Should/Could I semi-retire now, and question about medical insurance until 65?

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Animal Lover
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Should/Could I semi-retire now, and question about medical insurance until 65?

Post by Animal Lover » Mon Feb 11, 2019 12:28 am

I’d like to know if you were in my shoes, would you feel financially secure enough to give up a high income job now? I’m 59. I have about $800k in a 401k. (Almost all of these funds are in a VG account.) I will not have a pension. I have about $125k in cash. I own two homes with no mortgages. One home generates $1,100 a month in rent. I have no debt. I am single with no kids. I spend 50 hours or more a week at work in a high-stress job running a busy operation and earning $132k a year. But I have no life. And I am considering quitting and semi-retiring. I suspect my semi-retirement income would be about $35k a year. My Vanguard personal advisor has advised me not to quit my job. He wants me to continue to work until at least 62 and not draw SS until full retirement age. If he had his way, he’d have me working until full retirement age and not collecting SS until 70. I think he’s nuts. If you were in my shoes, would you semi-retire now? And my second question is, what do semi-retired or retired people in my situation do about health insurance until Medicare kicks in. If I semi-retire, I’m looking at about five years of financing healthcare. Any ideas? Thanks everyone.

123
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Re: Should/Could I semi-retire now, and question about medical insurance until 65?

Post by 123 » Mon Feb 11, 2019 1:24 am

If someone stops working they can often continue their medical coverage under COBRA for 18 months. They have to pay the full cost of the insurance (no employer subsidy) plus a handling charge. California extends COBRA in many cases by another 18 months if you're a qualifying resident of California, I don't know about other states. Other than that there may be private insurance or coverage under the Affordable Care Act available in your state. Costs and availability of medical insurance if the biggest issue for those that stop work before they are eligible for Medicare.

You didn't indicate the value of the two homes you own without mortgages. Depending on your state and the value of those properties they could potentially assist you in covering the costs of healthcare prior to Medicare. I wouldn't stop working until I had figured it all out. Healthcare is in a state of flux and availability health insurance could be your biggest financial issue. Maybe coverage under the Affordable Care Act would work for you, you may want to check those out so you have an idea of the potential costs.
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NoblesvilleIN
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Re: Should/Could I semi-retire now, and question about medical insurance until 65?

Post by NoblesvilleIN » Mon Feb 11, 2019 8:08 am

Do you have the option to go part-time at your current company and still keep your health insurance? That is what I did for 3 years prior to fully retiring December 31st. The company I worked for offered health insurance as long as you worked 24 hours or more per week (scheduled). I decided that 27 hours worked for me (3 x 9). This did a couple of things for me. 1) The income was enough that we didn't have to tap into savings. 2) We still had group health (DW's company was too small to offer insurance). 3) It allowed me to practice "retirement" and confirmed that I could productively fill my days. One caveat, I felt the need (self inflicted, no pressure from manager) to make myself available on days off. I would check emails at lunch and respond when needed. Also I sometimes would work up to a half a day when needed (not compensated). For a couple of years before I pulled the plug, I would go to healthcare.gov and run my numbers for ACA. This gave us a good idea of what to expect health care was going to cost us.

JBTX
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Re: Should/Could I semi-retire now, and question about medical insurance until 65?

Post by JBTX » Mon Feb 11, 2019 8:52 am

before throwing in the towel I'd maybe explore taking a leave of absence and see how you feel. Explore jobs elsewhere that aren't as stressful. Also further explore consulting / contracting options.

I dont have good advice on the medical. It is a risk, and is in a state of Flux. I would not bank on. Wing able to get an affordable ACA policy down the road

student
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Re: Should/Could I semi-retire now, and question about medical insurance until 65?

Post by student » Mon Feb 11, 2019 8:58 am

As others have said, the value of your two houses is important. The key point is health insurance. Personally, I would probably try to hang on until 62 and the look at the numbers again.

Shallowpockets
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Re: Should/Could I semi-retire now, and question about medical insurance until 65?

