Pre 65 Retirees - Healthcare

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Incognito
Posts: 58
Joined: Mon Oct 15, 2012 9:15 am

Pre 65 Retirees - Healthcare

Post by Incognito » Mon Jun 11, 2018 8:27 am

What is the ballpark Healthcare premium expenses (for 2) until Medicare kicks in? The projected retirement income calculator at work shows in excess of $2000 per month as healthcare premium and that seems really high . How do other bogleheads handle this?

Thanks

Jack FFR1846
Posts: 8068
Joined: Tue Dec 31, 2013 7:05 am

Re: Pre 65 Retirees - Healthcare

Post by Jack FFR1846 » Mon Jun 11, 2018 8:42 am

I've done an ACA check to get an idea since I plan to retire within the next 2 years. Ours was more like $3k a month.
Bogle: Smart Beta is stupid

jebmke
Posts: 8458
Joined: Thu Apr 05, 2007 2:44 pm

Re: Pre 65 Retirees - Healthcare

Post by jebmke » Mon Jun 11, 2018 8:45 am

My preliminary budget for HC when I anticipated retiring early was $1,000 per month per person all-in (insurance, co-pay, uninsured items). At the time I had not anticipated being entitled to retiree health insurance. As it turned out, I stayed working long enough to become eligible so my total cost has been running a bit below the original budget. I'm on Medicare now and my spouse goes on in September. I don't expect the cost to decline significantly from our prior run rate though.
When you discover that you are riding a dead horse, the best strategy is to dismount.

marcopolo
Posts: 1270
Joined: Sat Dec 03, 2016 10:22 am

Re: Pre 65 Retirees - Healthcare

Post by marcopolo » Mon Jun 11, 2018 8:53 am

Incognito wrote:
Mon Jun 11, 2018 8:27 am
What is the ballpark Healthcare premium expenses (for 2) until Medicare kicks in? The projected retirement income calculator at work shows in excess of $2000 per month as healthcare premium and that seems really high . How do other bogleheads handle this?

Thanks
It varies quite bit by state, and even localities. But, $2k/month for 2 people in their late 50s or early 60s is probably middle of the road estimate if you are having to pay full cost of premiums. Have you investigate whether you could manage taxable income (Modified Adjusted Gross Income, MAGI) to become eligible for ACA subsidies?

We are currently on company paid COBRA until the end of the year, and planning to switch to an ACA plan for next year. Assuming current laws stay in place (who knows), we can manage income to stay below the ACA cliff, where the premiums can take a BIG jump.
Once in a while you get shown the light, in the strangest of places if you look at it right.

WhyNotUs
Posts: 1358
Joined: Sun Apr 14, 2013 11:38 am

Re: Pre 65 Retirees - Healthcare

Post by WhyNotUs » Mon Jun 11, 2018 8:56 am

$2200 per month for a $6500 copay in my area. Increasing annually...
I own the next hot stock- VTSAX

Incognito
Posts: 58
Joined: Mon Oct 15, 2012 9:15 am

Re: Pre 65 Retirees - Healthcare

Post by Incognito » Mon Jun 11, 2018 9:45 am

Thanks for the replies. I guess I need to go back to the drawing board and also figure out the strategy to keep the income low so I can be eligible for ACA. I must have terribly underestimated our expenses in retirement - at least until we turn 65.

J295
Posts: 1718
Joined: Sun Jan 01, 2012 11:40 pm

Re: Pre 65 Retirees - Healthcare

Post by J295 » Mon Jun 11, 2018 9:53 am

Yep. ACA for us in our 50s. We keep our MAGI under the cliff to qualify for PTC (modified gross income; premium tax credit).
Kaiser has a nice calculator for planning purposes.

jebmke
Posts: 8458
Joined: Thu Apr 05, 2007 2:44 pm

Re: Pre 65 Retirees - Healthcare

Post by jebmke » Mon Jun 11, 2018 10:01 am

Incognito wrote:
Mon Jun 11, 2018 9:45 am
Thanks for the replies. I guess I need to go back to the drawing board and also figure out the strategy to keep the income low so I can be eligible for ACA. I must have terribly underestimated our expenses in retirement - at least until we turn 65.
It is good to fully understand expenses. I worked on this part of the equation much more than the asset/income side when doing an initial plan. That said, if your plan sustainability depends on subsidized health care you might be too close to the edge.
When you discover that you are riding a dead horse, the best strategy is to dismount.

Carefreeap
Posts: 2421
Joined: Tue Jan 13, 2015 7:36 pm
Location: SF Bay Area

Re: Pre 65 Retirees - Healthcare

Post by Carefreeap » Mon Jun 11, 2018 10:02 am

2k is probably about right. We're less than that right now but fortunately other than a couple of generic meds (and what seems like an annual PT session!) we don't have much out of pocket besides the premiums. I think we're at about $725 for him (59) and about $675 for me (56). I expect those premiums to keep increasing in the 10% range as they have for the last 5 years.

I always said that healthcare would be the new mortgage payment for retirees.

