Author Topic: Early retirees - What are the nuts and bolts of your healthcare plans (U.S.)  (Read 3301 times)

Adam Zapple

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I'm about 10 years out from a retirement at 48 and have no idea how to plan for healthcare.  A good place for me to start is hearing from those already retired.  How much is healthcare costing you?  Is there anything else you can share?

Will

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I think the reason you aren't getting replies is because things can (and probably will) change a lot in the next 10 years (especially with some of the people currently in charge of things).  Therefore, what we spend now is pretty much irrelevant.  My subsidized plan costs me $1.20/month.  I certainly don't expect it to stay the same for long.



Acastus

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1. Use ACA, aka Obamacare.
2. Vote Democrat, so ACA survives.
3. Support Medicare for all or similar universal healthcare initiatives. I think this may need to go 1 state at a time, like marriage equality.
4. Earmark $100k if things do not work out.
5. Fingers crossed.

Financial.Velociraptor

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I'm on Obamacare.  I found out shortly after my old policy lapsed that I was uninsurable in the US prior to ACA (pre-existing).  I was on an "indemnity plan" as a stop gag until ACA came online.  I pay 356.23 a month less a 35.62 "wellness credit" for taking a detailed survey from my plan provider.  It has gone up 20% or more every year.  My plan is the second lowest Bronze level plan and is HSA compatible so I made my first max HSA contribution this year (no earned income required!)  I have qualified for the maximum ACA tax subsidy 3 out of 5 years and expect to make it 4 out of 6 for 2018.  So my net healthcare cost is really quite reasonable. 

FIFoFum

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My health care plan to cover me until Medicare age (assuming THAT doesn't change a lot) is:

1. Live in a state with Medicaid expansion + decent health care options & qualify by keeping income below a certain level.
2. Go on ACA plan if income is above Medicaid expansion cut off. Ideally stay within income levels for subsidies, but if not, pay full cost for plan and it's use. 
3. Get a job that provides health care for min # of hours (20, 30, etc). This is helpful if: options 1 & 2 disappear or become unavailable for pre-existing conditions, or income will exceed subsidy level anyway & ACA costs skyrocket.
4. Become an expat in a location with better alternatives (for me, that's living close to family in country with socialized medicine or much cheaper pay out of pocket care or both).

I'm currently doing option #1. Last year, I mostly did option #2 but income exceeded subsidies. The cheapest plans for someone my age (early 40s) where I live were $250 to $300/month with high deductibles. So my annual costs ranged from $5000 to $7500 average for actual care used + prescription drugs. They would have been higher this year. On option #1, I am paying nothing & more is covered (even some basic dental).

Everyone's experience will vary so much based on your personal situation and where you live. And it will change each year, let alone in 10 years. I'm projecting nothing with confidence based on what exists now. My numbers are meaningless for me, let alone for OP.

It's important to pay attention, and it's important to have a political voice (and VOTE!). What's happening is unclear, but you won't be surprised in 10 years if you're following and participating in the process of what happens next.

boarder42

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Trying to figure out what you'll spend on healthcare in 10 years is a losing battle in the us at this point. Assume the ACA based on your experience income and location and family size. And see what it is.

sol

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Stay healthy.  Buy insurance through the state exchange.  If the ACA goes away and my costs go up considerably as a result, I'll have to throttle back some other spending (like charitable donations) to cover the difference.

And as an absolute last resort, I could get another job.  <shudder>

ixtap

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Our plan is to get catastrophic insurance and leave the country, but it doesn't sound like that plan helps you.

sol

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I pay 356.23 a month ... HSA compatible

Is that your gross cost for premiums, or your net cost for insurance?  I ask because roughly 40% of my monthly premium for my HSA-compliant plan magically appears in my HSA as an "insurer pass-through contribution" and then it just sits there waiting for me to use it.  So it's kind of like my net costs are only 60% of what I pay in premiums, because I sort of get the rest back.

My costs are very similar to yours.  My insurance plan then deposits $1500/year into my HSA for me.  More if we take the stupid health assessment questionnaire and get our blood drawn.

Financial.Velociraptor

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I pay 356.23 a month ... HSA compatible

Is that your gross cost for premiums, or your net cost for insurance?  I ask because roughly 40% of my monthly premium for my HSA-compliant plan magically appears in my HSA as an "insurer pass-through contribution" and then it just sits there waiting for me to use it.  So it's kind of like my net costs are only 60% of what I pay in premiums, because I sort of get the rest back.

