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Is retiree medical worth sticking around?
Old 03-31-2016, 11:52 AM   #41
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Is retiree medical worth sticking around?

I decided to implement my simulated retirement plan for 2016.

This consists of redirecting my paycheck to a separate account and funding my living expenses with quarterly installments from taxable investments.

Needless to say the first 6 weeks were a wild ride. Nothing like seeing the equivalent of 1/2 year's salary evaporate in 2-3 days.

I've been tracking my expenses pretty closely, making a conscious effort not to change my spending habits as I want an accurate depiction of the numbers. There has been a fairly wide variation month to month. I've been tempted to not book some things because "that's a one off thing that doesn't happen every month". The reality is there is ALWAYS something that happens each month so it all gets booked.

My expenses have run 20-30% higher than my initial guesstimate so I upper the amount for Q2. I was lamenting having to withdraw the money for Q2 since the portfolio hadn't fully recovered. I did it anyway and recouped all of Q2's amount over the following 2 days. LOL.

The good news - putting the annualized Q2 spending into firecalc yields:
91% success omitting pension & SS
94% when including pension
100% when including both.

I noticed that there are 5-7 "bad actors" on the firecalc chart that seem to take a lot of extra cash to eliminate and reach 100% success.

If I up the spending number to drop the success rate and ignore those 5-7 scenarios, it allows enough to cover the additional healthcare expense if I were to retire.

At this point all seems good but the year is still young. I'll continue to plod along, see how things shake out and let the money pile up.





This is your life....and it's ending one minute at a time.
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Old 03-31-2016, 12:14 PM   #42
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Seems to me you could have simply taken the equivalent amount from your paycheck , put the rest into separate savings account, rather than pull from your investment accounts.

It's a bit disruptive to your investing what you are doing, and money is fungible so no benefit from the method you picked.
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Old 03-31-2016, 12:25 PM   #43
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I haven't revisited this thread in a while and feel the need to explicitly state some important points.

#1) You can go to the Social Security and use the Estimator. It is available at https://www.ssa.gov/retire/estimator.html No need to setup an account for this. No password is needed Just provide SSN, name, place of birth, birthdate and Mothers maiden name. On the 2nd screen enter '$0' for last years income. This is the figure that they assume that you continue to earn until you are in your 60s. By entering $0 you are tricking it into showing what you have already accrued. After that you will be shown monthly payment amounts starting at age 62/FRA/70. Note the significant increase by waiting until age 70.

#2) You provided a yearly pension estimate in your original post. Is this a traditional pension where the payout is based on your final average salary and number of years served. These types of pensions tend to accrue exponentially in the last years worked. If you are accruing $20,000-$25,000 in pension value for each additional year worked, the retiree medical may really be the small potatoes in this analysis.

#3) Why would you want a GOLD plan. Consider an ACA BRONZE plan unless you are sick and know that you will be requiring lots of medical care. You can change this on a year to year basis. With a GOLD plan you are pre-paying even if you aren't sick. With a BRONZE plan you don't nearly as much up front but will have higher deductibles if you are sick. The big advantages of any of these plans are twofold a) you will get the discounted ins co. contracted prices for in-network medical services as opposed to the retail values which can be 2X to 10x times the discounted values. The second advantage is b) you will limit your maximum yearly out of pocket expense to a defined number. Above this the plan will pay 100% of covered costs. Gold plans and Bronze plans both have these same features. Go for Bronze unless you know that you will have significant on-going medical expenses in the next year

I originally was planning to work to age 55 to get retiree health care and the retirement pension. The pension was frozen when I was 47 or so. With the passage of the ACA, and currently the spouse of someone who still have retiree health care, I decided to pull the plug and have not looked back.

Also, a comment on your experiment about simulating retirement income. This may be useful for a test of your emotions, but you may also wish to do a financial study on your spending. What I did was track and categorize all my spending for years before retiring. When adjusting for things like vacation, furniture or vehicle purchases, capital improvements to house etc, the baseline spending was very consistent year to year. This spending was not based on any type of budget -- it was just on what I felt was worth it each year. Bottom line was that I had years of validation data about how much I like to spend each year. SS pensions and savings were more than enough to cover.

I have never been happier since pulling the ER plug back in 2012-2013 or so. I hope it works out for you too.

-gauss
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Old 03-31-2016, 12:48 PM   #44
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The SS number I used for the latest runs assumes zero future earnings. If I continued to work to FRA, SS + pension would exceed my expenses.

The pension is now frozen so that number will not change whether I retire tomorrow or 10 years from now.

The gold plan was picked as a worse case scenario. In reality, I'd probably go with a bronze plan as I only see the doc 1-2 times a year for routine stuff.

I have several years of quicken data that are inline with what I'm spending so as an overall number it's pretty consistent on an annual basis.

By sequestering my paycheck, I've effectively quit my job from a financial standpoint and am forced to get by with what I have, bringing the emotional aspect into play while still having the safety net of the accumulating savings.

I will continue to work for a few more years to raise SWR and provide more buffer but it's interesting to see my paycheck become less and less relevant.



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Old 03-31-2016, 01:35 PM   #45
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Quote:
Originally Posted by gauss View Post
#3) Why would you want a GOLD plan. Consider an ACA BRONZE plan unless you are sick and know that you will be requiring lots of medical care. You can change this on a year to year basis. With a GOLD plan you are pre-paying even if you aren't sick. With a BRONZE plan you don't nearly as much up front but will have higher deductibles if you are sick. The big advantages of any of these plans are twofold a) you will get the discounted ins co. contracted prices for in-network medical services as opposed to the retail values which can be 2X to 10x times the discounted values. The second advantage is b) you will limit your maximum yearly out of pocket expense to a defined number. Above this the plan will pay 100% of covered costs. Gold plans and Bronze plans both have these same features. Go for Bronze unless you know that you will have significant on-going medical expenses in the next year
Interesting observation, the spread between Bronze and Platinum plans on Kaiser Permanente is smaller compared to the spread on other HMOs. For someone already on maintenance medications, Gold/Platinum plans look much more attractive.

Besides, for the purpose of estimating medical expenses, probably safer if you use either Platinum premiums or Bronze premiums + max OOP instead of just looking purely at the lowest cost Bronze premiums.

That said, if someone can reduce "income" to 150-250% of FPL, Silver with Cost Sharing Reduction are the best option.
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Old 03-31-2016, 01:55 PM   #46
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Quote:
Originally Posted by Geld ist Freiheit View Post
I decided to implement my simulated retirement plan for 2016.
Very interesting idea. I'm probably 3 to 4 years from retirement, but I may try something similar as I get closer.
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