, 2017 10:19 pm

Jackson12 wrote:While the OP has some time before this is likely to become an issue, how are people factoring in long-term health care costs, especially if longevity runs in the family?

My parents had sufficient assets to self insure but long- term expenses were shockingly high and took a huge chunk of their savings and investments.

Medicare covers only a small period of time in nursing homes and ( as I understand it) not even that unless there is a 3 day stay in the hospital first ( observation time, even if for a whole day or night) doesn't count - only full admission for 3 days.

Currently, annual nursing home costs here are $90,000 a year, for a decent and basic nursing home. That's for a semi-private room.


My family tends to live long, but I don't recall one of any of them lasting a year in a nursing home. Then again, they had family to help so they didn't enter a nursing home until they were really bad. Assisted living is different than a nursing home.

I have a friend and both parents had alzheimers. They lived at home and the family paid for a full time live in helper. That didn't cost 90k a year. My friend said the pension and SS paid for the help and none came from savings.

My point is what percent of people will even enter a nursing home and how long will they stay? I'm not saying you should blindly think you're never going to need it, but I wouldn't be keeping an extra million lying around for that.

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

Post by sawhorse » Fri Mar 17, 2017 10:32 pm

You're right to be concerned about healthcare. I'm in my 30s and developed a serious disease that has already cost $25k out of pocket each of the last two years. If we didn't have access to insurance, we would be bankrupt.

Healthcare coverage in the future is very uncertain. It's impossible to predict what the laws will be a year from now let alone 30 years from now.

If you want to maximize your chance of being able to retire early without having to worry about healthcare, your best bet is to move to another country. Pretty much any other country. I can't foresee any country getting rid of its national health program entirely, though I can foresee them limiting access to citizens. Some countries already make immigrants purchase private health insurance for the first X number of years they are there. Even so, the costs will almost certainly be lower than in the United States.

Moving to another country is easier said than done of course unless you have dual citizenship.

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

Both places are high cost of living, so that would be a tradeoff. I was surprised to learn that some of the lowest cost of living areas have some of the highest premiums. The premiums in West Virginia are twice as much as in Massachusetts despite the latter being much higher cost overall. I think Wyoming has the highest health cost of all states, and it's very low cost overall.

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Re: Early Retirement - what to do about healthcare?

Post by Jackson12 » Fri Mar 17, 2017 11:41 pm

michaeljc70 wrote: My point is what percent of people will even enter a nursing home and how long will they stay? I'm not saying you should blindly think you're never going to need it, but I wouldn't be keeping an extra million lying around for that.


This seems to back up your assumptions: http://news.morningstar.com/articlenet/ ... ?id=564139.

At that time, 40% of those who reached age 65 eventually entered nursing homes.

Of those in nursing homes, 49% had their nursing home costs primarily covered by Medicaid.

65% of nursing home residents died within a year of admission.

78% of those in need of long- term care received it from family and friends. The average nursing home stay was about 2 and 1/2 years.

An uncle lived in a nursing home for nearly 10 years, which I assume is a rarity given the life span of males compared to females...and bearing in mind the statistics above..

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

Post by JDCarpenter » Sat Mar 18, 2017 11:54 am

Jackson12 wrote:While the OP has some time before this is likely to become an issue, how are people factoring in long-term health care costs, especially if longevity runs in the family?

...


For us, it will be paid out of portfolio, just like everything else. If we both are in LTC at the same time, we'll have essentially no other expenses (except taxes on amounts being taken out of Roths + 85% of social income)

The consensus on Long Term Care Insurance seems to be that it is only worthwhile (if at all) for those in upper-middle asset category who need to preserve their assets for a surviving spouse or wish to benefit their heirs. Those at the bottom have medicaid since their assets are already spent down; those nearer the top can pay out of assets.
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blueberry
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Re: Early Retirement - what to do about healthcare?

Post by blueberry » Sat Mar 18, 2017 12:16 pm

It is an unpredictable situation and at the very least I think warrants waiting on retirement until, if you are covering your kids through your job, your kids have their own health insurance. Keeping your options flexible, such as by having some way to make some earned income, having both taxable and tax deferred accounts, staying healthy, having liquid assets, and having no debt, -I'm hoping- will keep healthcare costs doable.

