Teacher early retirement insurance considerations

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BashDash
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Teacher early retirement insurance considerations

Post by BashDash »

Hi!
Thank you everyone for helping me in the past! Without BH help I would have never sorted out my hideous 403b fees and discovered the 457 plan.

I'm in my early 40s working in a NY district that teachers have to pay a high percentage 50% ( compared to other local districts) of their health insurance. This is quite costly for family insurance. This continues upon retirement until you reach medicare. I will have 30 years easily at age 55 which is when I can retire and collect the pension. A lot of teachers wait to retire so they can go right into medicare which I think is at 65. I recently calculated for my family insurance it would be 1800$ a month for my current family plan. When I am 55 I will still have a young teenager. Wife has the same job employment situation.

Has anyone been in a situation like this? Retired and worked a part time job that has good insurance? Am I missing something obvious? Just deal with it? Use 403b and 457 money for this? I have been building 403b, 457 and Roth IRA steadily while working.

Thanks!!
Chardo
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Re: Teacher early retirement insurance considerations

Post by Chardo »

Part time jobs rarely come with health insurance.
sailaway
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Re: Teacher early retirement insurance considerations

Post by sailaway »

Can you come and go from this plan? Have you looked at ACA plans considering your expected pension and any withdrawals you plan to make?

$1800/ month for a family plan seems pretty normal. If it is good coverage, an ACA plan might be even more. The safest thing is to just consider that as one of your expenses when calculating when to retire.
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Artful Dodger
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Re: Teacher early retirement insurance considerations

Post by Artful Dodger »

To follow up on Sailaway's post, you can look into ACA plans. As of right now, there is no cliff so making more than 400% of poverty would not disqualify you for a premium subsidy. I used Kaiser's calculator, put in a NYC zip code, and $100K of income for a family of 3. For a silver plan costing $1907 monthly you would get a $1199 tax credit, leaving you $845 to pay for the coverage. You'll pay more as income goes up, but normally your cost will run about 8.5% of your income. This assumes both you and your wife are not working and don't have other coverage (work related, not retiree) available.

Obviously, a lot can change by the time you turn 55, but this is how it would work now.
twh
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Re: Teacher early retirement insurance considerations

Post by twh »

You are 10 or 15 years away from this decision. A lot can change in that time. Unless you are thinking about a job change due to this issue, I'd just let it all alone for the next 7-10 years. The bottom line is you need a way to get some insurance and you have that, it just isn't all that inexpensive. Hopefully by then there will be other options.
Topic Author
BashDash
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Re: Teacher early retirement insurance considerations

Post by BashDash »

Thanks for the replies!
Sailaway and Artful: I have only briefly looked into or heard about ACA plans...I have read poster Ron Ronnerson insights into this matter who I believe is a teacher in California..however I don't think his teaching job comes with insurance at all...interesting stuff

TWH: Completely agree. Just should focus on what I control. Fill up the 403b and 457 and educating myself. Irks me a little that surrounding districts don't have contract like this but it isn't likely to change and I was the one who signed up for this. Luckily everything else is great as far as working.
suemarkp
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Re: Teacher early retirement insurance considerations

Post by suemarkp »

Unrelated note - is your pension reduced at 55 versus age 65? My wife's teacher pension has terrible reductions for early retirement. She's not collecting it until age 65 even though she has separated from service at age 57.

Can you change to another district that has better insurance coverage a few years before you retire? If you have a teenager, they really don't like to change their friend circle when in high school. So maybe move before, or wait until you're older (kid out of high school) to retire. If you're lucky, you can teach at a better adjacent district and just have a longer commute for a few years.

Another possibility is for one of you to change jobs looking for one that has better retiree health care. That may not be easy these days unless you take a federal job or perhaps a state job and have enough service credit to get it (if teacher service credit crosses to other state jobs).

As others have said, you are 15 years away from this decision, and things can change a lot in that time including employee benefits. Acting now could be counter productive, but planning and thinking are usually good. My pension calculation got frozen a few years before I retired. Fortunately, my benefits were grandfathered, but my retiree medical says "we reserve the right to cancel this benefit at any time".
Mark | Somewhere in WA State
Ron Ronnerson
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Re: Teacher early retirement insurance considerations

Post by Ron Ronnerson »

BashDash wrote: Tue Jan 24, 2023 6:20 am Thanks for the replies!
Sailaway and Artful: I have only briefly looked into or heard about ACA plans...I have read poster Ron Ronnerson insights into this matter who I believe is a teacher in California..however I don't think his teaching job comes with insurance at all...interesting stuff

TWH: Completely agree. Just should focus on what I control. Fill up the 403b and 457 and educating myself. Irks me a little that surrounding districts don't have contract like this but it isn't likely to change and I was the one who signed up for this. Luckily everything else is great as far as working.
You’re correct in that I’m a California teacher. My wife is a stay-at-home parent and we are both 48 years old. We have one child, age 8.

