I think ACA programs vary a lot from state to state
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There has been lots of talk about bridging healthcare after retirement before Medicare on this forum.
Here is one thread
The stipend will be nice as it will cover the premium, but it will count as taxable income. That will most likely eliminate the possibility of having your premiums supplemented by the government.
Yes, the ACA programs vary a lot from state to state. In the states I am familiar with, they only cover medical care within the state you live in (except for emergencies occurring out of state).
We have used exchange health insurance since my husbands early retirement in 2020 in two states now - MA and NJ. The original process of getting the coverage was not bad. My husband as of 9/1 is on Medicare (turns 65 this month). I am a year younger. It took us over 4 hours of phone conversations over at least 6 phone calls over about 2 weeks to get our coverage correct. All we wanted was to end his health coverage and keep my health coverage and both our dental coverage.
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In my state (MA), ACA plans tend to be similar in coverage to corporate plans, except that they are virtually all HMOs, and the deductibles and out of pocket maximums are quite a bit higher.
Itâs not like the bad old days of HMOs from decades ago though, most doctors and facilities take most HMO plans.
One thing you do need to be aware of is the hospital network. The cheapest plans did not provide access to any of the Boston hospitals.
I found that cost-wise, the premiums + deductible were in the same range for the bronze, silver, and some of the gold plans - about $25k per year for two people in their early 60âs. Some of the gold and platinum plans get really pricy, but have almost no or no deductible and OOP max. The plan we choose is a bronze level plan that is HSA-eligible and has a $3500 deductible for each of us. This costs around $18k in premiums per year.
The Inflation Fighting Act of 20-whatever eliminated the subsidy cliff, so you will get a subsidy of some sort based on the second lowest priced silver plan and how much that exceeds 8.5% of your income, whereas before the instant your income crossed 400% of the federal poverty level your entire subsidy vanished. (I hope I got that right.) It pays for a little less than half of our premium, and continues until 2025 or 2026.
Lots of people try to drive their taxable income to close to zero in order to maximize their subsidy, which seems abusive but thatâs the rules.
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This thread is always such a wealth of knowledge and makes me realize I have a lot to learn! DH and I are hoping to âretireâ in 2030, which puts me at 54 and him at 55. He is likely to work doing something he enjoys part/full time possibly. We are very lucky he has a nice pension, although we likely wonât take that until 65, but can get full medical at 55 which is significant.
There is so much data and information for those retiring at 62 or 65, but âearlyâ retirement seems so frowned upon it worries me we may be underestimating things.
We have significant 401K with his current employer, he has a rollover IRA, I have a SEP IRA, an inherited IRA, tax managed SMA, CDs, HYSA and stock options.
Seems to be we should be working to pay down our mortgage at 5.875 and funding our âcashâ bucket in addition to continuing to max our retirement contributions. We will be able to draw on his 401K at 55 since heâll be retiring from that job, but should we plan to?
Would love any advice anyone has to offer as we map out the next 5-6 years.
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I am also in MA - I chose âname brandâ insurance plans from the network and have been fine. I know somebody who chose the very low end âno-nameâ plans and as you mentioned, the big Boston hospitals are not included (and they have been struggling for a very long time to find any PCP that will accept new patients and take that insurance.)
When shopping for any insurance (even an employee supplied one), you really need to check if the doctors, pharmacies, and hospitals you use accept that plan.
One of the exchange plans we had in NJ was fine at CVS but not accepted at Walgreens (something I had not checked as it seemed obvious to me that they would have been included). I got rejected at Walgreens when trying to get a âfreeâ flu shot there. Luckily, there seems to always be a CVS across the street from every Walgreens.
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I think that health care will be the biggest challenge for any really early retirees going forward. Having to figure out health coverage for 10 or more years will be both challenging and expensive.
Bridging a few years is much easier. Live off non-retirement savings, keep income low, and use ACA insurance.
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Unfortunately, the ACA could end up being gutted. Something to consider.
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Well, this is the rule. It was the state ACA agent (provided for free to us - paid for by NJ), who clued us in to this rule. We did this, I did not consider it abusive. My husband truly had no income, I have very low income from a part-time job, and we could afford to live off of non-retirement savings. Even without considering the health care premium, we were not ready to start using our retirement savings yet.
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Thank you. We are eligible for medical coverage at 55 as part of his pension plan, which makes a huge difference! Of course, we need to find out more information but have been told our contribution will be about the same as it is now as a full time employee.
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thatâs unlikely IMO, but you raise a good point for those retiring in their 50âs: health care, taxes, et al will change in 10-15 years.
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That the situation we had. Retiree health benefits at 55. We waited until my husband was 60, as now can withdraw from 401k without penalty and he started his pension.
The problem is that the company can and in our case did change how they provide healthcare. It was part of the pool the company was in, now they are giving us a stipend and we have to purchase our insurance from the exchange.
I am happy that we only have a few years to navigate this until Medicare. Instead if we had retired at 55. Just my opinion though. And salaried employees are different than hourly that have unions behind them
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I guess one thought is what money will you spend initially? Will his part-time job cover your expenses? Withdrawals from the retirement accounts before 59.5 will accrue a penalty. Should you begin increasing your liquidity?
I guess my biggest piece of advice is to really understand your spending and to talk about how you want your retired life to look. Iâm about to post an update, but we never really had a budget and didnât understand our spending. We just knew we usually had enough. Creating an actual budget for a year enabled us to see where our money was going and sparked lots of conversation about whether it was going where we wanted/needed.