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

Post by celia » Sat Mar 18, 2017 12:30 pm

burt wrote:The system cannot be fixed until medical "COSTS" are addressed.

Our Medical System is broken.

bligh wrote: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

But this should be qualified.

Each country is likely reporting different things that are included in this number. For example, in the U.S. we have a lot of medical research, agencies like the Centers for Disease Control, local and state health agencies, and rebuilding of medical infrastucture. (In California, all the hospitals are being retrofitted or being rebuilt so they can withstand tighter earthquake regulations. They have to be able to continue their operations during and after the "big one".) How many other countries have these "medical" expenses? I have been in ERs in Europe where they don't even have screens on the open windows so the insects come in. I consider that pretty basic and simple to fix, but they don't do it. (I was lying on the examining table waiting for the doctor one time while I watched a spider walk across the ceiling above me.)

We also have one of the longest life expectancies in the world.

So you might want to take the total picture into account if you decide to move.

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

Post by patngordo » Sat Mar 18, 2017 12:57 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


That was the only way we could figure out how to do it when we retired pre-medicare age and the COBRA ran out. We chose Panama because you could get good medical care out of pocket, and you could also get a reasonably priced "catastrophic care" policy. Worked out well.

I know a couple who moved to Merida (in Yucatan) for the same reason.

Don't know anything about the Caribbean, we were on the Pacific side of Panama

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Re: Early Retirement - what to do about healthcare?

Post by ReadyOrNot » Sat Mar 18, 2017 4:48 pm

This must vary quite a bit by state and going up with time and age. For a single person, mid-50's, pre-ACA, a low-end catastrophic-only insurance-like policy at an HMO (you have to pay first $4K or $5K deductible per year, $40K or $50K max or something like that, limited to using HMO doctors) comparable to bare-bones Bronze ACA plan, was around $150 a month, going up to around $240 a month as provisions of ACA kicked in and male and female costs equalized, in California. I think it must have gone up to around $300/ month after ACA was in effect. In Washington state, ACA bronze plan was around $400/month. Probably higher now and in the future. Though those costs were growing alarmingly higher over only a few years, they seemed to allow early retirement at a do-able cost. But I suspect California and Washington have somewhat high medical costs, so if you look for a state with lower costs, it could be reasonable in the future.
You could probably take a class at a local college and get the student health insurance (probably with requirement to use the student health center for routine health care).

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Re: Early Retirement - what to do about healthcare?

Post by knpstr » Sat Mar 18, 2017 5:14 pm

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


It would be unlikely that you need the full $28,000 each and every year. If you did, get a plan with a lower deductible.
My wife and I have a combined premium expense of $665/mo with bronze plans, so about $8,000 per year.
However, you can offset some cost by using a HSA; in both tax deduction sense and the tax free money to pay expenses. If we get a deduction of $1,000 on contributions our effective cost for insurance is now $7,000. With counting our HSA contributions of $6,800 our total health care "costs" come in at $14,800-1000= $13,800 per year.
Counting this expense we have total living expenses of about $50,000/year, which equates to a $1.25M nest egg needed.
Subtract rental cash flow of $26,000... we have a difference of $24,000 or $600,000 nest egg needed.

Not everyone lives in a HCOL area.

This is how people (can) retire early without having 3 or 4 million in the bank.
:beer
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Watty
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Re: Early Retirement - what to do about healthcare?

Post by Watty » Sat Mar 18, 2017 5:18 pm

JDCarpenter wrote:
Jackson12 wrote:While the OP has some time before this is likely to become an issue, how are people factoring in long-term health care costs, especially if longevity runs in the family?

...


For us, it will be paid out of portfolio, just like everything else. If we both are in LTC at the same time, we'll have essentially no other expenses (except taxes on amounts being taken out of Roths + 85% of social income)


Hearing that LTC might cost $100K a year in an expensive area sounds like a lot but if your normal retirement budget was $80K a year then the gap is not as large at sound. Home equity is our safety net. We don't have a real expensive house but it is worth enough that the money equity could fill that gap for a lot longer than we could realistically expect to spend in long term care.

The big risk for us is that long term care will be needed while we are both still alive.

Where you live makes a huge difference too.