My costs are very similar to yours.  My insurance plan then deposits $1500/year into my HSA for me.  More if we take the stupid health assessment questionnaire and get our blood drawn.

The invoice is for 356.23 and is reduced to 320.61 after the wellness credit.  This is my out of pocket cost.  The HSA contribution is an additional out of pocket cost but comes with tax advantages including improving my ACA subsidy.  Last year's ACA subsidy was about 2,800.  So I expect to pay about 1,000 net for premiums and a few hundred in copays/medication.  I think it is very reasonable so far.

sol

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So I expect to pay about 1,000 net for premiums and a few hundred in copays/medication.  I think it is very reasonable so far.

Sweet, a grand a year for health insurance seems pretty damn reasonable to me.  Do you mind sharing what taxable income level you had to target to achieve this great rate?  Is it just for you, or for you and a family?

Financial.Velociraptor

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So I expect to pay about 1,000 net for premiums and a few hundred in copays/medication.  I think it is very reasonable so far.

Sweet, a grand a year for health insurance seems pretty damn reasonable to me.  Do you mind sharing what taxable income level you had to target to achieve this great rate?  Is it just for you, or for you and a family?

It is for just me.  Thanks to some tax loss shenanigans, AGI has come in between 20 and 25k in the years I collected the subsidy.  I shoot for harvesting my gains all at once every third year or so to allow for collecting the subsidies in off years.  Results in a lower long term average tax rate!

sol

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It is for just me.  Thanks to some tax loss shenanigans, AGI has come in between 20 and 25k in the years I collected the subsidy.  I shoot for harvesting my gains all at once every third year or so to allow for collecting the subsidies in off years.  Results in a lower long term average tax rate!

Thanks for sharing.  You're one of my favorite posters here, because you actually do the math on these sorts of things and then share your findings.  I love a quantitative approach.

Consolidating capital gains is an interesting approach I hadn't considered before.  I know it makes sense for other parts of the tax code, like doubling up property tax or other deductions to itemize in alternate years, but for capital gains I had sort of assumed it made more sense to fill the 0% LTCG tax bracket every year you're eligible.  Is it a lower long term average in your case because of other parts of the tax code, like the ACA subsidies, or is it straight up cheaper on capital gains?

boarder42

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man its great you guys have HSA options in your states.  my state does not have an HSA option on the exchange.  though i can get a bronze plan for 56 bucks a month which is basically nothing for health insurance. and this is with really high spending - 80k MAGI with 2 kids.

Financial.Velociraptor

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It is for just me.  Thanks to some tax loss shenanigans, AGI has come in between 20 and 25k in the years I collected the subsidy.  I shoot for harvesting my gains all at once every third year or so to allow for collecting the subsidies in off years.  Results in a lower long term average tax rate!

Thanks for sharing.  You're one of my favorite posters here, because you actually do the math on these sorts of things and then share your findings.  I love a quantitative approach.

Consolidating capital gains is an interesting approach I hadn't considered before.  I know it makes sense for other parts of the tax code, like doubling up property tax or other deductions to itemize in alternate years, but for capital gains I had sort of assumed it made more sense to fill the 0% LTCG tax bracket every year you're eligible.  Is it a lower long term average in your case because of other parts of the tax code, like the ACA subsidies, or is it straight up cheaper on capital gains?
Thank you for the kind compliment!  It is high praise indeed to be on the infamous Sol's short list.

It is all about capturing the ACA subsidy.  When I harvest gains, I'm in at most the 22% bracket.  When I harvest losses I'm in a  negative bracket.  Being in the 22% bracket every third year and negative otherwise beats the heck out of 15% every year!

dude

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I'll have FEHB for life as a retired fed employee. Currently costs me $372/mo. ($4,464/yr) for Self +One Cadillac plan (BCBS) now. Will pay what then current fed employees pay. Of course, there's always the risk that those fucks in Congress will mess with the plan, but it's all I have to go on for now.

Paul der Krake

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Trying to guess what the health landscape will look like in your retirement, 10 years from now, is completely crazy.

Nobody knows. We have unhinged socialists on the left pushing for a half-baked Medicare-for-all plan, free-market-at-all-cost zealots on the right, a bunch of centrists disagreeing on which shitty systems to replace with other shitty systems. At the same time, individual states trying to legislate their own solutions while the federal government tries to nudge things along in different directions with each administration. And that's just the legislative/political stuff!