We did consider manipulating our income for ACA subsidies (briefly). For a variety of reasons including ethical, we chose not to. Instead we've been using our low income years to do Roth conversions and cashing out some real estate with big cap gains. In the past we were able to itemize and deduct some of those medical costs. I'm not sure we will be able to itemize in the future.

User avatar
MP123
Posts: 795
Joined: Thu Feb 16, 2017 3:32 pm

Re: Pre 65 Retirees - Healthcare

Post by MP123 » Mon Jun 11, 2018 11:13 am

$1500-$2200 for premiums is about right for two people in their 50s or 60s. That's been increasing at 10-30% a year too depending on the insurer and your location. Also, you need to consider the maximum out of pocket (OOP) which is probably in $14k range for two people. Hopefully you won't hit that every year but it's potentially in addition to your premiums so make an allowance for that.

I'm not sure how long you have to go before Medicare but I wouldn't count on being able to get subsidies for the long term. It's certainly very helpful if you can though.

User avatar
PhysicianOnFIRE
Posts: 408
Joined: Fri Jan 08, 2016 3:46 pm
Location: Up North

Re: Pre 65 Retirees - Healthcare

Post by PhysicianOnFIRE » Mon Jun 11, 2018 11:26 am

If you're reasonably healthy and willing to live with the required attestation of faith and limitations, health sharing ministries can save you a lot of money. A number of self-employed physicians are using these plans instead of traditional health insurance.

Also, catastrophic plans are available without penalty starting next year (or late 2018, really).

:beer
-PoF

BarbK
Posts: 245
Joined: Sun Nov 22, 2009 11:27 am

Re: Pre 65 Retirees - Healthcare

Post by BarbK » Mon Jun 11, 2018 11:30 am

Ours was $1400 per month for an HSA Bronze plan. After doing the math for getting a better plan (Silver), the extra premium negated the lower deductible so took our chances with staying healthy. I don't know if this just applies to Bronze HSA plans, but they combine the deductibles for 2 or more, so we went with separate policies. Our worse case OOP would have been $23400 if one of us met the deductible, and $30K if both of us needed the plan.

I'm on Medicare now but he still have 4 years of paying the full fare. Our cost went down $5k since I went on Medicare.

furwut
Posts: 1345
Joined: Tue Jun 05, 2012 8:54 pm

Re: Pre 65 Retirees - Healthcare

Post by furwut » Mon Jun 11, 2018 11:56 am

Healthcare.gov will give you a more accurate estimate for your location as well as the value of the subsidy if your income is below 400% Federal Poverty Level.

Rupert
Posts: 3788
Joined: Fri Aug 17, 2012 12:01 pm

Re: Pre 65 Retirees - Healthcare

Post by Rupert » Mon Jun 11, 2018 12:06 pm

Incognito wrote:
Mon Jun 11, 2018 9:45 am
Thanks for the replies. I guess I need to go back to the drawing board and also figure out the strategy to keep the income low so I can be eligible for ACA. I must have terribly underestimated our expenses in retirement - at least until we turn 65.
Just to be clear (because lots of people misunderstand what the ACA is and how it works) -- Anyone can buy an ACA policy. You only have to "be eligible for" subsidies.

User avatar
munemaker
Posts: 3562
Joined: Sat Jan 18, 2014 6:14 pm

Re: Pre 65 Retirees - Healthcare

Post by munemaker » Mon Jun 11, 2018 12:19 pm

You have two choices (that I know of): COBRA or ObamaCare.

If you go with ObamaCare, how much you pay depends on your modified adjusted gross income. Use the calculator at https://www.kff.org/interactive/subsidy-calculator/ to get a very close estimate of what you will pay.

My wife and I planned to keep our income down to qualify for the ObamaCare subsidy. We pay $134/month (total - for both of us) for a Silver plan with no deductibles. We do have substantial assets. There are copays for lots of things though, but not everything. We have been on ObamaCare for 18 months and are very pleased.

I will be going on Medicare late this year, and that obviously will result in a significant increase in cost.

The trick is to plan in advance to keep your taxable income down. When I say plan, I mean: 1) have a liquid account (e.g. mmf) to cover your expenses, 2) have your primary holdings in deferred accounts (IRAs, 401k, 403b, etc.) or accounts that don't throw off a lot of income or capital gain distributions, 3) don't take SS or pensions until you and your spouse are on Medicare. If you can do that, you can keep your taxable income low. If not, you will pay the long dollar.
Last edited by munemaker on Mon Jun 11, 2018 1:32 pm, edited 3 times in total.

Spirit Rider
Posts: 9125
Joined: Fri Mar 02, 2007 2:39 pm

Re: Pre 65 Retirees - Healthcare

Post by Spirit Rider » Mon Jun 11, 2018 12:36 pm

munemaker wrote:
Mon Jun 11, 2018 12:19 pm
The trick is to plan in advance to keep your taxable income down.
Hence the value of TLH and substantial capital loss Carryforward and Roth contributions even when in the same or slightly lower tax bracket in retirement. I'm saving > $1K/person/month in ACA premium subsidies and cost sharing reductions.