I live in Georgia where the costs are relatively low, about $75K a year according to this web site.

https://www.genworth.com/about-us/indus ... -care.html

That is not a lot more than our planned retirement budget and Social Security will cover a lot of that.

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

Post by Watty » Sat Mar 18, 2017 5:35 pm

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


It would be unlikely that you need the full $28,000 each and every year. If you did, get a plan with a lower deductible.
My wife and I have a combined premium expense of $665/mo with bronze plans, so about $8,000 per year.
However, you can offset some cost by using a HSA; in both tax deduction sense and the tax free money to pay expenses. If we get a deduction of $1,000 on contributions our effective cost for insurance is now $7,000. With counting our HSA contributions of $6,800 our total health care "costs" come in at $14,800-1000= $13,800 per year.
Counting this expense we have total living expenses of about $50,000/year, which equates to a $1.25M nest egg needed.
Subtract rental cash flow of $26,000... we have a difference of $24,000 or $600,000 nest egg needed.

Not everyone lives in a HCOL area.

This is how people (can) retire early without having 3 or 4 million in the bank.
:beer


Another way to look at the math is that if you could retire at 55 except for the need to pay for health care than you could work two more years.

In oversimplified made up numbers than might allow you to save another $14,000($28K) a year, and not spend $70,000($140k) a year from your savings. That would put you ahead by $168K, $168K/$28= 6 Years health care costs. At that point you only have 8 years until you are 68 so you are just about good to retire. You could do much more detailed modeling but even a small delay in your retirement date can make a big impact.

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

Post by burt » Sat Mar 18, 2017 6:13 pm

celia wrote:
burt wrote:The system cannot be fixed until medical "COSTS" are addressed.

Our Medical System is broken.

bligh wrote: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

But this should be qualified.

Each country is likely reporting different things that are included in this number. For example, in the U.S. we have a lot of medical research, agencies like the Centers for Disease Control, local and state health agencies, and rebuilding of medical infrastucture. (In California, all the hospitals are being retrofitted or being rebuilt so they can withstand tighter earthquake regulations. They have to be able to continue their operations during and after the "big one".) How many other countries have these "medical" expenses? I have been in ERs in Europe where they don't even have screens on the open windows so the insects come in. I consider that pretty basic and simple to fix, but they don't do it. (I was lying on the examining table waiting for the doctor one time while I watched a spider walk across the ceiling above me.)

We also have one of the longest life expectancies in the world.

So you might want to take the total picture into account if you decide to move.


Regarding "USA having one of the longest life expediencies in the world."
USA appears to be #31.
https://en.wikipedia.org/wiki/List_of_countries_by_life_expectancy

However USA is #1 for health care expenses.
We're Number 1 !

burt

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Re: Early Retirement - what to do about healthcare?

Post by blueberry » Sat Mar 18, 2017 6:33 pm

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



Rarely discussed, but individual health insurance had all but disappeared in my state pre ACA, and I'm afraid that could happen again. I guess I'll move to Mexico (pfft pfft) or Canada (brrrr) if that happens again, and I'll take all who are willing with me.

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Re: Early Retirement - what to do about healthcare?

Post by randomguy » Sat Mar 18, 2017 7:27 pm

Watty wrote:
JDCarpenter wrote:
Jackson12 wrote:While the OP has some time before this is likely to become an issue, how are people factoring in long-term health care costs, especially if longevity runs in the family?

...


For us, it will be paid out of portfolio, just like everything else. If we both are in LTC at the same time, we'll have essentially no other expenses (except taxes on amounts being taken out of Roths + 85% of social income)


Hearing that LTC might cost $100K a year in an expensive area sounds like a lot but if your normal retirement budget was $80K a year then the gap is not as large at sound. Home equity is our safety net. We don't have a real expensive house but it is worth enough that the money equity could fill that gap for a lot longer than we could realistically expect to spend in long term care.

The big risk for us is that long term care will be needed while we are both still alive.

Where you live makes a huge difference too.

I live in Georgia where the costs are relatively low, about $75K a year according to this web site.

https://www.genworth.com/about-us/indus ... -care.html

That is not a lot more than our planned retirement budget and Social Security will cover a lot of that.


The problem is when there are 2 of you. You have a 100k budget and one hits the home for 100k/year. Now you need say 160k/yr. Or if both of you hit the home you are talking 200k.

