Skip to main content
No. of Recommendations: 1
Maybe my concern was too high but health insurance was the main reason I never chased early retirement and also avoided starting my own company. I had some friends that started their own companies but they were able to use their spouses health insurance.

Fortunately I will have federal health insurance and I can get that at 60 (and earlier depending on service time/early retirement, etc. which doesn't apply in my case).

When I was contemplating retiring over the last year, especially once I got within the 18 month COBRA window, I decided not to partly because of the extra insurance premiums I would have had to pay (~$14K for the 2 of us).
Print the post Back To Top
No. of Recommendations: 2
ACA (obamacare) plan. If you have the means to retire early, you will probably have some flexibility in managing your (MAGI) income in order to qualify for a subsidy.
Print the post Back To Top
No. of Recommendations: 0
Just to provide a link: www.healthcare.gov

That's the way to go. I need to dig into that site again soon. We'll be retiring in a few months. I'm thinking of waiting for the next ESPP purchase (March). But I want to retire 12/31 (because the medical benefits and reimbursement will be cleaner if I retire when I get my last paycheck of the year).
Print the post Back To Top
No. of Recommendations: 9
Assuming I retire and stop working. What are the most commonly recommended alternatives to work provided insurance to support a family and hold one through until age 65?

I would agree that ACA is probably going to be the most common. There are some other options that should be considered:

COBRA should be looked at for the first 18 months, and compared to coverage and cost of an ACA plan. What we found is that the coverage with ACA plans is considerably less than COBRA coverage, so any additional premium costs for COBRA were more than offset by the additional costs that the ACA plan didn't cover. As always, YMMV. I will note - we live in a rural area with fewer ACA choices, which makes our ACA coverage more expensive.

If your employer has retiree health coverage and you meet the eligibility requirements to be covered, you should also compare that coverage and cost to ACA coverage.

You may want to look at non-ACA private insurance, but beware of any restrictions on coverage, including, but not limited to, pre-existing conditions and annual/lifetime caps on payouts - neither of which is allowed in ACA plans.

I would strongly recommend against considering Health Care Sharing Ministries. They are not insurance, and are not regulated by state insurance regulators. If coverage is denied, you have no ability to appeal other than the company's appeal structure, and generally, you are not allowed to sue. They often also have annual and lifetime coverage caps, which, as mentioned above, are not allowed in ACA plans.

AJ
Print the post Back To Top
No. of Recommendations: 2
John Oliver did a great piece of "Health Care Sharing Ministries". Basically, as you said, don't do it. They'll take your money and then are under no obligation to pay you anything. Which apparently happens a lot.

https://www.youtube.com/watch?v=oFetFqrVBNc&t=36s

I'll have to check on COBRA vs ACA, though I think our COBRA is limited to one year at my company.

1poorguy
Print the post Back To Top
No. of Recommendations: 2
As others have suggested, the ACA (Obamacare) is likely your best option. The COVID legislation passed earlier this year actually increased the tax subsidies going to higher income earners.

New ACA Subsidies Available On April 1
https://www.healthaffairs.org/do/10.1377/hblog20210316.22283...

</snip>


Begin now by making your retirement portfolio "Obamacare ready" by minimizing dividend and interest income and delaying any taxable pension and SS benefits to at least age 65. I'd budgeted $20,000/yr for health insurance in my 60's and actually was paying less than $20/year in health insurance premiums the last few years before I qualified for Medicare. Riches await those who understand the law.

Obamacare Repeal? My amazing story of drastically lower premiums.
https://retireearlyhomepage.com/obamacare_2017.html

</snip>


Health insurance today is a world away from what was available in the 1990's when I early retired at age 38. Back then, people trying to get health coverage in the individual market were getting screwed in every orifice with no recourse.

intercst
Print the post Back To Top
No. of Recommendations: 5
I may be mistaken, but I *believe* COBRA cannot be limited to one year by the employer. I believe the minimum time period is 18 months, by federal law. Employers may choose to extend that period, and there are longer periods in certain circumstances. But 18 months is the minimum.
Print the post Back To Top
No. of Recommendations: 1
If your employer has retiree health coverage and you meet the eligibility requirements to be covered, you should also compare that coverage and cost to ACA coverage.

