Author Topic: retire early and lose retirement health benefits  (Read 2665 times)

billy b

  • 5 O'Clock Shadow
  • *
  • Posts: 35
  • Age: 36
  • Location: CA
  • tech + mmm = lot's of savings
retire early and lose retirement health benefits
« on: October 26, 2018, 05:48:35 PM »
Hey, I'm 36 right now and would like to retire at 46 from my state job in CA., but I just found out I would for fit my medical and dental retirement benefits through CalPers, if I quit before I turn 50.  The benefits would begin normally at 50 to 64 (65 is medicare for everyone, except I would still have CalPers medical for prescription only).  The annoying part, it's mandatory to pay into this benefit every month, while I'm currently working, which they started charging me in July 2017, and I'm currently paying $305.00 per month, and there are no refunds.  They told me this is "CalPers law."   When I turn 46, I would have paid a combined $52,300 for this benefit. 

 I'm trying to figure out how I should proceed, and if anyone else has faced this issue?

StetsTerhune

  • Bristles
  • ***
  • Posts: 439
Re: retire early and lose retirement health benefits
« Reply #1 on: October 26, 2018, 06:13:45 PM »
There's lots of people who face some variety of pension/insurance loss if they retire early. It doesn't sound like you can avoid it, and it doesn't sound like you are planning on changing jobs. Just forget about it for now. there's zero point in thinking about how much you have or will pay into it. That's just a cost of having the job you have.

At some point along the way, you'll have to figure out how much qualifying for this benefit is worth to you (which is wholly unrelated to what you paid into it), and decide if it's worth working 4 more years to get it. It sounds like it's a pretty substantial benefit. But then again 4 extra years working is pretty substantial too.

jim555

  • Handlebar Stache
  • *****
  • Posts: 1844
Re: retire early and lose retirement health benefits
« Reply #2 on: October 26, 2018, 07:02:48 PM »
I lost retiree medical benefits because I left prior to 55.  Just one of those things you have to deal with when getting out early.

maizeman

  • Magnum Stache
  • ******
  • Posts: 2997
Re: retire early and lose retirement health benefits
« Reply #3 on: October 26, 2018, 07:17:05 PM »
Do you have to work full time until 50 to qualify for the healthcare? Does the benefit continue if you were to switch to another job covered by CalPers? If the answer to the first is yes, maybe you could go extremely part time from age 47-50. If the answer to the second is yes, try to find the least stressful job that is still in the CalPers system (even if it pays peanuts).

But more generally I'd listen to StetsTerhune's advice. Don't tie yourself to a job for an extra four years just because you've had a big sunk cost in terms of money you're forced to pay out of your paycheck each month. Just treat it like an extra tax. And once you hit 46, if four years of your life sounds like a fair trade for subsidized healthcare go for it, and if it doesn't, there are plenty of other ways to get health insurance.

sol

  • Walrus Stache
  • *******
  • Posts: 7361
  • Age: 41
  • Location: Pacific Northwest
Re: retire early and lose retirement health benefits
« Reply #4 on: October 26, 2018, 07:28:29 PM »
Do you have to work until you are 50 to claim the benefit, or do you have to be working at age 50 to claim the benefit? 

Some early retirees in the federal system try to get rehired as they approach traditional retirement age in order to qualify for benefits.  They have to work for a minimum of two years, I think, but it can be part time and something easy. 

But for most of us, we just forfeit our health insurance and proceed to buy it on the open market.  For normal MMM style incomes, this is usually about the same cost as you would pay for your former employer subsidized plan anyway, so you're not really losing much unless your employer offers/mandates one of those ridiculous cadillac plans that the ACA hits with surcharges.

billy b

  • 5 O'Clock Shadow
  • *
  • Posts: 35
  • Age: 36
  • Location: CA
  • tech + mmm = lot's of savings
Re: retire early and lose retirement health benefits
« Reply #5 on: October 26, 2018, 08:03:46 PM »
I'm going to check if part time would quality, I'll also see if go to a different job that uses CalPers, if I'll still get the benefit.

Basically I have to continue to work until I'm at least 50, and once I quit my job any time after 50 they will give me the health benefits.



