Come on... tell us to retire now

[rkser]

I need your input as what to do in our current situation, as I am certainly stumped on this one, please bear with me with these numbers -

I am a 55 yr old, accident disabled physician, working part time in my own solo practice, with diabetes and such.... and am unable to get individual health insurance policy . My 50 yr old wife manages the office.

Daughter married and gainfully employed, son is a freshman in college. We are new empty nesters, my father lives with us half the year, he is 83 and has alzheimer's dementia.


Current yearly expenses - $ 120,000
Extra Padding, unexpected yearly expenses - $ 25,000
------------
Total annual expenses - $ 145,000

Current yearly disability income - upto age 65 - $ 156,000
Our combined salaries - part time work W2 - $ 60,000
Office building rental net income - - $ 60,000
{It houses our + 2 other practices } ------------
Total annual income - $ 276,000

Mortgage free Home and Office Building
529 Edu. savings enough for son's education
We save regularly, difficult to put a number, but say 50 to 100 k a year

Assets - numbers rounded

Retirement - Mutual Funds - $ 1,650,000
Non retirement - Taxable - $ 1,175,000
--------------
Total money assets $ 2,825,000

Asset Allocation - 45% Stocks/55% Bonds + fixed income

IF we close shop now and we retire ............
I lose - Medical Insurance, self insure for 11 yrs till age 66 - Medicare
- Our salaries $60,000
- Our Office rental income may go down by how much
(By an unknown amount as then our office will need to be rented out in the very soft rental market of our town)

I do gain freedom of not getting bound to a schedule even though it is part time, start hobbies and may do limited travel with constraints of disability.
The various calculators- Fidelity, Firecalc, etc show green, say we enough.


What would you do ?
Thanks in advance for all and any opinions, will render more info to any more questions......, (come on .... tell us to retire now )


Thanks and regards

 

[REWahoo]

With your stated health problems I would not consider retiring if I had to self-insure - too risky. Maybe hang on a couple more years and see how the Affordable Health Care Act plays out?

 

[MichaelB]

Agree that PPACA is key for you. Does your current expense include health care or is that included in business expense? Also, does your state offer a high risk health insurance pool?

 

[ziggy29]

With your stated health problems I would not consider retiring if I had to self-insure - too risky.

This.

Apart from the health insurance situation, the numbers seem to work. Unfortunately, that's like saying "other than that, Mrs. Lincoln, how was the play?"

 

[bld999]

Go For It

Unless the Practice is your highest and best pleasure, make plans to get out and begin to enjoy yourself. As you know better than others, medical issues can begin to pile up at a baffling pace, and with db, the effect is magnified.
Get out there and smoke the tires!

 

[packrat44]

Maybe you could set aside the entire disability income (invest it but not spend any gains from it) along with the net from your salaries and try to live on the remainder. This would give an indicator if you are financially able to pull the plug. You could also use this period of time to adjust your expenses into categories of: needs; wants; and fluff. While your rental income market may be softening you would be adding 1 more unit to the mix.

 

[rkser]

Thanks for your replies,

-MichaelB by PPACA - I presume you are referring to Affordable health care act - Obama Care, certainly if that did become a reality lots of my health insurance problems would be solved. Yes, the office pays the health insurance premiums for both of us and the other 2 staff. I need to find out about the high risk pools in Florida.

-Packrat44 - By living on the remainder if you mean the $60k from the rental income, it would be tough going. With $100k we will be able to manage by trimming the charities/donations. Funny during the long residency & fellowship yrs, we managed fine on exactly $60k.

My wife is the only share holder on the LLC, thru which she presently manages the 3 office rentals including mine, in the building. I wonder if she would be able to get the health Insurance thru the LLC and include me as the spouse.

I do think of taking the risk of ER at times, as we would be able to wing all but the hospitalization expense, my wife is the careful one and is scared of the jump from the cliff. I keep pointing out that we will never be able to spend the pile of money to which we keep adding to if we wait another 10 yrs.
It is funny, how health insurance is holding up early retirement for so many.


Thanks and regards

 

[W2R]

It is funny, how health insurance is holding up early retirement for so many.

Yes, it is strange that so many of us have had to do this. I had to delay my retirement for two years in order to qualify for retiree health insurance at age 61. Looks like you may have to delay for two years (for PPACA/Obamacare, in your case, if that even solves your health insurance dilemma) as well. It is very aggravating to wait when one is otherwise financially independent and ready to retire. If it is any comfort, in retrospect it does seem like those two years flew by quickly, and I ended up with a larger nestegg to enjoy. In any case, good luck.

