THE FISCAL BLUE PRINT
WITH COACH JEFF MONTGOMERY
Episode 21: Healthcare Before Medicare
Today we are going to discuss Healthcare before Medicare and the challenges and opportunities that arise when retiring before Medicare age. I have wanted to tackle this subject on the podcast for some time now. Although it’s not the most exciting topic I think it is extremely important! The topic is our Health Care in retirement.
And………I’m not just talking about Medicare. We will go over Medicare in this 1st episode but I am also going to discuss HEALTHCARE BEFORE MEDICARE.
What happens if you retire early……? before you can collect Medicare? Or what if you are covered by a spouses HC plan and they lose their job and you’ve already retired before the AGE OF 65?
What will be YOUR BRIDGE TO MEDICARE?
I’m no Health insurance expert! With that being said I think we can cover a large amount of information over the next 4 episodes in a way that can clarify some of your options NOT ONLY when it’s time to start Medicare but also if you find yourself looking for healthcare before Medicare. Which is quite common.
Disclaimer: Please do not take advice from me on this show. As a licensed Fiduciary I am only allowed to give advice to clients. Unless you’re a client I can’t give you advice because I don’t know you. Think of this as helpful hints and education only! And please, before implementing any information or ideas you hear on this show always consult your legal adviser, your tax adviser, and your financial adviser.
(1:30) Practical Planning Segment
So welcome to our brand-new series (which could be 3 parts……. maybe 4) titled, Healthcare Before Medicare and I’m joined my co-host Joani Gursky………hello Joani!
(3:15) Joani and I have noticed a recent trend in our office and that trend is people are often retiring a bit earlier than they have in the past. Now this is just a general observation base on the folks we work with and what we have noticed in our practice over the last few years.
We don’t have any hard statistics that say people are retiring earlier we are just noticing it because of the unique challenges that come with early retirement and the planning opportunities that arise especially when it comes to healthcare.
We did find a fairly recent study from Fidelity in conjunction with the Stanford Center on Longevity,1 that showed people retire an average of 4 years sooner than they had originally planned.
So, there is a little data backing up our personal observation.
It’s great if you can retire early! But how many folks have thought about how things will change from both an income standpoint and an expense standpoint??? I think most people realize and look at the fact that their income will obviously change drastically……. or at least the source of the income will change drastically.
But many people, talking from our experience only, have only scratched the surface of how their expense’s change in retirement……….and mainly around our topic today of HC before MC.
(6:30) So, let’s start by defining what we consider retiring early. Basically, we are talking about retiring before the age of 65 which is the start of your eligibility for Medicare. However, if you only retire a year or so before turning age 65 then your strategy for healthcare will be quite different then if you are retiring in your 50’s or early 60’s and have to cover 5 maybe 10 years of HC expenses.
That could be substantial!…….. and right about the time you may start to experience some health-related issues because of your age!
Exactly, so in this series we are going to focus on those early retirees. The one’s that retire in their 50’s or early 60’s.
So, a lot of things happen at once when you retire early right? What do you think is the biggest adjustment?
(8:30) The most obvious change is that you no longer have that steady income each month and that could be a HUGE adjustment!
Correct! ……Now maybe you have a pension, but often a pension won’t start when you retire that early.
You also have to assess whether you are eligible to start SS. Remember the earliest is age 62 and if you get a PT job or a job offer you can’t refuse you have to be careful about your earnings while collecting SS before your full retirement age.
(10:30) You have Keep an eye on your expenses. Most people think you’ll spend less in retirement but honestly you may have a lot of time to fill. Additional hobbies (golf, bowling, happy hours) cost money. Additional travel must be paid for.
And the biggest potential additional expense is healthcare to bridge that gap prior to Medicare. So, let’s do just a brief review on this first episode of the HC options you have if you retire early way before Medicare eligibility…. okay
(12:00) We came up with 6 or 7 options and the first one you have on the list is COBRA.
- COBRA coverage. The Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, allows you to continue your current health care coverage for a certain amount of time, but you may be required to pay the full cost of your health coverage plus an additional 2% charge.
While you are working, your employer will typically cover a significant portion of the cost of your coverage, reducing the cost for active employees, but that is rarely the case for those who continue coverage through COBRA.
For an employee covered under a qualifying event, COBRA coverage can last for 18 months from the date you elect coverage. But its expensive because you are paying the full cost of coverage with no help from your past employer.
But if you like your current plan and you are within 18 months of turning 65 and signing up for Medicare, this could be a viable option over the short term.
(13:50) Next, you may be covered under a Spouse’s plan.