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Agree that understanding your spending/ budget is the most important starting point.
It appears that tumagmom has CDs and HYSA, those could be spent before the IRA. Also agree that one does not want to take early IRA withdrawals.
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Definitely some options but without actual numbers weâre all just guessing. I agree with @tumagmom that thereâs a lot out there for people looking to bridge for a few years, but retiring in your mid-50s is a lot of years to cover in retirement, and she doesnât want to cut too much into principle too early. At 54, those retirement funds could be needed for 40+ years.
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You might want to check out the Boglehead site. You could anonymously post your balances in each of these buckets, and would receive lots of advice on tax-efficient strategies.
As commented above, your first step should be to figure out your spending. If all expenses run through one checking account, download all transactions for the past calendar year, assuming it is not too late to pull down 2023 information. Do the same for your credit cards, and then start sorting your spending into categories so that you can see where your money is going. If too late for 2023, start doing this at the end of 2024.
Once you have a handle on how much money you think you will be spending annually in retirement, you can then figure out where youâll be pulling money from.
You wonât be required to take RMDâs until age 75, so if the 401(k) is very large, he may want to perform Roth conversions once the 401(k) converts to an IRA. Will you be in your mid-50s in 2030? If so, it sounds like you need to find 10 years of spending until the pension kicks in at age 65.
I agree that paying down your 5.875 mortgage makes sense, because your CDs and high yield savings are most likely earning less than that, but again you need to look at years of cash flow projections to determine the proper course.
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Yes I was typing out long response as your response arrived.
There are many variables here and many, many unknowns. Bogleheads is filled with people who have retired early or are planning to do so, and will happily provide their thoughts!
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It sounds like youâre in a really good spot, especially considering youâre giving yourself at least a 5-6 year runway. That benefit of full medical at 55 is sweet. Are you certain that is not subject to change if his employer decides that they need to?
Does the 401k with his employer have enough to pay for your yearly spending to bridge you over to when his pension starts, i.e. 10 years worth of spending (or at least a big chunk of it)? Does his pension provide survivor benefits? You donât mention any Social Security benefits; do either/both of you have those (in the future)?
I agree that you can withdraw (Rule of 55) penalty-free (but still taxed!) from his 401k when he turns 55, but just because you can doesnât mean it makes sense to. It really has to be viewed within your full financial picture, and what it costs to maintain your standard of living, and how long your money needs to last you.
Iâll echo the recommendation to visit the Boglehead forums. That site is better for tackling your questions, and you can lurk and read other peopleâs posts to learn what things you should be considering. I would definitely spend a bit of time getting your bearing over there. While I donât consider the posters to be flamers, IMO it is being considerate of their time for you to be knowledgeable to a certain degree before posting, if youâre going to ask for advice there.
What youâre asking about is FIRE (Financially Independent Retire Early) and there are many online communities for that discussion. Youâre right in that most retirement advice is geared toward retiring in oneâs 60s, and the approach for younger retirees needs to consider more information largely because the money has to last much longer.
ETA: I really like the podcast âThe Retirement and IRA Showâ where the hosts share their MDF (Minimum Dignity Floor, itâs their own terminology not an industry standard term) concept of making sure that your basic living expenses (food, utilities, transportation, housing, healthcare) are covered with secure income in your retirement. And then outside of that then your extra money is for the fun stuff you want to have/do in retirement.
ETA2: Another FIRE website for in-the-weeds analysis is earlyretirementnow dot com, especially the Safe Withdrawal Rate Series.
ETA3: This video really surprised me: âHereâs How to Pay $0 Taxes on $100k Retirement Incomeâ at https://www.youtube.com/watch?v=8pvqCAKc3vk
Iâm surprised by all these nuanced tax rules that make a large difference in determining what pot of funds - and to what extent - you should withdraw money from in retirement.
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When thinking about part-time jobs and medical expenses pre-retirement, it can be relevant to consider how to optimize this from a tax perspective. Self-employment gives additional potential flexibility to limit your income, deduct healthcare costs etc. In particular there can be some advantages to using a C corporation instead of an S corporation or unincorporated business.
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Very sweet. But⊠often not guaranteed to stay the same over time. The closer you are to age 65 before retiring, the lower the risk.
@tumagmom - Definitely start tracking your spending âoutflowâ. (I find it much easier and more comprehensive to track rather than list categories / guess.) For about 8 years before retirement I took 5 minutes extra when balancing the checkbook to capture subtotals⊠VISA + Checks/Autopays + Cash. I omitted college payments and retirement savings. To avoid spiked month, I also omitted car purchase in cash (though we did need to have that as a factor to consider along with monthly average outflow).
Suggestion: Consider attending a retirement planning night class. If there is a free private consultation offered with it, do it⊠but donât feel any obligation to sign up with that advisor. The whole exercise will encourage you to get your ducks in a row with paperwork and planning.
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Absolutely! Well worth it to figure out the specifics about company insurance. I never really thought about it until a few years before we retired, as we were union members, and I knew that we could keep the same company medical plan until age 65. However, the devil is always in the details. We can keep the plan, but we have to pay for it, and the company decided it would cost us about $1265/person instead of the $150 we were currently paying, because the union negotiated this on health care costs 30 years ago, and never renegotiated it. And oh, they can adjust the price every year (though of course, it never goes down). We changed to a high deductible plan, which is still costing us a lot of money. Definitely something for people to investigate.
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