Bateaux

  • Handlebar Stache
  • *****
  • Posts: 1239
  • Location: Port Vincent
Re: retire early and lose retirement health benefits
« Reply #6 on: October 27, 2018, 10:57:13 AM »
I'm OMY, maybe multiple OMYs because of this.  I'm 50 and must retire 55 minimum to get health insurance through the company.  That's a long 5 years of my last healthy years.  November 6th is a huge day coming up.  Unless I see a window of hope for Medicare for all, I'm just too fearful of what may come to give up the Cadillac plan I'm on now.  Even after 55 however, the plan offered would still cost $800+ plus a month for me and my spouse.   Maybe that's really not worth waiting for.

sol

  • Walrus Stache
  • *******
  • Posts: 7361
  • Age: 41
  • Location: Pacific Northwest
Re: retire early and lose retirement health benefits
« Reply #7 on: October 27, 2018, 11:39:41 AM »
I'm just too fearful of what may come to give up the Cadillac plan I'm on now.

How much healthcare do you consume in a typical year?  I think lots of people are in love with cadillac plans that they basically don't use.  You're not really losing anything to give up a plan that isn't doing you any good anyway.  Most people are served just as well by a more normal health care plan, since the ACA mandates that all preventative care is 100% covered, you are guaranteed issue with a pre-existing condition, and major conditions like pregnancies cannot be excluded. 

The old idea of "cadillac" plans is largely obsolete now that the shittiest rip-off health insurance plans are illegal.  The days when unions tried to negotiate better insurance packages instead of higher pay are gone. 

You may not need to replace your $800/mo plan if you aren't currently managing an expensive condition.  A $400 plan could offer you all of the same benefits that you actually use, if you're a normal health care consumer, and then depending on your income the ACA can make the $400 plan cost something between $400 and $0.

freeat57

  • 5 O'Clock Shadow
  • *
  • Posts: 88
Re: retire early and lose retirement health benefits
« Reply #8 on: October 27, 2018, 01:31:12 PM »
You are relying on the politicians to refrain from changing the program in the next 14 years.  Given the budget demands in current day CA and the burden of CALPERS on the budget, the benefit that looks so appealing today may not be the same in the future.

https://www.sacbee.com/opinion/california-forum/article209303974.html

I worked for a megacorp that was known for generous benefits.  After a major early retirement/downsizing event 8 years ago, the company announced huge cuts to retiree health benefits.  Retirees, especially early retirees paid about as much per month as private (now ACA) would have cost them.  I.e. it was really little benefit at all.  The only difference was that they, for the most part, kept the same providers they had previously.  A promise today from a government or corporation is meaningless tomorrow.

sol

  • Walrus Stache
  • *******
  • Posts: 7361
  • Age: 41
  • Location: Pacific Northwest
Re: retire early and lose retirement health benefits
« Reply #9 on: October 27, 2018, 01:57:10 PM »
You are relying on the politicians to refrain from changing the program in the next 14 years.

Yes, just like other people are relying on their megacorp to refrain from changing their programs.  At least with Congress I get a tiny tiny say in the matter, and these decisions are first debated on a national stage instead of sprung on unsuspecting enrollees out of the blue.

I'm a red panda

  • Walrus Stache
  • *******
  • Posts: 7170
  • Location: United States
Re: retire early and lose retirement health benefits
« Reply #10 on: October 27, 2018, 03:36:20 PM »
I'm just too fearful of what may come to give up the Cadillac plan I'm on now.

How much healthcare do you consume in a typical year?  I think lots of people are in love with cadillac plans that they basically don't use.  You're not really losing anything to give up a plan that isn't doing you any good anyway.  Most people are served just as well by a more normal health care plan, since the ACA mandates that all preventative care is 100% covered, you are guaranteed issue with a pre-existing condition, and major conditions like pregnancies cannot be excluded. 

The old idea of "cadillac" plans is largely obsolete now that the shittiest rip-off health insurance plans are illegal. 

Already, there are marketplaces where plans don't cover pre-existing conditions anymore. This person is planning 10 years in the future. We have no idea if rip off health care plans will be illegal or not.

If they were 36, and planning to leave now, I'd say leave. But planning to stay until 46? I'd stay until 50.  It's not that much longer and good health care makes a huge difference.