 

[ziggy29]

Yes, it is! I had to delay my retirement for two years in order to qualify for retiree health insurance at age 61. Looks like you may have to delay for two years (for PPACA/Obamacare, in your case) as well.

If COBRA is an option, if the courts uphold the law and the November election results don't suggest a strong push to repeal before 2014, I'd think that would be an escape hatch.

 

[W2R]

If COBRA is an option, if the courts uphold the law and the November election results don't suggest a strong push to repeal before 2014, I'd think that would be an escape hatch.

Good idea. Those are big "ifs", though. What a dilemma.

 

[MichaelB]

Rkser, there is no high risk pool in Florida. Down here we're pretty much on our own unless we can get group insurance. If the annual expense you indicate of $120k does not include health care insurance, the entire "extra padding" will easily consume that.

If your wife's business meets the minimum requirements set by the health care insurers it will qualify for a small business policy. The rules are different for a business of one vs two or more, and most insurers still underwrite. UHC doesn't, or at least didn't. Small business policies are mandatory, however, so you are sure to get one. My suggestion would be to talk with an agent who represents the major insurers - UHC, Aetna and BCBS.

Cobra technically doesn't apply to small business (2-50 IIRC) in Fl, but there is a small business conversion requirement. I am not familiar with the details but I think there is a standard policy the insurers are required to offer you, at least for the 18 months. After that I'm not sure. Something to look into.

Edit: if you choose to get insurance via your wife's business, companies of 1 have a short window to apply - one or two weeks late in the year for a policy beginning the following Jan 01. That's it. This link to Kaiser Foundation has good info on Florida regulations http://www.statehealthfacts.org/

 

[jclarksnakes]

It is a crazy world we live in today. Who would have thought that someone worth several million would be faced with questions about being able to retire? If it were not for the healthcare questions you could be out the door right now. I would think that health insurance through your LLC would be very expensive. Waiting to see what happens with PPACA seems like the prudent choice.

 

[Alan]

I would also stick it out for a couple of years to see what happens with the ACA.

I also delayed my retirement for 2 years to qualify for retiree health benefits.

 

[Meadbh]

You save regularly, difficult to put a number on it, say $50-100k per annum. It seems to me that it would be really worthwhile doing a detailed budget and savings analysis. That's a pretty big range! Why not spend the next year or two accounting for everything you spend and critically examining what you really need to live on.

Do you have a professional corporation? Do you have, or could you purchase, a corporate health plan? A corporate pension?

I have a corporate health plan for my employees (me) which reimburses me for uninsured health expenses, thereby converting them to corporate expenses and reducing corporate taxes.

 

[packrat44]

-Packrat44 - By living on the remainder if you mean the $60k from the rental income, it would be tough going. With $100k we will be able to manage by trimming the charities/donations. Funny during the long residency & fellowship yrs, we managed fine on exactly $60k.


Thanks and regards

My response was not as clear as I had intended. I was figuring you would add to your present rental income along with potential income from a future vacated 3rd office that you presently occupy along with the income that your $2,825,000 in money assts are generating. You would not have to physically remove those gains from your retirement accounts, but substiute an equal amount from your other present income.

 

[Koolau]

I would consider moving to a state which offers some sort of pool health insurance. It's a terrible thing to have to consider, but, honestly, in your case, health insurance is a deal breaker in my opinion. There really isn't enough money in your savings to "self insure" (again, IMO).

Other than that (Mrs. Lincoln, heh, heh) you seem good to go.

One more thing. None of my business, but I would consider cutting overall expenses "just because". At your age, you may need to preserve your capital for a relatively long time. Some folks on this forum spend less than $30K/year. Not suggesting that, but the higher the spending level, the "easier" it is to find places to cut. If you don't wish to cut, I would at least have a backup plan which would include cutting spending.

Good luck. Sounds like you have the basics covered except HC. Oh, and YMMV.

 

[W2R]

I was discussing this thread with a friend, and he had an idea that I thought I'd bring up.

Perhaps you could join another group of doctors, essentially giving them your practice and getting health insurance with a minimal amount of involvement on your part. Going in one morning every other week, for example, in exchange for health insurance would be a good deal for you. Getting your practice would be a good deal for them.

 

[rkser]

Thanks every body for your opinions and comments, I appreciate that.

MichaelB, yes I will check in with our present insurance agent about getting health insurance through the LLC.

W2r -Merging the practice with another one has been toyed around off and on.