Be aware that not all retiree healthcare coverages include children. Both our kids are still young enough to be included on our healthcare, but it is not an option with our retiree healthcare insurance.

FWIW,

IP
Print the post Back To Top
No. of Recommendations: 3
1poorguy: "I'll have to check on COBRA vs ACA, though I think our COBRA is limited to one year at my company."

I believe, with a fair amount of certainty (but not absolute certainty) that federal law mandates 18 months of Cobra coverage as long as you pay.

Regards, JAFO
Print the post Back To Top
No. of Recommendations: 2
The COVID legislation passed earlier this year actually increased the tax subsidies going to higher income earners.

Only for 2021 and 2022.

AJ
Print the post Back To Top
No. of Recommendations: 1
aj485 writes,

<<The COVID legislation passed earlier this year actually increased the tax subsidies going to higher income earners.>>

Only for 2021 and 2022.

</snip


Sure. But politicians have great difficulty clawing back a benefit once it's enacted. And since the Obamacare tax subsidies are laundered through the insurance companies with a big piece being skimmed off for Executive Compensation, there is a wide and wealthy coalition of players who want to make it permanent.

intercst
Print the post Back To Top
No. of Recommendations: 0
Be aware that not all retiree healthcare coverages include children. Both our kids are still young enough to be included on our healthcare, but it is not an option with our retiree healthcare insurance.

It is possible to have separate medical insurance for the parents and the children. It may not be cost effective, but could be an option.

Ira
Print the post Back To Top
No. of Recommendations: 0
It is possible to have separate medical insurance for the parents and the children. It may not be cost effective, but could be an option.

This is what we did. Youngest was still in college and we paid for healthcare through the university for him, which was reasonable. Any student who is taking a certain minimum number of credits is eligible. It's what I may do when I lose retiree healthcare because DH has Medicare. As long as the gov't doesn't lower the age of Medicare, I should be over 60 when this happens and can get free tuition. Lots of classes I would be happy to take, for fun.

Not everyone's preference, but I find learning fun. Or there is part time work that allows you to get healthcare coverage. https://www.google.com/search?q=companies+that+offer+health+...

IP
Print the post Back To Top
No. of Recommendations: 1
Maybe my concern was too high but health insurance was the main reason I never chased early retirement and also avoided starting my own company. I had some friends that started their own companies but they were able to use their spouses health insurance.

Fortunately I will have federal health insurance and I can get that at 60 (and earlier depending on service time/early retirement, etc. which doesn't apply in my case).

When I was contemplating retiring over the last year, especially once I got within the 18 month COBRA window, I decided not to partly because of the extra insurance premiums I would have had to pay (~$14K for the 2 of us).
Print the post Back To Top
No. of Recommendations: 3
I am now exploring retiring. Turning 50, with multiple kids in early teens. Have to figure out the kid coverage and personal/wife coverage until age 65 (Medicare.)

Assuming I retire and stop working. What are the most commonly recommended alternatives to work provided insurance to support a family and hold one through until age 65?


Honestly ? Not retiring. I'd wait until the kids are in college at the least. While there are machinations to qualify for health insurance, they may not be worth it for this time of your life.
Print the post Back To Top
No. of Recommendations: 0
Health insurance for a family is not a blocker to retiring as some have said -- but it can make a big difference to when you can retire and also can involve sticker shock especially if you're used to a company subsidized gold level plan (speaking from experience LOL!). Do some research on healthcare.gov and whatever your state's affordable care site is.

In my state even 100% out of pocket (no subsidy) a bronze plan for couple+kids is ~20k year. Although since bronze plan covers so little until high dollar -- it's really for those with no ongoing medical issues + extremely important to also put aside money to cover the possible out-of-pocket.
Print the post Back To Top
No. of Recommendations: 1
laughingcat writes,

In my state even 100% out of pocket (no subsidy) a bronze plan for couple+kids is ~20k year. Although since bronze plan covers so little until high dollar -- it's really for those with no ongoing medical issues + extremely important to also put aside money to cover the possible out-of-pocket.

</snip>


Exactly!