How much healthcare do I consume in a typical year? Not a TON. But it seems a number of years are atypical. A broken neck with more than a million dollars billed.  A c+section and cholesteoctomy in the same year. An ice skating fall that requires 6 months of PT.
I assume with kids things will be even more unpredictable. I don't know where OP is on that.

Great healthcare is worth 4 years, to me. It would not be worth 14 if OP wanted to retire today.
« Last Edit: October 27, 2018, 08:06:14 PM by I'm a red panda »

clifp

  • Bristles
  • ***
  • Posts: 485
Re: retire early and lose retirement health benefits
« Reply #11 on: October 27, 2018, 04:49:16 PM »
I'm going to check if part time would quality, I'll also see if go to a different job that uses CalPers, if I'll still get the benefit.

Basically I have to continue to work until I'm at least 50, and once I quit my job any time after 50 they will give me the health benefits.

California is one of the many states that is facing a pension crisis.  This recent Frontline documentary is worth watching.


https://www.pbs.org/wgbh/frontline/film/the-pension-gamble/


Historically, when pension benefits get states do several things.  First switch new hires to hybrid 401K/pension system, 2nd increase the penalties for early retirement, and 3rd reduce the health benefits.  So I wouldn't spend too much time worrying about this.  A lot can happen in 14 years, and it wouldn't be at all surprising if the health care benefit was changed to requiring you to work to 55, or increasing the amount you had to pay to get the health care benefit.




billy b

  • 5 O'Clock Shadow
  • *
  • Posts: 35
  • Age: 36
  • Location: CA
  • tech + mmm = lot's of savings
Re: retire early and lose retirement health benefits
« Reply #12 on: October 27, 2018, 06:34:40 PM »
I'm a red panda, I don't have kids, just my wife and I, with 2 badass dogs. But man, that sure is some bad luck with your previous medical issues.  Ya, my wife just thinks I should stay until 50.

clifp, I'm grandfathered in at 50, but yes they could raise the monthly rate now.  It started at $195 a month and now it's $305.
And I heard my monthly premium when retired will be about $80 per month for self+spouse.  I'll check out that video, hopefully it's not fake news complainypants stuff :)

On a long side note, I currently have traditional kaiser medical plan (self+spouse) through my wife's work, bi-weekly $45.  I'm looking into changing to a high deductible health plan in a couple days, though her work, which is $38 bi-weekly, and her company will contribute $2,000 to a HSA, with annual deductible in network $3,000 and out of pocket annual maximum in network $6,850.  The high deductible health plan seems comparable to kaiser outside of the deductible of course.  My wife and I are relatively healthy, but she is a bit of a hypochondriac and currently worried about hair loss, went to see a doc and specialist, sounds like stress is part of the issue, so ya..... :/

This high deductible health insurance/HSA is all new to me, though I have heard lots of bits and pieces about it.  So why is there two different deductible amounts?  I thought that you pay the high deductible for non preventative stuff and after that, they cover the majority like my current kaiser plan. 

des999

  • Stubble
  • **
  • Posts: 151
Re: retire early and lose retirement health benefits
« Reply #13 on: October 29, 2018, 11:51:47 AM »
I'm a red panda, I don't have kids, just my wife and I, with 2 badass dogs. But man, that sure is some bad luck with your previous medical issues.  Ya, my wife just thinks I should stay until 50.

clifp, I'm grandfathered in at 50, but yes they could raise the monthly rate now.  It started at $195 a month and now it's $305.
And I heard my monthly premium when retired will be about $80 per month for self+spouse.  I'll check out that video, hopefully it's not fake news complainypants stuff :)

On a long side note, I currently have traditional kaiser medical plan (self+spouse) through my wife's work, bi-weekly $45.  I'm looking into changing to a high deductible health plan in a couple days, though her work, which is $38 bi-weekly, and her company will contribute $2,000 to a HSA, with annual deductible in network $3,000 and out of pocket annual maximum in network $6,850.  The high deductible health plan seems comparable to kaiser outside of the deductible of course.  My wife and I are relatively healthy, but she is a bit of a hypochondriac and currently worried about hair loss, went to see a doc and specialist, sounds like stress is part of the issue, so ya..... :/

This high deductible health insurance/HSA is all new to me, though I have heard lots of bits and pieces about it.  So why is there two different deductible amounts?  I thought that you pay the high deductible for non preventative stuff and after that, they cover the majority like my current kaiser plan.