Now think about what the drug industry wants, what insurers wants, what nurses want, what doctors want, what medical schools want, and what corporate America (who is still largely footing the bill) wants. Think about the leverage each of these actors has on the others. Can you see a clear path forward? Yeah, me neither.

Stay flexible and worry about this in 8 years, not now.

boarder42

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@Financial.Velociraptor thanks for sharing this strategy i'm quite intrigued by it now.  may have to try something like this when i FIRE.

sol

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It is all about capturing the ACA subsidy.  When I harvest gains, I'm in at most the 22% bracket.  When I harvest losses I'm in a  negative bracket.  Being in the 22% bracket every third year and negative otherwise beats the heck out of 15% every year!

I'm still not sure I understand the plan here, so let me see if I have this straight.

Some years you're in the 22% bracket, which tops out out $82.5k for a single filer or 165k for MFJ, and in that year you don't get any ACA subsidy or other tax breaks so you pay something ridiculous for healthcare, like $10k for one person.  To offer a simplified example, you might sell $100k worth of winning stocks that generate $80k of gains, pay the LTCG rate of 15% on approximately half of that 80k, then pay $10k for insurance and have approximately $85k left over on spend on rent and food and whatever.

Then for the next few years you tax do tax loss harvesting, selling more losers than winners such that you still have income, but your net taxable income is negative.  So you might sell 42k of winning stocks and 43k of losing stocks, for $85k of income that shows up as a taxable loss.  You pay zero in LTCG taxes and $1k for health insurance, leaving you with $84k to spend on rent and food and whatever.  You've effectively received a $9k ACA subsidy in two years, in exchange for paying an extra $6k in LTCG and full freight on health insurance in one year.  Is that right?

In this situation, it looks to me like the only limit on not qualifying for the ACA subsidy every year is the amount of losers you have available to sell.  Is that the problem?

Because the alternative would seem to be to just play it straight up the calendar, selling like $90k each year with a mixture winners and losers, and taking a partial (reduced) ACA subsidy each year.  I suppose it depends on exactly where your income requirements sit with respect to the subsidy cliffs, huh?  Just like with consolidating income tax deductions, it only makes sense for certain income bands.

This might be a little more "nuts and bolts" than the OP wanted, but if it saves me (18k-6k)=12k over a three year span, that's a nontrivial percentage of my retirement budget.
« Last Edit: August 22, 2018, 11:44:25 AM by sol »

boarder42

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It is all about capturing the ACA subsidy.  When I harvest gains, I'm in at most the 22% bracket.  When I harvest losses I'm in a  negative bracket.  Being in the 22% bracket every third year and negative otherwise beats the heck out of 15% every year!

I'm still not sure I understand the plan here, so let me see if I have this straight.

Some years you're in the 22% bracket, which tops out out $82.5k for a single filer or 165k for MFJ, and in that year you don't get any ACA subsidy or other tax breaks so you pay something ridiculous for healthcare, like $10k for one person.  To offer a simplified example, you might sell $100k worth of winning stocks that generate $80k of gains, pay the LTCG rate of 15% on approximately half of that 80k, then pay $10k for insurance and have approximately $85k left over on spend on rent and food and whatever.

Then for the next few years you tax do tax loss harvesting, selling more losers than winners such that you still have income, but your net taxable income is negative.  So you might sell 42k of winning stocks and 43k of losing stocks, for $85k of income that shows up as a taxable loss.  You pay zero in LTCG taxes and $1k for health insurance, leaving you with $84k to spend on rent and food and whatever.  You've effectively received a $9k ACA subsidy in two years, in exchange for paying an extra $6k in LTCG and full freight on health insurance in one year.  Is that right?

In this situation, it looks to me like the only limit on not qualifying for the ACA subsidy every year is the amount of losers you have available to sell.  Is that the problem?

Because the alternative would seem to be to just play it straight up the calendar, selling like $90k each year with a mixture winners and losers, and taking a partial (reduced) ACA subsidy each year.  I suppose it depends on exactly where your income requirements sit with respect to the subsidy cliffs, huh?  Just like with consolidating income tax deductions, it only makes sense for certain income bands.

This might be a little more "nuts and bolts" than the OP wanted, but if it saves me (18k-6k)=12k over a three year span, that's a nontrivial percentage of my retirement budget.

4k a year are some pretty long and sic mustachian vacations coupled with some travel hacking thats a pile of extra dough.  or alot of food for the hungry just be being efficient with your taxes and the ACA.