The other issues is that long term care can be long term. Most people are there <3 years (i.e. a large but manageable amount of money). But the outliers go 10+ years (i.e. might be more than you can afford). And a lot of long term insurance is limited these days to things like 5 years so it really doesn't protect you against the extreme cases.

Personally I will figure either my accounts will have grown absurdly large (unavoidable if you start with a conservative 3-4% SWR) or I will take my chances with medicaid if I have been in the home for 10+ years. Most places will not kick you out if you came in as a paying patient for years prior.

Jackson12
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Re: Early Retirement - what to do about healthcare?

Post by Jackson12 » Sat Mar 18, 2017 9:09 pm

randomguy wrote:
Watty wrote:
JDCarpenter wrote:
Jackson12 wrote:While the OP has some time before this is likely to become an issue, how are people factoring in long-term health care costs, especially if longevity runs in the family?

...


For us, it will be paid out of portfolio, just like everything else. If we both are in LTC at the same time, we'll have essentially no other expenses (except taxes on amounts being taken out of Roths + 85% of social income)


Hearing that LTC might cost $100K a year in an expensive area sounds like a lot but if your normal retirement budget was $80K a year then the gap is not as large at sound. Home equity is our safety net. We don't have a real expensive house but it is worth enough that the money equity could fill that gap for a lot longer than we could realistically expect to spend in long term care.

The big risk for us is that long term care will be needed while we are both still alive.

Where you live makes a huge difference too.

I live in Georgia where the costs are relatively low, about $75K a year according to this web site.

https://www.genworth.com/about-us/indus ... -care.html

That is not a lot more than our planned retirement budget and Social Security will cover a lot of that.


The problem is when there are 2 of you. You have a 100k budget and one hits the home for 100k/year. Now you need say 160k/yr. Or if both of you hit the home you are talking 200k.

The other issues is that long term care can be long term. Most people are there <3 years (i.e. a large but manageable amount of money). But the outliers go 10+ years (i.e. might be more than you can afford). And a lot of long term insurance is limited these days to things like 5 years so it really doesn't protect you against the extreme cases.

Personally I will figure either my accounts will have grown absurdly large (unavoidable if you start with a conservative 3-4% SWR) or I will take my chances with medicaid if I have been in the home for 10+ years. Most places will not kick you out if you came in as a paying patient for years prior.


. I agree that long term insurance is risky: permiums can soar and there are outliers who live longer than a few years in a nursing home. But if a couple needs the funds, can't save enough to self- insure and won't qualify for Medicaid, the insurance is an option.

I do know people already benefiting from it.

Also, if you buy long- term insurance that qualifies as State Partnership plans (which are generally equal or superior to the usual long term care plans) , you get dollar for dollar asset protection while still qualifying for Medicaid.

So let's say you purchased $200,000 or $300,000 of insurance ( individually or as a couple) .If all the benefits are used....$200,000 or $300,000 - or whatever- any remaining assets ( a house, CDs, equities, whatever) are protected dollar for dollar and do not have to to be depleted to meet Medicaid eligibility.

Another factor is a family history of longevity. That happens to be the case in my family . While one parent died at 83, another lived till nearly 100 as did a grandparent and an aunt lived till 101. Another aunt ( maternal side) lived till 100.. Same history of longevity with my spouse, with the exception of a great grandparent.

Given those odds, shoukd we roll the dice? We're putting aside funds for long term health care.


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

Post by celia » Sun Mar 19, 2017 1:20 am

burt wrote:Regarding "USA having one of the longest life expediencies in the world."
USA appears to be #31.
https://en.wikipedia.org/wiki/List_of_countries_by_life_expectancy

OK. That's the page I was looking at too, but I was looking at the graph at the top of the page. Not all countries are shown on it, and we're not the highest, but we're near the top.

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Re: Early Retirement - what to do about healthcare?

Post by sawhorse » Sun Mar 19, 2017 1:33 am

celia wrote:
burt wrote:Regarding "USA having one of the longest life expediencies in the world."
USA appears to be #31.
https://en.wikipedia.org/wiki/List_of_countries_by_life_expectancy

OK. That's the page I was looking at too, but I was looking at the graph at the top of the page. Not all countries are shown on it, and we're not the highest, but we're near the top.