Post by Shallowpockets » Mon Feb 11, 2019 9:05 am

I don't understand why a person making 132k only has 800k plus 125k cash in the absence of mortgages on two houses and income from a rental? Are you in a HCOL area? How long has this income been, or are you only now up to 132k?
Surely 132k per year would allow a single person (no debt) to sock away a lot of money on the road to retirement.
Are you house poor due to paying mortgages on two properties?
I see a big hole here in the overall financial picture.

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RickBoglehead
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Re: Should/Could I semi-retire now, and question about medical insurance until 65?

Post by RickBoglehead » Mon Feb 11, 2019 9:10 am

We'd love to retire now. Healthcare is the big reason we're holding out another 2 or so years, because DW would qualify for coverage from the state for ~$1,400 a month until Medicare, ~$965 when she's on Medicare and I'm not, and ~$400 when we're both on Medicare. Have to hit the 10 year mark which is basically 2 years from now.

From what I read, people are paying 75 - 100% more than this for worse coverage, so we're waiting.
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260chrisb
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Re: Should/Could I semi-retire now, and question about medical insurance until 65?

Post by 260chrisb » Mon Feb 11, 2019 9:12 am

I like where you are and I'm at a similar point and similar situation just a couple years younger. Can you live on 35K a year? Sounds like it. Where does that money come from? So, work until 60 while you save up some more cash. Do COBRA from work for the year and a half if it makes financial sense and buy insurance on the market for the next 4.5 years. I'm doubting your going to need the money as you draw from your 401K but who's to say you couldn't sell the rental house and use those proceeds to live on. I saved to spend and live and not to leave. While I'll certainly leave something to somebody I'm going to use my savings to early retire and it seems to me having 800-900K or more (which you will) is enough especially since you have other assets and cash as I do. I like the feeling of "getting a life" as my last years of work approach. I'm sure the last one will be reassuring as you get near 60.

J295
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Re: Should/Could I semi-retire now, and question about medical insurance until 65?

Post by J295 » Mon Feb 11, 2019 9:16 am

Animal Lover » Sun Feb 10, 2019 11:28 pm

.... I spend 50 hours or more a week at work in a high-stress job ...... But I have no life. And I am considering quitting and semi-retiring. .... If you were in my shoes, would you semi-retire now? And my second question is, what do semi-retired or retired people in my situation do about health insurance until Medicare kicks in
Would like to know home values and overall expenses to help with the financial decision. Pending that info .....

I would definitely look at part time or any other transition. High stress and "no life" tell me all I need to know about your situation.

FWIW, I am married with three adult children and I transitioned from full time to part time at 53, and eventually to no time. I left the firm in which I was one of the partners in my peak earning years. I'm 59 now. Great outcome and zero regrets.

Health insurance? We have been on the Affordable Care Act many years now. This past year we managed modified adjusted gross income and had the full $24k of premiums covered by the premium tax credit. Take a look at the many posts on this forum about the ACA and the kaiser website to determine MAGI cliff and other info on your particular state. No guarantees for sure going forward, but we're fine living with that unknown.

Sorry that you are experiencing so much stress, and hope you can navigate to a much better environment going forward.

PaunchyPirate
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Re: Should/Could I semi-retire now, and question about medical insurance until 65?

Post by PaunchyPirate » Mon Feb 11, 2019 9:31 am

Animal Lover, do you reliably know how much money you need per year to live the way you wish to live after retirement? I tracked my spending for 2 years in great detail to fully understand how much I was spending on everything before I pulled the trigger on early retirement. I live in a low-cost-of-living area, so I can keep my expenses pretty low if I wish to.