Even people with a multi-million dollar retirement portfolios should be able to reduce their Modified Adjusted Gross Income income (MAGI) with a little planning to qualify for the maximum Obamacare subsidy. It makes little sense to volunteer for a $20,000/yr reaming if you can avoid it.

intercst
Print the post Back To Top
No. of Recommendations: 0
Even people with a multi-million dollar retirement portfolios should be able to reduce their Modified Adjusted Gross Income income (MAGI) with a little planning to qualify for the maximum Obamacare subsidy. It makes little sense to volunteer for a $20,000/yr reaming if you can avoid it.

I don't even have a million dollar retirement portfolio -- but I'm interested in the planning. Can give some specifics? --Or is it all explained on your website?

culcha
Print the post Back To Top
No. of Recommendations: 1
culcha asks,

I don't even have a million dollar retirement portfolio -- but I'm interested in the planning. Can give some specifics? --Or is it all explained on your website?

</snip>


It's really pretty simple.

Delay SS and any pensions to age 65.

Limit interest and dividend income as much as possible in favor of funding living expenses with capital gains and tax-fee returns of capital. (Non-dividend paying stocks like BRK are a Godsend.)

Many retirees have a fairly large fixed income allocation. If it's in a taxable account, you can spend down some of that to fund living expenses without much of an income tax liability -- heck it might even provide a capital loss to offset income from elsewhere.

If you plan ahead, you can spread out any portfolio changes over multiple years to lessen any tax impact.

Obamacare makes it easier for millionaires to retire early?
https://retireearlyhomepage.com/healthcarereform.html

</snip>


intercst
Print the post Back To Top
No. of Recommendations: 4
If you plan ahead, you can spread out any portfolio changes over multiple years to lessen any tax impact.

This is really letting the tail wag the dog. Like the people who let income taxes drive their investment sell decisions.

Anyway, it all goes away at 65, when you go on Medicare.
Print the post Back To Top
No. of Recommendations: 1
Anyway, it all goes away at 65, when you go on Medicare.

Not exactly - many moving parts...
Print the post Back To Top
No. of Recommendations: 1
If you have a few years to go until retirement, then you can work at setting up stock outside of IRA/401k as intercst is suggesting to keep your income below the subsidy level. Or if your planned retirement income is already below the subsidy amount (which depends on how many kids you have) -- then you'll be getting the Obamacare subsidy anyway.

But if you don't fit into either of those categories then you'll just have to pay the health insurance out of pocket -- but that is just something to plan for and research the costs (as OP asked about) and not a reason to not retire (as another poster said).

Besides adding children to the plan is not near as expensive as adding older people.
wife: 7.5k
husband: 8.5k
kids: +2.5k each
(obviously if there are known on-going medical issues -- that is a different story)
Print the post Back To Top
No. of Recommendations: 2
Anyway, it all goes away at 65, when you go on Medicare.

No, IRMAA can hit you after you're on Medicare. So making decisions about how much taxable income you will have is still important. IRMAA penalties generally aren't as expensive as losing an ACA subsidy because you went a dollar over the income limit, but they aren't cheap, either. For 2021, for singles with over $88k in income, or MFJ with over $176k in income, they will pay an extra $712.80 per Medicare recipient annually for Part B, and even more if they have Part D. The next step (at $111k for singles or $222k for MFJ), will cost an additional $1,069.20 ($1,782 additional total) annually per Part B recipient.

AJ
Print the post Back To Top
No. of Recommendations: 1
an extra $712.80 per Medicare recipient annually
...
The next step (at $111k for singles or $222k for MFJ), will cost an additional $1,069.20 ($1,782 additional total) annually


You made me chuckle at this. $1,782/yr is $150 a month. We were paying $1,000 a month until 65. And with a lot less than $222K income.

And....cry me a river. $111,000 taxable income is probably close to $175,000 total income. So that huge $1,782 is almost a whole 1% (one percent).

But, yeah, I agree it's easy to lose focus and get caught up in the weeds over trivial nothingburgers. I still find myself buying store-brand canned vegetables instead of name-brand to save a dime.
Print the post Back To Top
No. of Recommendations: 0
And....cry me a river. $111,000 taxable income is probably close to $175,000 total income. So that huge $1,782 is almost a whole 1% (one percent).