The first deductible is how much you must pay ($3000) out of pocket before they pay their 80% or 90% or whatever portion.  The second deductible is the most you would ever pay out of pocket for the entire year (would be an additional $3850 in your case). 

That is actually a good plan.  My deductible is only $3500, but my out of pocket for the year just went up to $11,000.  And, unfortunately for me, I hit it every year.  Remember prior to ACA there was a lifetime max (which I would have hit by now).  So, I'm thankful it's only $11,000 a year, and not 100's of thousands it would be pre-ACA. 

maizeman

  • Magnum Stache
  • ******
  • Posts: 2997
Re: retire early and lose retirement health benefits
« Reply #14 on: October 29, 2018, 11:57:07 AM »
That is actually a good plan.  My deductible is only $3500, but my out of pocket for the year just went up to $11,000.  And, unfortunately for me, I hit it every year.  Remember prior to ACA there was a lifetime max (which I would have hit by now).  So, I'm thankful it's only $11,000 a year, and not 100's of thousands it would be pre-ACA.

Just to clarify, you mean a lifetime max after which insurance pays nothing and you pay everything, not a lifetime max after which you pay nothing and insurance pays everything, right?

(I remember the pre-ACA plans where this was a thing, but at this point perhaps a lot of younger folks or those who always had employer health insurance who don't remember the lifetime benefit caps.)

Bateaux

  • Handlebar Stache
  • *****
  • Posts: 1239
  • Location: Port Vincent
Re: retire early and lose retirement health benefits
« Reply #15 on: October 29, 2018, 11:59:31 AM »
I'm just too fearful of what may come to give up the Cadillac plan I'm on now.

How much healthcare do you consume in a typical year?  I think lots of people are in love with cadillac plans that they basically don't use.  You're not really losing anything to give up a plan that isn't doing you any good anyway.  Most people are served just as well by a more normal health care plan, since the ACA mandates that all preventative care is 100% covered, you are guaranteed issue with a pre-existing condition, and major conditions like pregnancies cannot be excluded. 

The old idea of "cadillac" plans is largely obsolete now that the shittiest rip-off health insurance plans are illegal.  The days when unions tried to negotiate better insurance packages instead of higher pay are gone. 

You may not need to replace your $800/mo plan if you aren't currently managing an expensive condition.  A $400 plan could offer you all of the same benefits that you actually use, if you're a normal health care consumer, and then depending on your income the ACA can make the $400 plan cost something between $400 and $0.

We had the unfortunate luck of having cancer visit our family.   We've used over a million dollars of health care.  Big medicine.  Not bandaids.  We've had bankrupted if not for the ACA.

des999

  • Stubble
  • **
  • Posts: 151
Re: retire early and lose retirement health benefits
« Reply #16 on: October 29, 2018, 12:49:54 PM »
That is actually a good plan.  My deductible is only $3500, but my out of pocket for the year just went up to $11,000.  And, unfortunately for me, I hit it every year.  Remember prior to ACA there was a lifetime max (which I would have hit by now).  So, I'm thankful it's only $11,000 a year, and not 100's of thousands it would be pre-ACA.

Just to clarify, you mean a lifetime max after which insurance pays nothing and you pay everything, not a lifetime max after which you pay nothing and insurance pays everything, right?

(I remember the pre-ACA plans where this was a thing, but at this point perhaps a lot of younger folks or those who always had employer health insurance who don't remember the lifetime benefit caps.)

correct, max after which ins pays nothing.  kind of scary to think about :(

Slee_stack

  • Pencil Stache
  • ****
  • Posts: 849
Re: retire early and lose retirement health benefits
« Reply #17 on: October 30, 2018, 12:18:02 PM »
Pensions/HC Benefits sure are an obnoxious carrot aren't they?

'All or nothing' means seven more years of exciting cubicle life for us....if we can't come to our senses first.