Financial.Velociraptor

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It is all about capturing the ACA subsidy.  When I harvest gains, I'm in at most the 22% bracket.  When I harvest losses I'm in a  negative bracket.  Being in the 22% bracket every third year and negative otherwise beats the heck out of 15% every year!

I'm still not sure I understand the plan here, so let me see if I have this straight.

Some years you're in the 22% bracket, which tops out out $82.5k for a single filer or 165k for MFJ, and in that year you don't get any ACA subsidy or other tax breaks so you pay something ridiculous for healthcare, like $10k for one person.  To offer a simplified example, you might sell $100k worth of winning stocks that generate $80k of gains, pay the LTCG rate of 15% on approximately half of that 80k, then pay $10k for insurance and have approximately $85k left over on spend on rent and food and whatever.

Then for the next few years you tax do tax loss harvesting, selling more losers than winners such that you still have income, but your net taxable income is negative.  So you might sell 42k of winning stocks and 43k of losing stocks, for $85k of income that shows up as a taxable loss.  You pay zero in LTCG taxes and $1k for health insurance, leaving you with $84k to spend on rent and food and whatever.  You've effectively received a $9k ACA subsidy in two years, in exchange for paying an extra $6k in LTCG and full freight on health insurance in one year.  Is that right?

In this situation, it looks to me like the only limit on not qualifying for the ACA subsidy every year is the amount of losers you have available to sell.  Is that the problem?

Because the alternative would seem to be to just play it straight up the calendar, selling like $90k each year with a mixture winners and losers, and taking a partial (reduced) ACA subsidy each year.  I suppose it depends on exactly where your income requirements sit with respect to the subsidy cliffs, huh?  Just like with consolidating income tax deductions, it only makes sense for certain income bands.

This might be a little more "nuts and bolts" than the OP wanted, but if it saves me (18k-6k)=12k over a three year span, that's a nontrivial percentage of my retirement budget.
You have the general idea.  For me, the years with taxable income AGI is closer to 40-50k than the 82.5k limit.  So, realistically, most of my income is in the 15% tax bracket and in the tax loss harvesting years, it is non-taxable plus the ACA credit.  You can harvest tax losses up to 3,000 beyond zero and reduce taxable income accordingly.  After that, there is no benefit to taking more tax losses although they do carry forward to future years. 

On a strategic investing note (I'm one of the non-indexing heretics here), you really want to cut your losers early and let your winners ride.  I do that mostly by following trailing stop losses.  It gets to be an exercise in putting a finger in the air and hoping you know which way the wind is blowing in the taxable years as you maybe let some losers continue to linger.  Call me a dirty, dirty market timer!  Also, you have an expectation of 15% LTCG.  I'm primarily a short term holder and the vast majority of my gains are STGC.  I don't give any thought to long term versus short term because my long term tends to be immaterial. 

bilmar

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As others have stated a lot can change in the next few years but here are a couple of tips that work for me now.

1. Get  and fund a Roth .
After 5 yrs  you can use it to supplement your money (as necessary) without generating taxable income that would increase ACA cost.

2. Consider paying off your mortgage just before you retire.
Yes there are lots of reasons not to do this  but one reason this helps is that you don't need taxable income to pay the mortgage any more so it reduces your ACA cost because from an income perspective you are suddenly 'poorer'.


Also note that currently,  ACA plans differ not just in cost but in benefits too according to income:
E.g.  if you make $30K then you may be eligible for plan 123 at $300 mo with a deductible of $5000  , doctor visit $40
but if you make $15k then you may be eligible for plan 123.C  at $60 mo which is the very same plan but has a deductible of $0 , doctor visit free

FernFree

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Bilmar - great point about paying off the house to help with ACA eligibility.  I never thought of that aspect before.  Oh, well.  Retired last week so might be a bit late for it. :)

Can you also clarify for me on the Roth 5 year withdrawals -- can you only withdraw each year however much you deposited 5 years previously, or can you withdraw however much you like as long as the account is at least 5 years old?

sol

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Can you also clarify for me on the Roth 5 year withdrawals -- can you only withdraw each year however much you deposited 5 years previously, or can you withdraw however much you like as long as the account is at least 5 years old?

I think you can withdraw (tax and penalty free) any contribution that has been in the account for at last five calendar years (so hypothetically four years and one day if you time it right).  I have seen accountants on the internet disagree with that interpretation, though.
« Last Edit: August 26, 2018, 10:23:53 AM by sol »

spartana

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I currently use the VA for free but when I first FIREd I first went on COBRA and then a low cost private catastrophic BCBS plan. That plan was cut when the ACA was enacted and I chose to.just use the VA (have a disability/injury caused by military service) because my taxable income was too low to receive  ACA subsidies and I didn't want Medicaid.