Sometimes it seems that some people would rather give away 1/3 or 1/2 or most of their money in order to avoid an income that puts them over the thresholds of these insurance premiums. Sure, if you're close, I can see pinching those pennies and finding ways to defer or reposition money, but if you are substantially over that, I agree with IP, first world problem.

Do I want to reduce my income from, say, $150,000/yr to $75,000/yr to avoid paying an extra $150 a month?

Probably not.

Pete
Print the post Back To Top
No. of Recommendations: 5
Rayvt analyzes,

If you plan ahead, you can spread out any portfolio changes over multiple years to lessen any tax impact.

This is really letting the tail wag the dog. Like the people who let income taxes drive their investment sell decisions.

Anyway, it all goes away at 65, when you go on Medicare.

</snip>


For me this was about a $100,000 dog, age 60-65. I'd budgeted $20,000/yr for health insurance. Was actually paying less than $20/yr the last few years before turning age 65.

I was very well compensated for the couple hours it took to implement the strategy versus doing nothing.

intercst
Print the post Back To Top
No. of Recommendations: 0
For 2021, for singles with over $88k in income, or MFJ with over $176k in income, they will pay an extra $712.80 per Medicare recipient annually for Part B, and even more if they have Part D. The next step (at $111k for singles or $222k for MFJ), will cost an additional $1,069.20 ($1,782 additional total) annually per Part B recipient.

And then at 70-something, you have required RMDs and you become single....

Just one more calculation ;)
Print the post Back To Top
No. of Recommendations: 14
<ki>
Do I want to reduce my income from, say, $150,000/yr to $75,000/yr to avoid paying an extra $150 a month?

But that's not the question on the table. It's not "do I want to reduce my income from, say, $150,000/yr to $75,000/yr to avoid paying an extra $150 a month?" The question is "do I want to reduce my taxable income from $150,000/yr to $75,000/yr?" If I am taking $150,000 out of a Traditional IRA, then that is all taxable income, but if instead I take that out of my taxable account where $75,000 is a return of capital and the other $75,000 is gains (and therefore taxable), I have taken the same amount of money, saved the taxes and the extra hit for medical insurance.

It's about minimizing taxes, and that's not the same as minimizing expenses.
Print the post Back To Top
No. of Recommendations: 0
It's about minimizing taxes, and that's not the same as minimizing expenses.

But is it minimizing taxes today versus future taxes? On the other thread about RMDs, minimizing future taxes by reducing the impact of RMD through conversions to Roth IRA today will impact your current medical insurance expenses.

PSU
Print the post Back To Top
No. of Recommendations: 0
Or, one could just have the majority of their retirement assets in a Roth account and not have to worry about it. ;P

https://www.healthcare.gov/income-and-household-information/...

Include most IRA and 401k withdrawals. (See details on retirement income in the instructions for IRS publication 1040). Note: Don’t include qualified distributions from a designated Roth account as income.
Print the post Back To Top
No. of Recommendations: 1
2gifts writes,


But that's not the question on the table. It's not "do I want to reduce my income from, say, $150,000/yr to $75,000/yr to avoid paying an extra $150 a month?" The question is "do I want to reduce my taxable income from $150,000/yr to $75,000/yr?" If I am taking $150,000 out of a Traditional IRA, then that is all taxable income, but if instead I take that out of my taxable account where $75,000 is a return of capital and the other $75,000 is gains (and therefore taxable), I have taken the same amount of money, saved the taxes and the extra hit for medical insurance.

It's about minimizing taxes, and that's not the same as minimizing expenses.

</snip>


Exactly!

I'm not suggesting that anyone reduce their annual spending in retirement, just that they pay attention to the best way to provide that annual dollar amount with the lowest tax liability over time.

In general, you want to realize capital gains and tax-free returns of capital before interest and dividend income. And delay taxable pensions and SS for as long as possible.

intercst
Print the post Back To Top
No. of Recommendations: 2
PSU asks,

<<It's about minimizing taxes, and that's not the same as minimizing expenses.>>

But is it minimizing taxes today versus future taxes?