Fishindude

  • Handlebar Stache
  • *****
  • Posts: 1840
Re: retire early and lose retirement health benefits
« Reply #18 on: October 30, 2018, 02:23:44 PM »
Pretty simple deal.  If you want to retire early, you have to have the resources to pay for health insurance coverage.  In the US, that doesn't leave a lot of options.
When my COBRA coverage runs out next year, we will be buying private insurance through ACA to the tune of roughly $11,000 per year for wife and I.  I'm 59 and she's 56 so we will be paying this    6 years for me and 9 years for her until medicare.

robartsd

  • Handlebar Stache
  • *****
  • Posts: 1809
  • Location: Northern California
Re: retire early and lose retirement health benefits
« Reply #19 on: October 30, 2018, 03:49:53 PM »
My understanding is that to get any medical benefit you have to go from job with CalPERS medical benefits to CalPERS retirement with medical benefits with no more than a 120 day break and have at least 10 years of credits. To get the full benefit you have to have 20 years of credits (prorated from 1/2 to full for credits between 10 and 20 years). You cannot start a CalPERS retirement before age 50 (age 52 if hired after 2012). Jobs with the State of California get medical benefits if they are at least half time and expected to last more than six months. I'm sure that getting a state job for benefits just prior to starting your retirement would work but I don't know if CalPERS has a look back period (like the two years minimum sol mentioned for the federal employee system). There is a risk that the rules could change on you between FIRE and returning to work to claim medical benefits prior to CalPERS retirement.

It's not easy to find clear information for how CalPERS handles a break or downshift before retirement. CalPERS might not adjust "final compensation" used to calculate benefits for inflation between the the time the compensation was earned and the beginning of retirement.

Acastus

  • Bristles
  • ***
  • Posts: 344
  • Age: 56
Re: retire early and lose retirement health benefits
« Reply #20 on: October 31, 2018, 01:46:53 PM »
One way to think of the trade off is, you will get an additional ~$25-35k pension if you wait until 50 to retire. Are the extra 4 years worth it?

billy b

  • 5 O'Clock Shadow
  • *
  • Posts: 35
  • Age: 36
  • Location: CA
  • tech + mmm = lot's of savings
Re: retire early and lose retirement health benefits
« Reply #21 on: November 01, 2018, 10:35:10 AM »
Pensions/HC Benefits sure are an obnoxious carrot aren't they?

'All or nothing' means seven more years of exciting cubicle life for us....if we can't come to our senses first.

Ya, there like exploding benefits if you don't fall in line, it feels criminal not to refund all of the fees they charge you from a benefit they took away that was mandatory to contribute to. grrrrrrrr

billy b

  • 5 O'Clock Shadow
  • *
  • Posts: 35
  • Age: 36
  • Location: CA
  • tech + mmm = lot's of savings
Re: retire early and lose retirement health benefits
« Reply #22 on: November 01, 2018, 10:54:39 AM »
Pretty simple deal.  If you want to retire early, you have to have the resources to pay for health insurance coverage.  In the US, that doesn't leave a lot of options.
When my COBRA coverage runs out next year, we will be buying private insurance through ACA to the tune of roughly $11,000 per year for wife and I.  I'm 59 and she's 56 so we will be paying this    6 years for me and 9 years for her until medicare.

I thought ACA would be generally cheaper option that COBRA?

billy b

  • 5 O'Clock Shadow
  • *
  • Posts: 35
  • Age: 36
  • Location: CA
  • tech + mmm = lot's of savings
Re: retire early and lose retirement health benefits
« Reply #23 on: November 01, 2018, 11:03:21 AM »
I'm going to check if part time would quality, I'll also see if go to a different job that uses CalPers, if I'll still get the benefit.

Basically I have to continue to work until I'm at least 50, and once I quit my job any time after 50 they will give me the health benefits.

California is one of the many states that is facing a pension crisis.  This recent Frontline documentary is worth watching.


https://www.pbs.org/wgbh/frontline/film/the-pension-gamble/


Historically, when pension benefits get states do several things.  First switch new hires to hybrid 401K/pension system, 2nd increase the penalties for early retirement, and 3rd reduce the health benefits.  So I wouldn't spend too much time worrying about this.  A lot can happen in 14 years, and it wouldn't be at all surprising if the health care benefit was changed to requiring you to work to 55, or increasing the amount you had to pay to get the health care benefit.