I think my situation is sort of different than yours. If an employee is offered insurance through work, their share of the premiums needs to be what is considered “affordable” by the ACA. In 2023, that means the employee’s share of the cost for the least expensive insurance offered to cover just the employee (not dependents) can’t exceed 9.12% of their modified adjusted gross income (MAGI). Per the rules of the ACA, my employer doesn’t offer me affordable coverage so my family qualifies for the subsidy. As a teacher, I have lots of tax deferred space available (pension contributions, 403b, 457b, traditional IRA, and HSA) so I can control MAGI quite a bit. We turn 50 next year so catch-up contributions will help further on that front.

So the question becomes: can you lower your MAGI enough to qualify for the ACA premium tax credit?

I personally take things year by year and hope that I can keep MAGI low enough. It has worked out so far but has been tricky to achieve some years.

If I no longer qualify for a subsidy at some point in the future, I will have to either purchase insurance through my employer or on the exchange and pay for it myself. Due to the size of the premium tax credit (which has ranged over $15k-$20k per year), we will do whatever we can to lower MAGI enough to qualify for the credit, though. Luckily, we have some options (for example, withdrawing Roth IRA contributions, borrowing money, receiving gifts, and churning credit cards for bonuses all put money in the wallet and don’t count as income).

Sort of oddly, even though my employer doesn’t pay for employee health insurance, it pays fully for retiree health insurance between the date of retirement and the age of Medicare. I hope my school district continues to do this when I retire but we’ll see what happens in the years ahead.

In any case, my employer won’t cover the insurance cost for my wife and daughter once I retire so we save in retirement accounts to help cover that expense just like we would to pay for any other expense. I plan to retire around age 60 (give or take a year).

My advice is to save what you can, learn the rules of the ACA, and stay flexible as things often change. It may also be worth exploring if it makes sense to change employers.
capran
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Re: Teacher early retirement insurance considerations

Post by capran »

BashDash wrote: Mon Jan 23, 2023 1:19 pm Hi!
Thank you everyone for helping me in the past! Without BH help I would have never sorted out my hideous 403b fees and discovered the 457 plan.

I'm in my early 40s working in a NY district that teachers have to pay a high percentage 50% ( compared to other local districts) of their health insurance. This is quite costly for family insurance. This continues upon retirement until you reach medicare. I will have 30 years easily at age 55 which is when I can retire and collect the pension. A lot of teachers wait to retire so they can go right into medicare which I think is at 65. I recently calculated for my family insurance it would be 1800$ a month for my current family plan. When I am 55 I will still have a young teenager. Wife has the same job employment situation.

Has anyone been in a situation like this? Retired and worked a part time job that has good insurance? Am I missing something obvious? Just deal with it? Use 403b and 457 money for this? I have been building 403b, 457 and Roth IRA steadily while working.

Thanks!!
We retired as educators in Washington state (me in 2013 and her in 2014). I stayed on her medical the first year, and then we both had to pay 600 each for our medical, so 1200 per month for both of us until Medicare age. Youngest was 25 by then and it would have been another 600 to cover him, so sounds like a decent deal to cover your family given inflation. Spouse had 30 years in and got her full retirement at 59 1/2 when she quit/retired. I only had 26 years so had to wait till 65 for my pension. Never considered working part time or subbing. I would have rather toughed it out and worked another year or two if we couldn't swing it financially. And depending on your nest egg in deferred, nice to pull some out before IRMAA kicks in once all income streams come on line.
talzara
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Re: Teacher early retirement insurance considerations

Post by talzara »

BashDash wrote: Tue Jan 24, 2023 6:20 am Thanks for the replies!
Sailaway and Artful: I have only briefly looked into or heard about ACA plans...I have read poster Ron Ronnerson insights into this matter who I believe is a teacher in California..however I don't think his teaching job comes with insurance at all...interesting stuff
It's complicated. You can put the family on retiree health insurance, put the family on an ACA policy, or put only adult children on an ACA policy. Then you have the ACA subsidy calculation, and the ACA works differently in New York than it does in California.

One consideration is whether the premiums vary by age. Employer insurance plans are usually group-rated, so all adults pay the same premium. Children pay less, but at a certain age, dependent children get counted as adults.