Medical Insurance is the big unknown. My former company had an HR website with all of our benefit information on it. That website told me what my costs would be for continuing my existing insurance through the 18-month COBRA period that is required by law. I also am single with no kids. My cost was going to be just over $900 per month to continue my current plan. You might try to track down this number if you can. HR probably has to tell you if you ask, but that could reveal your thinking to them. I compared COBRA to what I could purchase on my own. I would start with the healthcare.gov website (this is the ACA (Obamacare) exchange) and research your options. You can enter your age and location and whether you smoke or not and find the exact price you would pay if you purchase through the site. You don't need to fully create an account to find this information. Just pretend you need insurance due to loss of a job and answer the questions based on that. Even if you don't qualify for government subsidies, you can still purchase a plan through the website. But you can also approach insurance companies that sell policies in your location directly. In my case, the only ones that sell to individuals in my county are the same ones that were on the ACA website and they sold at the same unsubsidized price. I recommend you buy an ACA-compliant policy even if you don't buy it thru the ACA website. But there are some alternatives which could save you money (but also offer more risk/less benefits). I eventually selected an $850 per month policy through the ACA website. Lower cost plans were available (with lower benefits, of course).

My investments are larger than yours. My investment dividends and interest will bring in almost enough money for my planned expenses, including healthcare, so I should not have to pull too much money from my investments to live on. You should research the various web-based tools that are out there to help you determine if you have enough money to meet your annual expenses for rest of your life.
Last edited by PaunchyPirate on Mon Feb 11, 2019 10:02 am, edited 2 times in total.

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Watty
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Re: Should/Could I semi-retire now, and question about medical insurance until 65?

Post by Watty » Mon Feb 11, 2019 9:49 am

The big question is what your expenses are.

The other is what you houses are worth.

Yet another is what your Social Security benefit will be at your full retirement age if you stop working today.

Some small companies are not required to offer COBRA so one thing to find out is if your company is large enough to be required to offer COBRA. One advantage of COBRA is that you will not have to change your doctors or start your 2019 deductible again.

Be sure to check the COBRA rules for your state. There are a few that require 36 months instead of 18 but they might call it something different. If you leave your job in the middle of the summer then 18 months of COBRA will get you through the rest of 2019 and all of 2020.

One thing to know is that some, but not all, companies will pay health care through the end of the month when you terminate. That means that if your last day is the 1st of the month you may get an extra months healthcare compared to if your last day was the last day of the month.

I know someone that retired earely but was concerned about healthcare so they went back to work for a few months then quit again as soon as they turned 63.5 so that 18 months of COBRA would get them to medicare.

What to do really depends on the rest of your details. I am married but I did retire at about your age and the similar assets and it is working out fine so it may be possible. I do live in a relatively low cost of living and low tax area which helps.

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happysteward
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Re: Should/Could I semi-retire now, and question about medical insurance until 65?

Post by happysteward » Mon Feb 11, 2019 9:57 am

run your numbers at firecalc.com, test different assumptions, and see the reults...it is purely a number crunching exercise but for me at least very helpful...
"How much money is enough?", John Rockefeller responded, "...just a little bit more."

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Re: Should/Could I semi-retire now, and question about medical insurance until 65?

Post by FoolMeOnce » Mon Feb 11, 2019 10:14 am

The answer could be absolutely! Or not even close! Or somewhere in between. Nobody can say unless you tell us what your annual expenses are.

Home values, ability to downsize if necessary, future SS are important, too. And you said the monthly rent you get from one property, but what is the monthly cash flow from it after taxes/insurance/maintenance/vacancies? The rent without that info is meaningless. You can't get any worthwhile advice without providing this info, especially your annual expenses.

Topic Author
Animal Lover
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Re: Should/Could I semi-retire now, and question about medical insurance until 65?

Post by Animal Lover » Mon Feb 11, 2019 11:14 am

REPLY:
Thank you every one for your responses. Most of you seem to think I should stay employed for right now. But here are answers to some questions that came up:

Rental House is worth $125,000.
Primary home is worth $147,000.
Rental Cash Flow after expenses is aprox $800 per month.
I will be living in a low tax state (which also accounts for why my estimated semi-retirement income is so low ($35k a yr).
I will need to do more math to be more specific, but I estimate my monthly expenses in semi-retirement to be about $4,500. I realize I would need to start drawing on my 401k funds if necessary to make ends meet given an estimated $35k semi-retirement income until I draw on SS.