My sister just got laid off and will transition into FIRE once her unemployment benefits run out. She signed up for an ACA Bronze level plan. She is paying $62/month for a Kaiser plan but could have gotten one that cost about $1.50/month. Both have an annual OOP max of $6200/year. That was based on approx $36k annual income. Her ACA subsidy is $517/month regardless of what kind of plan she chose. Once her unemployment ends and her income is lower she will qualify for expanded Medicaid but she plans to try to adjust her income level in order to get an Enhanced Silver plan which is around $75/month with about $2000/ year OOP max.
« Last Edit: August 25, 2018, 06:37:58 PM by spartana »

jim555

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Can you also clarify for me on the Roth 5 year withdrawals -- can you only withdraw each year however much you deposited 5 years previously, or can you withdraw however much you like as long as the account is at least 5 years old?

I think you can withdraw (tax and penalty free) any contribution that has been in the account for at last five calendar years (so hypothetically for years and one day if you time it right).  I have seen accountants on the internet disagree with that interpretation, though.
Here is a good article on Roth rules...
https://www.kitces.com/blog/understanding-the-two-5-year-rules-for-roth-ira-contributions-and-conversions/

Much Fishing to Do

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Maybe I've been unlucky (or just plain stupid) but I can't figure out how you all come out with hard numbers for this stuff for planning purposes, it seems like I have a $1k/month premium but that is all that is projectable, b/c the ins company can call something as not "reasonable or customary" and then doesnt pay most of it, or denies something completely as not allowable even when I'm in network and it seems like it fits, making that $1k/month an expense on top of my healthcare bills.

I'm trying to get the family to figure out what they are sick with months ahead of time so I can go thru the proper approval channels but they dont seem to want to comply with that simple request.  Its also just hard to believe what you get billed in the first place (I questioned a $10k bill years ago from the emergency from that my ins company denied and then they said if I dropped my challenge I actually wouldnt owe anything at all...its almost like the healthcare system will just take what ever you have if you willingly hand it over before questioning...I'm at a lost for this because every other expense in my life seems very straight forward and makes ERE very simple, yet healthcare will take 100% of what you have (the drug companies seem to even say this when they charge tens of thousands for a drug but then say they will not deny anyone who needs it, in other words they will take everything you have but no more before giving you the prescription).  Its all so incredibly expensive I;ve stopped complaining about the little ridiculousness of the fact I have to pay a doctor $150 to get his signature which allows me to buy a $4 antibiotic from Walmart to ease my child's pain, that used to drive me nuts back when my net worth was much lower but now just feel bad for others on this sort of thing
« Last Edit: August 26, 2018, 03:20:36 PM by Much Fishing to Do »

Laura Ingalls

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Re: Early retirees - What are the nuts and bolts of your healthcare plans (U.S.)
« Reply #29 on: September 08, 2018, 06:58:19 PM »
My health care plan to cover me until Medicare age (assuming THAT doesn't change a lot) is:

1. Live in a state with Medicaid expansion + decent health care options & qualify by keeping income below a certain level.
2. Go on ACA plan if income is above Medicaid expansion cut off. Ideally stay within income levels for subsidies, but if not, pay full cost for plan and it's use. 
3. Get a job that provides health care for min # of hours (20, 30, etc). This is helpful if: options 1 & 2 disappear or become unavailable for pre-existing conditions, or income will exceed subsidy level anyway & ACA costs skyrocket.
4. Become an expat in a location with better alternatives (for me, that's living close to family in country with socialized medicine or much cheaper pay out of pocket care or both).

I'm currently doing option #1. Last year, I mostly did option #2 but income exceeded subsidies. The cheapest plans for someone my age (early 40s) where I live were $250 to $300/month with high deductibles. So my annual costs ranged from $5000 to $7500 average for actual care used + prescription drugs. They would have been higher this year. On option #1, I am paying nothing & more is covered (even some basic dental).


Nice summary.  We presently are employing option 1.  We have used option 2 as well.  I have a job that would offer insurance, but it is not affordable by ACA standards, but it is an option.  $900 a month premiums would stink and be close to all my take home pay but it would buy some time to figure out something better.  We have also talked about maybe using option 4 at some point too. C