I would certainly hope we'd be ahead of the countries we're ahead of. You have to look at the countries we're behind. We're behind Slovenia, Greece (high smoking rate and drinking rate for both countries), Costa Rica, and Chile. Australia, which has a similar obesity rate as United States, even higher according to some studies (the super toned surfer image is far from reality), is 4th. So you can't blame it on American lifestyle.

We're only one spot ahead of Cuba for goodness sake.

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Re: Early Retirement - what to do about healthcare?

Post by ge1 » Sun Mar 19, 2017 6:21 am

In our own early retirement plans, that is exactly what I budget for, i.e. 2k per month for health care expenses. Thankfully so far we are very healthy, but should that change our plans may have to change as well.

Regarding all the comments about cheap health insurance in Europe: I spent some time in Switzerland and whilst the health care is first class, it's very expensive as well and you would easily spend over 1k per month on premiums for a family.

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Re: Early Retirement - what to do about healthcare?

Post by Nick341981 » Sun Mar 19, 2017 8:21 am

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


Mr. Money Mustashe
Rootofgood
Wherewebe

That's 3 different examples of people who did it with less than a million and the first 2 examples have kid/kids. I don't know any of them personally of course but if they are not lying on their blogs all three seem to be doing pretty good.

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Re: Early Retirement - what to do about healthcare?

Post by hicabob » Sun Mar 19, 2017 8:25 am

sawhorse wrote:
celia wrote:
burt wrote:Regarding "USA having one of the longest life expediencies in the world."
USA appears to be #31.
https://en.wikipedia.org/wiki/List_of_countries_by_life_expectancy

OK. That's the page I was looking at too, but I was looking at the graph at the top of the page. Not all countries are shown on it, and we're not the highest, but we're near the top.


I would certainly hope we'd be ahead of the countries we're ahead of. You have to look at the countries we're behind. We're behind Slovenia, Greece (high smoking rate and drinking rate for both countries), Costa Rica, and Chile. Australia, which has a similar obesity rate as United States, even higher according to some studies (the super toned surfer image is far from reality), is 4th. So you can't blame it on American lifestyle.

We're only one spot ahead of Cuba for goodness sake.


It seems to me that the best healthcare in the world is available in the US but we get by far the worst value for our countries total healthcare spending. Interesting how that developed in such a capitalistic/free market advocating country but it's certainly not very "bogleheady".

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Re: Early Retirement - what to do about healthcare?

Post by Lynette » Sun Mar 19, 2017 9:13 am

I was born overseas but have lived in the US for over 35 years. I would caution anyone who wants to live overseas for cheap medical insurance so that you can retire early. Most of the countries where I would like to live probably won't want me unless I can prove that I have considerable financial assets. For other developing countries, one has to consider what type of social life/security etc you will have. Unless one has lived overseas in the country where you want to live, I would suggest that you try living there first. Also learn the language and culture.

I had dual nationality but dropped it as the financial aspects were too burdensome. I had to prepare tax returns for both countries and the tax laws are different. For example, capital gains are taxed differently. If you purchase a property overseas, what are you going to do if you ever want to return to the US. Will you be allowed to bring back the capital. If you die overseas, what are the inheritance laws?

If you do not have sufficient funds to pay for potentially huge medical costs in early retirement, I would advise working till 65 when you can go onto medicare. Even that isn't cheap. I pay more now that I am on medicare than when I was employed.

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Re: Early Retirement - what to do about healthcar

Post by Jackson12 » Sun Mar 19, 2017 2:28 pm

Nick341981 wrote:
sox2017 wrote:I'm stumped at how anyone retires early unless they have 3 or 4 million in the bank.


Mr. Money Mustashe
Rootofgood
Wherewebe

That's 3 different examples of people who did it with less than a million and the first 2 examples have kid/kids. I don't know any of them personally of course but if they are not lying on their blogs all three seem to be doing pretty good.


Yes, they do pretty good if you can live on their budget. I'll use Mr. Money Mustache as an example.

I follow Mr. Money Mustache, have learned a great deal from his blog ( but see caveats below) and will check out the other 2 blogs. Mr. Money Mustache has made life choices that others here might either find difficult or impossible, depending on where they live , it would be difficult to find a place to live and keep expenses as low as his.