That documentary was eye opening, makes me feel good that I'm a super saver.

billy b

  • 5 O'Clock Shadow
  • *
  • Posts: 35
  • Age: 36
  • Location: CA
  • tech + mmm = lot's of savings
Re: retire early and lose retirement health benefits
« Reply #24 on: November 01, 2018, 11:07:33 AM »
You are relying on the politicians to refrain from changing the program in the next 14 years.  Given the budget demands in current day CA and the burden of CALPERS on the budget, the benefit that looks so appealing today may not be the same in the future.

https://www.sacbee.com/opinion/california-forum/article209303974.html

I worked for a megacorp that was known for generous benefits.  After a major early retirement/downsizing event 8 years ago, the company announced huge cuts to retiree health benefits.  Retirees, especially early retirees paid about as much per month as private (now ACA) would have cost them.  I.e. it was really little benefit at all.  The only difference was that they, for the most part, kept the same providers they had previously.  A promise today from a government or corporation is meaningless tomorrow.

This article sounds about right, I can see pensions going away in 20 years.

billy b

  • 5 O'Clock Shadow
  • *
  • Posts: 35
  • Age: 36
  • Location: CA
  • tech + mmm = lot's of savings
Re: retire early and lose retirement health benefits
« Reply #25 on: November 01, 2018, 12:19:44 PM »
So after racking my brain for a bit, I'm considering FI and my wife and I quitting our jobs in 3 or 4 years, so I will be 40 or 41 years old.

We are debt free, own 1 house and 2 cars all paid off

I would change up my investments so just max out wife's 401k that has match/bonus, and put ALL other money to invest into my taxable Vanguard with VFIAX. 

yearly expenses are $16,100 not including medical dental

So I just need 10 years worth in taxable account to sustain us before my pension will begin when I turn 50 years old, so $20,000 a year X 10 years = $200,000 and need to buy medical dental

Now I'm trying to figure out the healthcare aspect of FI, so is ACA going to collapse in 2019 as insurance penalties will be eliminated?

Is just my capital gains considered income when I withdraw it from my account in that year and all dividends earned in the whole taxable account for that year, or is principle also included in income at withdraw time?

I went to Covered California website and entered income as $20,000 for 2 adults only and it said we qualified to Medi-Cal.  That does not sound right?


lhamo

  • Walrus Stache
  • *******
  • Posts: 8546
  • Location: Seattle
Re: retire early and lose retirement health benefits
« Reply #26 on: November 01, 2018, 12:32:35 PM »
Here is a chart with the links for income brackets for different levels of coverage/subsidies in CA:

https://www.healthforcalifornia.com/covered-california/income-limits

CA is an expanded medicaid state, so the cutoff levels for Medicaid are higher.  $22,715 is the cutoff for a 2-adult household.

jim555

  • Handlebar Stache
  • *****
  • Posts: 1844
Re: retire early and lose retirement health benefits
« Reply #27 on: November 01, 2018, 01:24:03 PM »
$22,715 is the number for a 2 person household.

Cassie

  • Magnum Stache
  • ******
  • Posts: 4455
Re: retire early and lose retirement health benefits
« Reply #28 on: November 14, 2018, 08:06:48 PM »
Bil, you will have more free time in retirement and may want to have a bigger budget.  We find we are spending more money as we have the time and energy to do things.  I hope you have other money in retirement accounts so you just won’t be living on your pension.  Things can happen to change your expenses.

chasesfish

  • Magnum Stache
  • ******
  • Posts: 2516
  • Age: 36
  • Location: Texas
    • Years in the making, I created a journal!
Re: retire early and lose retirement health benefits
« Reply #29 on: November 15, 2018, 07:06:15 AM »
Its just another form of golden handcuffs.  I walk away from $350,000 in deferred compensation for retiring early, but I leave with my mental and physical health.

We trade time for money and money for time

DaMa

  • 5 O'Clock Shadow
  • *
  • Posts: 99
Re: retire early and lose retirement health benefits
« Reply #30 on: November 17, 2018, 07:31:46 PM »
If you do retire with medical coverage, it would be a good idea to have a plan for if it suddenly goes away.  Here in the Metro Detroit area, many people got screwed when their retiree health benefits got cut and eventually disappeared when the cities, counties, and companies went under.  Imagine retiring at 50 with good coverage and ending up several years short of Medicare with no coverage at all.