Why just $800K in a 401k with high income some asked? A 13-year marriage took us all over the country and interrupted my career, so my income during those years ranged from $21,000 - $89,000 a year. And during those 13 yers, we had three bad real estate deals. That marriage ended seven years ago and cost me some money. I have been earning over $100k for 7 years. I max out my 401k every year since then to catch up. And I was paying a mortgage. I live very frugally. As said in the original post, no debt. And I have no cable or netflix or any other entreatment device costing me money except for the $50 per month internet bill to use this 9-year old computer. My cell phone plan is as basic as possible costing me $65 a month. I make all my lunches and rarely eat out. As I mentioned in the original post, I have no life. So I have very few friends (no time) which means I don't do much, hence I don't spend much. And because I "live" at work, when I am home, I want to stay home. So I don't go out much. I think you guys get the picture.

Again, thanks everyone for your responses. This is very helpful.

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djpeteski
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Re: Should/Could I semi-retire now, and question about medical insurance until 65?

Post by djpeteski » Mon Feb 11, 2019 11:16 am

Animal Lover wrote:
Mon Feb 11, 2019 12:28 am
My Vanguard personal advisor has advised me not to quit my job. He wants me to continue to work until at least 62 and not draw SS until full retirement age. If he had his way, he’d have me working until full retirement age and not collecting SS until 70.
If he is a paid adviser then he has a vested interest in this. Also this is the typical advice that the industry gives. If a person runs out of money they can complain that their adviser steered them wrong. On the other hand, if a person dies at 71 the only ones left to complain are the heirs. They are not going to because they just got a bunch of money.

The key in all of this is what is your spending like? You don't really outline that and without a bunch of money you could be cutting it very close.

I really like the idea of a different job. Could you get a 60-80K job that you find enjoyable, is far less stress, and offers health insurance? I'd try that first and see what you think. Lets say it takes you 6 months to find a position because you are being picky. You find it, do that for a year, then you are in COBRA range of 62.

Doing a quick calc, you are looking at about 2650 from SS at age 62. Adding the rental income, and another 2500 from your investments, I think a safe income would be about 75K per year. Can you live off of that or less and still have some fun?

Mike Scott
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Re: Should/Could I semi-retire now, and question about medical insurance until 65?

Post by Mike Scott » Mon Feb 11, 2019 11:22 am

As mentioned, health insurance is the biggest unknown.

What about a career switch? Moving to a full time with benefits but lower stress job might be close enough to semi-retiring for a while.

mlipps
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Re: Should/Could I semi-retire now, and question about medical insurance until 65?

Post by mlipps » Mon Feb 11, 2019 11:31 am

An easy way to eyeball the costs of Cobra for the first 18 months is to check your W2. Box 12, code DD, shows employer contributions for health insurance. That # divided by 12 plus your monthly payroll deduction are pretty close to the amount you should expect to pay to keep your employer coverage.

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David Jay
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Re: Should/Could I semi-retire now, and question about medical insurance until 65?

Post by David Jay » Mon Feb 11, 2019 12:28 pm

If you can keep your total reported income (that includes rental income) under $64,000 you can qualify for an ACA subsidy. In my case, that puts a Bronze plan under $100 a month (for a couple - less since you are single). Check that out, it may be the answer to health care for you to age 65.
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billthecat
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Re: Should/Could I semi-retire now, and question about medical insurance until 65?

Post by billthecat » Mon Feb 11, 2019 12:48 pm

Animal Lover wrote:
Mon Feb 11, 2019 11:14 am
REPLY:
I think you guys get the picture.
No need - I just need to look up from my computer, haha. Bad real estate deals too.

Have you modeled out your situation in cfiresim.com or firecalc.com?
We cannot direct the winds but we can adjust our sails.

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