Koolau -Yes downsizing to cut the living expenses partly has been on our mind, but the way the house prices have gone down in our neighborhood and all over Florida, we will take a hit of about 200k after the commissions and such... we are locked up in a big house for the present, and currently paying its high maintenance. But your point is well taken, we can trim expenses in other areas.

Meadbh-Last year our daughter got married and the whole family got carried away and spent a six figure amount for the 4 day event , making calculating the savings for last year at best a guess. We usually save around 70k a year savings including the retirement plan at work and the remaining into taxable accounts. The numbers will be more accurate now on, as I am using Mint to ledger in all the expenses and income.
Practice is a C Corp, I have the same United Health Care insurance as the employees. A year back we closed the office 401k retirement plan, due to lengthy paper work and the growing expenses of the administrating firm, and also there was not much money left after the expenses. I also realized the taxes may not be much lower for me during future retirement, just saving in the taxable accounts after our 2 Roths looked much simpler.
By buying a Corporate Pension plan, I presume you are talking about a defined benefit plan, well in the first place there is no money left and the IRS does NOT look at those plans as favorably as defined contribution plans, such as Keogh, 401k plans, both of which we have had at different times and presently closed due to paucity of funds.

Yes, in the meantime we are hanging on for few more years, before taking the Early Retirement, hoping it will be really earlier then at age 65.
Practicing Medicine has not been much fun lately anyway, and doing for these meager returns makes less sense, but for the precious and prized health insurance.

Thanks every one, with regards

 

[BellBarbara]

Can you establish a domicile in Mass? We have the health exchanges here, no pre-existing conditions, you can insure. It's not going away, people love it.

Might be worth looking into renting a 1 bedroom apt in an inexpensive area of Mass.

We won't leave the state because we don't have to worry about health care.

 

[rkser]

Barbara - Thanks for reminding us of that option,
I wonder what goes in to establishing a domicile in Massachusetts, is that 1 bedroom rental good enough, or does one has to live in Ma for say 6 months in a yr. I will look into that.

Thanks and regards

 

[Lagniappe]

Won't he have to pay Mass state taxes on his retirement income if he sets up domicile to get access to health insurance? IIRC Florida has no state taxes, so this might be a large incremental amount. It may be worth it to get health insurance, just another factor to consider.

 

[lhamo]

How are you funding DS's college expenses? Is that part of your annual spending totals? If so, then you will see a HUGE drop in expenses when he graduates.

Even with high maintainance costs on your primary residence, your spending totals seem quite high to me. Are there places you can cut back without feeling deprived? Understand you haven't been tracking closely up to now, but once you have a few months of expense records if you feel comfortable you can post the details here. We're pretty good at doing "tough love" on people's budgets. You don't have to take anyone's suggestions, obviously, but sometimes it helps to get feedback from different perspectives.

What would your retail property get if you closed the practice and sold it? It might generate less income than your current rentals, but you would be relieved of the stress and pressure of managing property.

Are there medical programs in your area where you could start scouting for someone to come in and share or possibly take over your practice? Being a a bit proactive on that front might be a win-win situation for you and another young doctor.

Good luck working this out. Hope you are able to find a way to retire early with solid health insurance coverage.

lhamo

 

[BigNick]

Even with high maintainance costs on your primary residence, your spending totals seem quite high to me. Are there places you can cut back without feeling deprived? Understand you haven't been tracking closely up to now, but once you have a few months of expense records if you feel comfortable you can post the details here.

+1. The OP's numbers look great to me apart from planning to spend $120K *and* a $25K cushion "just in case". It would make me wonder if someone has some to terms with the adjustments needed for true ER, which in my opinion is about retiring to have more time, even if that means fewer toys.

 

[rkser]

lhamo- Our 529 plans savings like I said in my first post, will be enough for his education including his graduate school, he goes to a local state school now. The Real Estate market is quite down now, for what it is worth, a realtor informally estimated the present price to be less than the cost of the construction built in 1999 and that convinced us to hang on to it for now.

$ 10000 is a very conservative number, MINT shows an average monthly expense as $ 7000. After a few more months in Mint, my estimate will be more closer to reality and then I will post the numbers.

Thanks & regards

 

[obgyn65]

Hello rkser - I am a few years younger than you are, with NW numbers in the same ballpark. However, my expenses are much, much lower than yours. With your level of expenses it might be wise to wait and check if you may be able to cut down on expenses (?). Have you entered your numbers in this free tool :

Merrill Edge| See Where You Stand

Good luck

What would you do ?