Hi family ( himself, wife, kid) lived on a bit over $25,000 a year,in 2013 and 2014 . If not for a home renovation and other one time expenses they would have lived on a bit over $19,000
In 2013 and a bit over $ 16,000 in $2014

I'm assuming that is their retirement budget. And he must be accumulating some incredible savings.

How many here can do that? It's poverty wages. I envy that low budget. I just can't see living on that in retirement at age 33.or at any age.. .unless I could take a reasonable draw from savings and know I wouldn't outlive my assets.

The Mustache family makes a large batch of inexpensive lunches - and eats the same exact lunch every day Try doing that yourself or getting your kids to go along with that,
Groceries are a large part of most people's budget ( there have been several threads here about trying to cut grocery budgets )

And even with their frugal lifestyle, it's a huge chunk of the Moustache budget.They eat organic food.

Health care expenses are extremely low.. Insurance is low.

He can handle even large home maintenance tasks himself..which certainly saves significant money. Example: He installed his own furnace.
Actual electric use: $24. ( monthly)
Fixed line charge from electric company: $10 ( monthly)
Actual Natural gas use: $35 ( monthly)
Fixed monthly charges from gas company: $15
Water (mostly fixed charges): $20 ( minthly)
They used only $300 for a cell phone( entire year).

No cable tv.

Their auto used only 2 tanks of gas in 2014. How many here can duplicate that? Did they use an electric car? Bike everywhere?

They do 2 loads of laundry a week and hang much of it to dry rather than using a dryer. They purchase very few clothes .

They take 2 showers a week.

They rarely eat out. Like almost never. Except when on vacation. And they do fake vacations.

So.. Yes, it's possible for them.

Is it possible for most? . Is it a lifestyle I'd want? Only out of necessity . We'd have to make significant changes. We'd have to move elsewhere. Leave our community, our friends.

And keep in mind that at this point , the blog itself is a security net and brings in a fair amount of money ( at least, as I understand it) Updates to that are frequent. Is that retirement savings ? It produces significant money. Whether it is used as income or saved saved or donated.... I have no idea.

Again, I envy that budget. And could never duplicate it in retirement. Except if necessary..and probably not without significant deprivation of basic needs.

i
Last edited by Jackson12 on Tue Mar 21, 2017 11:36 am, edited 2 times in total.

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Re: Early Retirement - what to do about healthcare?

Post by Artsdoctor » Sun Mar 19, 2017 3:12 pm

sox2017 wrote:Thanks for the replies.....not an easy topic to factor into LT planning. Things will probably look drastically different in 5 or 10 years from now, so in my situation, the best advice is probably similar to other personal finance advice.....save more, spend less, invest for the LT


Sox,

You are right to consider this topic, and you'd be smart to keep an eye on how this evolves.

But the fact is, and will continue be, that access to healthcare will be extremely volatile going forward. As was stated earlier, there are two questions: (1) will I have access to healthcare, and (2) how much will it cost? There was a time not long ago when people were simply forced to work in a job that provided healthcare, period. They would have been happy to pay anything on the individual side but did not access to policies at any price.

You're trying to predict where this is going to be in 20 years. There's no way to do this. People are struggling to predict where we're going to be in one year.

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Re: Early Retirement - what to do about healthcare?

Post by GerryL » Sun Mar 19, 2017 3:14 pm

Some years back -- well before ACA -- I discovered that I would be eligible for early retirement from my company by the age of 60. I started planning to retire from that stressful environment and look for a job that would provide subsistance wages but probably nothing extra to add to my retirement savings, which were pretty solid.

My employer did not (and still does not) offer healthcare benefits to retirees. When I played with the numbers, I realized that healthcare was going to be a major problem. Very expensive ... if I could even get anyone to insure me. I talked myself out of taking early retirement and decided to plow ahead at the same company as long as I could keep my job (through several job actions that followed). I predicted that if we ever got any kind of universal coverage in the US, it would be after I was already eligible for Medicare.

So, how did it turn out? The projected month of my early retirement would have been October 2008, when the economy was in free fall and I probably could not have found the fall back job I would have needed. And the ACA online insurance marketplace opened the month I became eligible for Medicare.