</snip>


It's about minimizing your tax liability over your lifetime. If you have a large IRA that will bump you into a higher tax bracket once the RMDs start at age 72, it may be worth while to do an annual Roth conversion in the preceding years large enough to top off the next lowest tax bracket to the tax bracket you'll be in at age 72. (IRMAA penalities are just another tax in that calculation.)

intercst
Print the post Back To Top
No. of Recommendations: 18
It's about minimizing your tax liability over your lifetime. If you have a large IRA that will bump you into a higher tax bracket once the RMDs start at age 72, it may be worth while to do an annual Roth conversion in the preceding years large enough to top off the next lowest tax bracket to the tax bracket you'll be in at age 72. (IRMAA penalities are just another tax in that calculation.)

I just find it interesting when multiple threads are going on at the same time. In one thread on RMDs, the advice is to convert traditional IRAs to Roth before RMDs starts. This increases taxable income. That could include the years before Medicare. Then in another thread on health insurance, the advise is to minimize current taxable income to get the ACA subsidies. When discussing each topic in isolation, the advice is correct. When looking at both together, the advice conflicts and more careful evaluation of the whole financial situation is needed.

PSU
Print the post Back To Top
No. of Recommendations: 1
PSUEngineer writes,

<<It's about minimizing your tax liability over your lifetime. If you have a large IRA that will bump you into a higher tax bracket once the RMDs start at age 72, it may be worth while to do an annual Roth conversion in the preceding years large enough to top off the next lowest tax bracket to the tax bracket you'll be in at age 72. (IRMAA penalities are just another tax in that calculation.)>>

I just find it interesting when multiple threads are going on at the same time. In one thread on RMDs, the advice is to convert traditional IRAs to Roth before RMDs starts. This increases taxable income. That could include the years before Medicare. Then in another thread on health insurance, the advise is to minimize current taxable income to get the ACA subsidies. When discussing each topic in isolation, the advice is correct. When looking at both together, the advice conflicts and more careful evaluation of the whole financial situation is needed.

</snip>


Absolutely. I've been fighting RMDs since age 40 once I realized that my DELL and Pfizer windfalls were likely going to put me in the top tax bracket with 30 years of compounded investment returns. That's why I started SEPP withdrawals at age 40 from the IRA and left my taxable account intact. (The exact reverse of what financial planners would tell you to do 30 years ago.)

When I studied the Obamacare law in 2010 and learned that there was no asset means test on the tax subsidies (i.e., you could have $100 million in BRK and still qualify for Medicaid as long as your taxable income was low enough), it quickly became apparent that was a $100,000 benefit versus the $20,000/yr I had budgeted for health insurance age 60-65. It made sense to pause the RMD planning for 5 years to capture the Obamacare windfall. Now that I'm 65, I'm planning a big Roth conversion this December.

intercst
Print the post Back To Top
No. of Recommendations: 0
If I am taking $150,000 out of a Traditional IRA, then that is all taxable income, but if instead I take that out of my taxable account where $75,000 is a return of capital and the other $75,000 is gains (and therefore taxable), I have taken the same amount of money, saved the taxes and the extra hit for medical insurance.

Good point, and I suppose I'm personalizing this a bit, trying to come up with a good solution or a good question "on the table", as you put it: my taxable account is largely one wherein the return of capital would be a small proportion of the gain (currently, unless the market takes a very bad turn) and so this strategy is limited in effectiveness. In your example, that would work great. For me, taking out $150,000 would return a capital of about $25,000. It still reduces the gain to 'only' $125,000, but probably not enough to offset insurance, especially with SS and a small pension added in on top. Again, a first world problem.

Pete
Print the post Back To Top
No. of Recommendations: 0
Now that I'm 65, I'm planning a big Roth conversion this December.

So, you'll have one big (((huge))) taxable event, one year only, correct? One and done as they say.

Pete
Print the post Back To Top
No. of Recommendations: 16
"Again, a first world problem."

Not all of the first world has this problem.
Most countries have a functioning health care system instead of a health care insurance business.
Print the post Back To Top
No. of Recommendations: 1
MataroPete asks,

Now that I'm 65, I'm planning a big Roth conversion this December.

So, you'll have one big (((huge))) taxable event, one year only, correct? One and done as they say.

</snip>


Absolutely not!