ACA plans are age-rated in most states, using a compressed age curve. 19-year-olds pay less than 64-year-olds. New York has community rating for ACA policies, so it makes less sense to move adult children to an ACA policy. If you're paying 50% of the employer's retiree policy, that might still cost less than a community-rated ACA policy. However, ACA subsidies could save you more than 50% if you qualify for a subsidy.

Because it's complicated, you really have to look at all the options and do the calculations. Don't forget to consider quality. ACA plans may have limited networks and higher deductibles than your employer policy. You may be willing to pay more for a better plan.
Topic Author
BashDash
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Re: Teacher early retirement insurance considerations

Post by BashDash »

THanks for all the detailed replies! I appreciate the knowledge!

It definitely does not look like the grass is greener at another job. Shortish commute and awesome students. I don't think the contract will change with regards to the health insurance dramatically. My employer plan is great for my family and whenever we need it for my children one of which has special medical issue it is always convenient and we have our choice of doctors. The employer does offer a high deductible plan as well but I have decided to leave status quo mainly because I want to keep our current care the same and also to reduce complexity. I don't want to make changes and then we can't the medical care we need.

It does bother me a little that similar local jobs doing the exact same thing pay 0% into their health insurance but I did know this ahead of time so that is on me over 20 years for deciding this.

For now the plan, is load up the Roth IRA, 403b, and 457. I am even starting to diversify into the roth 457 a little bit to create some diversity of my retirement money.
Ron Ronnerson
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Re: Teacher early retirement insurance considerations

Post by Ron Ronnerson »

BashDash wrote: Thu Jan 26, 2023 9:11 am THanks for all the detailed replies! I appreciate the knowledge!

It definitely does not look like the grass is greener at another job. Shortish commute and awesome students. I don't think the contract will change with regards to the health insurance dramatically. My employer plan is great for my family and whenever we need it for my children one of which has special medical issue it is always convenient and we have our choice of doctors. The employer does offer a high deductible plan as well but I have decided to leave status quo mainly because I want to keep our current care the same and also to reduce complexity. I don't want to make changes and then we can't the medical care we need.

It does bother me a little that similar local jobs doing the exact same thing pay 0% into their health insurance but I did know this ahead of time so that is on me over 20 years for deciding this.

For now the plan, is load up the Roth IRA, 403b, and 457. I am even starting to diversify into the roth 457 a little bit to create some diversity of my retirement money.
I think it’s vital to look at your overall situation. A good working environment and a short commute are definitely valuable.

In the district where I work, teachers don’t get health benefits paid for by the district but the paychecks are at least a little higher compared to nearby districts which contribute toward health benefits. Specifically, in my district, teacher salaries range from $78k to $143k (the range will increase to $84k to $153k as of July of this year). Does your employer pay a larger salary if they are not quite as generous on the health insurance front? If not, how do they manage to secure employees during a time when much of the country is experiencing teacher shortages?
Topic Author
BashDash
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Re: Teacher early retirement insurance considerations

Post by BashDash »

Ron:
The district does not have a higher salary than local districts. I don't think the teacher shortage necessarily applies to certain parts of the country. Hardly anyone really retires here and if they did the job would be filled pretty easily. I feel lucky to have this job just you can't help compare to other jobs sometime locally. For example, if you are coaching for an extra 7k which is obviously a lot of time and energy that money all basically goes to health insurance. At another district, your regular job is comparable to this distrct but you have to coach to equal things out!
Ron Ronnerson
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Re: Teacher early retirement insurance considerations

Post by Ron Ronnerson »

BashDash wrote: Fri Jan 27, 2023 9:27 am Ron:
The district does not have a higher salary than local districts. I don't think the teacher shortage necessarily applies to certain parts of the country. Hardly anyone really retires here and if they did the job would be filled pretty easily. I feel lucky to have this job just you can't help compare to other jobs sometime locally. For example, if you are coaching for an extra 7k which is obviously a lot of time and energy that money all basically goes to health insurance. At another district, your regular job is comparable to this distrct but you have to coach to equal things out!
That’s interesting. Thanks for the explanation. The situation appears to be quite different where I am. I’m in a school district with lots of high-performing students and the work environment is good. However there is a teacher shortage here and it appears to be getting worse in recent years. Salaries are going up quickly around here as districts compete with one another to hire and retain teachers. My salary in 2021 was $110k, it became $124k (plus a $3k one-time bonus) in 2022, and will become about $135k later this year (the contract is already negotiated). We don’t get health benefits, though - at least not until we retire, at which point we can collect a pension and also get health benefits paid for by the district.
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