So, think about early retirement and periodically run the numbers as the different factors (especially healthcare) change, but avoid psyching yourself into a specific target date. And keep saving and nurturing your employability.

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Re: Early Retirement - what to do about healthcare?

Post by burt » Sun Mar 19, 2017 3:22 pm

hicabob wrote:
sawhorse wrote:
celia wrote:
burt wrote:Regarding "USA having one of the longest life expediencies in the world."
USA appears to be #31.
https://en.wikipedia.org/wiki/List_of_countries_by_life_expectancy

OK. That's the page I was looking at too, but I was looking at the graph at the top of the page. Not all countries are shown on it, and we're not the highest, but we're near the top.


I would certainly hope we'd be ahead of the countries we're ahead of. You have to look at the countries we're behind. We're behind Slovenia, Greece (high smoking rate and drinking rate for both countries), Costa Rica, and Chile. Australia, which has a similar obesity rate as United States, even higher according to some studies (the super toned surfer image is far from reality), is 4th. So you can't blame it on American lifestyle.

We're only one spot ahead of Cuba for goodness sake.


It seems to me that the best healthcare in the world is available in the US but we get by far the worst value for our countries total healthcare spending. Interesting how that developed in such a capitalistic/free market advocating country but it's certainly not very "bogleheady".


Regarding "It seems to me that the best healthcare in the world is available in the US..."

You are correct... if you can afford it.
Many VIP's across the globe come to the US for healthcare.... but only if they pay cash.

burt

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

Post by JohnnyO » Sun Mar 19, 2017 4:29 pm

Well this is much like blind gambling....

Retired at 52, this year. I have opted for COBRA for next 18 months which is going to cost $500 a month, pretty solid high deductible plan. The marketplace had plans in my state for a little more say $550 a month with less benefits, but still affordable. I have no plans to go back to work, but life could throw a curve ball and insurance is really the only thing out there that will remain an unknown for the next 13 years at least.

We live beneath our means and are prepared for increased costs in the future but if it gets to out of hand then we will have to re-evaluate it.

Leap of faith, trust in retirement plan, stay healthy.... :sharebeer

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Re: Early Retirement - what to do about healthcare?

Post by sawhorse » Sun Mar 19, 2017 5:35 pm

burt wrote: Regarding "It seems to me that the best healthcare in the world is available in the US..."

You are correct... if you can afford it.
Many VIP's across the globe come to the US for healthcare.... but only if they pay cash.

burt

Yup. We hear about long wait times in other countries while forgetting that in the United States some people get treated sooner, but others wait literally forever because they can't afford it.

Like I said in another thread, I was trying to help a young boy from Europe come to Memorial Sloan-Kettering for treatment not available in his country. MSKCC demanded over $500k up front, several times what they were willing to accept from insured Americans. They would not budge at all. It was an awful situation because they led on the family by telling them that a discount could be worked out. They said this over and over again. They were happy to accept the family's money for a battery of preliminary tests (at a highly inflated price). Then they suddenly refused to budge on the price.

Needless to say the young boy died while his family was frantically trying to raise money. During this time, the boy had to stop the treatment available in his country at the request of MSKCC. The parents are tormented by the question of whether he might have survived had he not stopped that treatment.

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Re: Early Retirement - what to do about healthcare?

Post by marcos123 » Sun Mar 19, 2017 8:15 pm

Great thread.

A few folks here have suggested moving abroad for the sole purpose of retiring early with affordable health care.

I would advise against letting the healthcare cost tail wagging the overall move - or ER - dog.

Having said that, if you otherwise intend to live in a particular region, or country, say by having previously worked or lived there, then that may still be a better option, once you do the research - and plan accordingly.

Personally speaking, I early retired to South America at the age of 40 just over a decade ago. I certainly didn't do so for the universal care here (Brazil) or its cost (free). However, the private insurance market was much better than what I had been experiencing then in the US. In NYC at that age and in perfect health I was paying monthly premiums of just over $1,000 a month. Even now, with all the accumulated local inflation factored in, I am still paying considerably less than that, with access to top private local hospitals, with zero out of pocket for deductions or co-pays.