If your spouse is employed and has health coverage, you may be able to get covered on their employer’s plan—and this may be your best and most cost-effective option. If your spouse is already retired and has retiree medical insurance coverage, you may be able to be added to that coverage as well.
(14:50) 3rd option is the public marketplace of HEALTHCARE.GOV commonly referred to Obama Care.
Yes………The marketplace was established by the Affordable Care Act and provides plan options available to anyone who is not yet eligible for Medicare.
So, we are going to get into this option in some detail on the next podcast but the main component that is beneficial under this option is that
- You cannot be denied coverage for any reason, including a pre-existing condition.
This was often a significant issue for those contemplating early retirement because affordable health insurance coverage was hard to find and obtain, particularly for those with pre-existing medical conditions. Costs for these plans can vary widely, but some people qualify for government-provided subsidies through premium tax credits that can make the coverage more affordable.
We are going to run some examples on the next podcast on the costs of these plans and they vary widely based on your State and more importantly your sources and amounts of income when retiring early.
(17:45) 4th option as of right now, you can still purchase Private insurance.
To obtain coverage, you can also look to your local health insurance agent, trade or professional associations, and other so-called “private exchanges” that offer plans from multiple carriers. You may have more plan options available to you through these outlets than the public marketplace but note that government-funded premium tax credits cannot be applied to these plans.
(19:00) What about the Medi-Share programs out there?
Correct……. There are also alternative Medi-Share programs out there as well. A simple web search for the word Medi-Share you will find 2 or 3 different Medi-Share plans out there.
Now these are not technically called insurance plans. They are really sharing plans where you share in the cost of the other participants HC costs. We’ll spend some time discussing these plans in some detail on an upcoming episode.
(20:40) How about just simply part-time for a large company primarily for the health insurance.
Yes, this is a viable option for some. And we run into folks that one spouse or both are working PT just for the HC. But you must be careful if you are eligible for SS and collecting (age 62 for example) you must really watch how much you earn before the earnings restrictions start applying if collecting early.
(21:45) One other option:
And I guess there is another possible option and that is to simply go uninsured or some folks call that self-insured. This………Could be dangerous financially speaking if there was a serious accident or some other catastrophic illness.
Okay so those are the main options that we are going to discuss over the next few episodes. And we will explore some of the options in detail to hopefully shed some light on the very confusing and ever-changing HC landscape!
Before we wrap up today shows let’s go do a quick coaching segment
(23:00) Coachable Segment:
It’s simple! I want you to Do a Budget! If you are close to retirement and starting to wrap your head around HC options and costs ………………the first step is to do a BUDGET!!!!!
Even if you are not yet retired! DO A BUDGET!!!! You’ll be amazed where the money goes once you do this exercise. There are so many benefits to doing a budget:
- It Gives you control over your money – A budget is a way of being intentional about the way you spend and save your money. …
- It Keeps you focused on your money goals – You avoid spending unnecessarily on items and services that do not contribute to attaining your financial goals.
- Enables you to save for expected and unexpected costs – Budgeting allows you to plan to set aside money for emergency costs.
- Enables you to communicate with your significant others about money – If you share your money with your spouse, family, or anyone, a budget can communicate how you use money as a group. This promotes teamwork on working for common financial goals and prevents conflict on how money is used. Creating a budget in tandem with your spouse will avoid conflicts and resolve personal differences on how your money is spent. Budgeting teaches family members spending responsibility and accountability.
- Provides you with an early warning for potential problems – When you budget and take a “big picture” view, you will see potential money problems in advance, and be able to make adjustments before the problem appears.
- Helps you determine if you can take on debt and how much – Taking debt is not necessarily a bad thing if the debt is necessary or you can afford it. Budgeting shows you how much a debt load you can realistically take without being stressed or if taking the debt load is worth it.
- Enables you to produce extra money – In budgeting, you get to identify and eliminate unnecessary spending like late fees, penalties and interests. These seemingly small saving can add up over time.
AND… we are here to help you! Instead of you trying to remember every single line item you spend money on each month we have a very concise and thorough tracking tool to keep a budget.
It’s the MFS budget worksheet and we will send it to you for free.
- Simply send us an email to email@example.com and put a reference in the subject line requesting the budget sheet. Something simple like “PLEASE send me a budget sheet I need to get organized!!!”
And while you’re at, it why don’t you jot down a few questions you might have regarding this shows subject. I will try my best to address those questions on the upcoming episodes.
Stay tuned for some further discussion on some of the options for Healthcare Before Medicare on our next show!
“We appreciate you joining us today for this episode of The Fiscal Blueprint.
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