I'm doing annual Roth conversions over the next 7 years to age 72 when the RMDs are currently scheduled to start for me. Each annual Roth conversion will be sized to top out the tax bracket just below the bracket I'll likely be in when the RMDs start. Of course, there's a chance (likelihood?) that bull and bear stock markets will change the target tax bracket from year to year.

It's a moving target, but the only certainty is that doing nothing means a higher tax bill.

intercst
Print the post Back To Top
No. of Recommendations: 2
But is it minimizing taxes today versus future taxes? On the other thread about RMDs, minimizing future taxes by reducing the impact of RMD through conversions to Roth IRA today will impact your current medical insurance expenses.


I look at it a minimizing taxes in general, so for me, that means doing some Roth conversions today up to the Medicare IRMAA limit so that RMD's won't put us in that area when we reach that age. DH is still working and so I can't play those games that get our income so low that ACA becomes worthwhile, and we have good medical insurance available through a volunteer activity that I do. So I focus more on filling up the tax bracket up to the IRMAA limit with Roth conversions, and we will continue to do that at least until RMDs kick in. We may even do it after that as we will need to consider taxes when it's only one of us, and then taxes that the kids will pay on whatever they inherit in our TIRAs as that could put them in higher tax brackets. For DD, that means potentially being in a higher tax bracket than we are today, and so minimizing taxes includes looking at that. I would expect you to have a similar problem as your daughters make substantial salaries, so this may be something you are looking at as well.

Anyhow, that's my thinking and how this impacts us. It will be different for others.
Print the post Back To Top
No. of Recommendations: 2
Or, one could just have the majority of their retirement assets in a Roth account and not have to worry about it

To do that, it assumes that one was actually eligible to contribute to a Roth or could do the back-door Roth conversions. In our case, the only time we were eligible to contribute to Roths were during times when I was not working. There were a few periods of unemployment during my career when we made Roth contributions, and now that I am retired, we are able to contribute. I rolled my 401ks over to TIRAs when I left a job, and so the backdoor Roth didn't work for us. So we have significant taxable accounts, significant TIRAs, and small Roths, but are able to do some conversions for the next few years.
Print the post Back To Top
No. of Recommendations: 0
To do that, it assumes that one was actually eligible to contribute to a Roth or could do the back-door Roth conversions.

Or, took advantage of the 2010 special Roth conversion rules:

https://www.irs.gov/pub/irs-tege/forum10_roth_conversions.pd...

See slide 3.

I converted an IRA (previously a 401k) of about $100k in 2010 and split the income over two years, saving me thousands in taxes. Today, my Roth account more than twice the size of my current 401k and roughly half of my entire net worth.

This was the most significant financial decision in my lifetime, so far. Distant second was taking a $100k Covid hardship distro last year from my 401k (that was restricted to mutual funds) and rolling it into my IRA and Roth and buying QLD (Nasdaqx2) with most of it. Instead of very frothy S&P500 gains post Covid, I enjoyed 280% in QLD.
Print the post Back To Top
No. of Recommendations: 2
Or, one could just have the majority of their retirement assets in a Roth account and not have to worry about it. ;P

That assumes using a Roth account was the right choice at the time of contribution.

PSU
Print the post Back To Top
No. of Recommendations: 0
To do that, it assumes that one was actually eligible to contribute to a Roth or could do the back-door Roth conversions. In our case, the only time we were eligible to contribute to Roths were during times when I was not working. There were a few periods of unemployment during my career when we made Roth contributions, and now that I am retired, we are able to contribute. I rolled my 401ks over to TIRAs when I left a job, and so the backdoor Roth didn't work for us. So we have significant taxable accounts, significant TIRAs, and small Roths, but are able to do some conversions for the next few years.

It helps if you have a self-employed 401(k) (which I believe only requires an EIN to open). Then you can roll your tIRAs into the 401(k).
Print the post Back To Top
No. of Recommendations: 0
It helps if you have a self-employed 401(k) (which I believe only requires an EIN to open). Then you can roll your tIRAs into the 401(k).

Yup, but as I stated, I was the one switching jobs and moving 401k's to TIRA's. DH is the one who is self-employed, so this jockeying would not have worked for me. Good suggestion for others, however.
Print the post Back To Top