Every five years, until age 59, on top of an annual premium increase due to medical inflation, there is an age-based increase specified in the contract (ranging from 10%- 25%). After age 59 the age-based premium adjustments cease- but the final increase in the contract calls for a whopping 70%. So for the last decade - still post ER here - I have been planning for that eventual huge hit in medical expense. I opted to invest in local Zero Coupon Bonds in order to eventually get to the increase in capital necessary at that age to be within my safe withdrawal rate.

Bear in mind that for expats, unless you plan to travel regularly back to the US, or make a definitive move back, Medicare will be pretty much useless once you hit 65. I personally intend to opt out of Part B once I become eligible. If I had intended to move back, or to utilize the US health care system for something serious, then I suspect that I would be able to extract substantial health care savings at that point for selecting a basic local private plan. However, that is not my intention and I am planning/investing for the higher-cost local alternative - that is, zero Medicare.

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Re: Early Retirement - what to do about healthcare?

Post by JaneyLH » Sun Mar 19, 2017 8:27 pm

Saving$ wrote: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.


+1

I was lucky enough to meet a wonderful man in my late 40s who was a Federal employee. He had a guaranteed pension (not available anymore) and full medical for life at the employee rate. I brought a stock portfolio to the mix so we had a nice situation after we got married. Now 6 years after his retirement at 55 we pay about $400/month for decent Blue Cross insurance.

Of course, we realize that this is subject to change. :happy

cmdreset
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Re: Early Retirement - what to do about healthcar

Post by cmdreset » Sun Mar 19, 2017 9:49 pm

MMM has some good discussion on his site about his approach to healthcare - as of 2012 he got a plan through ehealthinsurance

Bear in mind MMM is Canadian and so he admits he always has a back-up plan if something catastrophic happens. Pre-ACA he would have been one diagnosis or accident away from poverty if he didn't have his Canadian citizenship to back him up.

It is hard to predict what will happen, but it is probably a safe bet that insurance costs are only going to go up beyond the rate of inflation for the foreseeable future.

Jackson12 wrote:
Nick341981 wrote:
sox2017 wrote:I'm stumped at how anyone retires early unless they have 3 or 4 million in the bank.


Mr. Money Mustashe
Rootofgood
Wherewebe

That's 3 different examples of people who did it with less than a million and the first 2 examples have kid/kids. I don't know any of them personally of course but if they are not lying on their blogs all three seem to be doing pretty good.


Yes, they do pretty good if you can live on their budget. I'll use Mr. Money Mustache as an example.

I follow Mr. Money Mustache, have learned a great deal from his blog ( but see caveats below) and will check out the other 2 blogs. Mr. Money Mustache has made life choices that others here might either find difficult or impossible, depending on where they live , it would be difficult to find a place to live and keep expenses as low as his.

[SNIP]

i

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Re: Early Retirement - what to do about healthcare?

Post by Barefootgirl » Sun Mar 19, 2017 9:55 pm

This has got to be one of the all time most insightful threads I've ever read here in the forum. People tackling an issue from all angles, rather than tackling each other or the premise itself...the issue strikes a common nerve perhaps. I am bookmarking this. Thanks all.
How many retired people does it take to screw in a lightbulb? Only one, but he takes all day.

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Re: Early Retirement - what to do about healthcare?

Post by jebmke » Mon Mar 20, 2017 12:02 am

sawhorse wrote:Yup. We hear about long wait times in other countries while forgetting that in the United States some people get treated sooner, but others wait literally forever because they can't afford it.

In my area you just wait because of appointment availability. I never had to wait more than a day in Belgium or Netherlands.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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Re: Early Retirement - what to do about healthcare?

Post by JDCarpenter » Mon Mar 20, 2017 7:55 am

Artsdoctor wrote:...

You're trying to predict where this is going to be in 20 years. There's no way to do this. People are struggling to predict where we're going to be in one year.


Quite true. We opted out of my all-encompassing, nearly free to me, work plan this year--enrolled under DW's average-at-best, expensive to us, plan. Why? My employer is too small for COBRA and the 18 months on DW's will take us all the way through 2018 (at over 2K a month for HDHP.)

Now, fingers crossed that her group plan will not exclude spouses again in 2018. (Did so a couple years ago for underwriting issues....) :oops:
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