OnTrack2020
Posts: 297
Joined: Mon Mar 20, 2017 10:24 am

Re: Pre 65 Retirees - Healthcare

Post by OnTrack2020 » Mon Jun 11, 2018 3:32 pm

Incognito wrote:
Mon Jun 11, 2018 8:27 am
What is the ballpark Healthcare premium expenses (for 2) until Medicare kicks in? The projected retirement income calculator at work shows in excess of $2000 per month as healthcare premium and that seems really high . How do other bogleheads handle this?

Thanks
I have been looking at the prices of ACA for our family---we have 4 kids aged 13 through 20. Husband would like to retire in a few years. It is so difficult to estimate at this point. As another poster mentioned, if we can keep our income down, the monthly premiums for our family would run around $400 per month (if receiving the subsidy). However, on some of the plans, the deductible and out-of-pocket max is crazy high. In theory, without the subsidy, we would be paying at least $1,000-$2,000 per month for premiums and another $14,000 per year deductible. We have thought about having husband take SS at 62, and just apply it to healthcare premiums/deductibles. Two of our children should be graduating from college in the next few years and am thinking they will have their own insurance.

The other issue is to price out any meds you take. From what I can tell, and I haven't been able to price it all out, but the prescriptions are not heavily discounted under the ACA, so I'm not sure how much we will pay at this point, but I'm assuming it would be a few thousand a month easily. I don't think I'm way off base here. I took a look at the cost of one of my husband's prescriptions under one of the ACA plans, and it about made my head spin.

I should add that, depending on what state you live in, some states offer very little in the way of ACA plans. I think we have four or five to choose from.

jebmke
Posts: 8458
Joined: Thu Apr 05, 2007 2:44 pm

Re: Pre 65 Retirees - Healthcare

Post by jebmke » Mon Jun 11, 2018 3:57 pm

OnTrack2020 wrote:
Mon Jun 11, 2018 3:32 pm
I should add that, depending on what state you live in, some states offer very little in the way of ACA plans. I think we have four or five to choose from.
This is a good point. When we were planning our return to the US we had a couple of adjacent states in mind. At the time, the ACA didn't exist and I had not determined that I would be eligible for retiree medical. One of the considerations in the choice we made was that the state has a high risk pool so in the even that we were shut out due to pre-existing conditions or any other factor, we knew we had access. If I were planning to retire today or soon, I would still include that criterion in my planning.
When you discover that you are riding a dead horse, the best strategy is to dismount.

JoeRetire
Posts: 1684
Joined: Tue Jan 16, 2018 2:44 pm

Re: Pre 65 Retirees - Healthcare

Post by JoeRetire » Mon Jun 11, 2018 4:08 pm

Incognito wrote:
Mon Jun 11, 2018 8:27 am
What is the ballpark Healthcare premium expenses (for 2) until Medicare kicks in? The projected retirement income calculator at work shows in excess of $2000 per month as healthcare premium and that seems really high . How do other bogleheads handle this?
We pay $274 per month, combined.

User avatar
MP123
Posts: 795
Joined: Thu Feb 16, 2017 3:32 pm

Re: Pre 65 Retirees - Healthcare

Post by MP123 » Mon Jun 11, 2018 5:20 pm

OnTrack2020 wrote:
Mon Jun 11, 2018 3:32 pm
I should add that, depending on what state you live in, some states offer very little in the way of ACA plans. I think we have four or five to choose from.
We have two, both of whom just filed for approval of 30% rate increases for 2019. :annoyed

Availability goes by county, so even within a state there may be big differences in number of insurers. Fortunately we do have a (semi-dormant) state high risk pool that is supposed to become active in counties that have no ACA insurers left.

nguy44
Posts: 53
Joined: Sun Jul 09, 2017 1:52 pm

Re: Pre 65 Retirees - Healthcare

Post by nguy44 » Mon Jun 11, 2018 8:52 pm

Incognito wrote:
Mon Jun 11, 2018 8:27 am
What is the ballpark Healthcare premium expenses (for 2) until Medicare kicks in? The projected retirement income calculator at work shows in excess of $2000 per month as healthcare premium and that seems really high . How do other bogleheads handle this?

Thanks
I used that estimate, and FAs that I have access to through work also used it. We had set aside over $100K for healthcare premiums between now (age 60) and 65. We have gotten lucky since, to save someone else's job, Megacorp put me in the " severance" pool so my health care through 2019 is at employee rates (currently $400/month). Then it is subsided at around 3x employee rates (which we estimate will be currently $1300/month at that time) until Medicare. If I apply all of my severance pay towards premiums we will only have to spend $20K-$25K from our savings for medical expenses before Medicare.

rick0
Posts: 61
Joined: Thu Jan 31, 2013 10:54 pm
Location: WA

Re: Pre 65 Retirees - Healthcare

Post by rick0 » Mon Jun 11, 2018 8:53 pm

Keep your Modified Adjusted Gross Income under 400% of the Federal Poverty Level so you get a subsidy.
This reduces our premiums to about 1/3 of the unsubsidized cost.
State, exact policy and age dependent, of course!

Go into https://www.healthcare.gov and set your income low to see the approximate effect.

More info at: https://www.healthinsurance.org/obamaca ... m-subsidy/

Post Reply