Why is my budget so high ??

[Live And Learn]

In my normal "making myself crazy" manner, I've found another site to estimate insurance costs under the Affordable Care Act.

National Health Reform Calculator

For 2 people, with the youngest one at 55 yo and 84k income costs are 18k for premiums with 12k max out of pocket. My 21k again doesn't look like enough.

I understand the 31k is worst case but when planning for ER I'm in the "you've gotta plan worst case" camp. (see my tag line !)

 

[REWahoo]

If you assume worst case for every possibility you can never retire. Of course since worst case when it comes to lifespan is "today is your last day", you really have nothing to worry about...

 

[MichaelB]

In my normal "making myself crazy" manner, I've found another site to estimate insurance costs under the Affordable Care Act.

National Health Reform Calculator

For 2 people, with the youngest one at 55 yo and 84k income costs are 18k for premiums with 12k max out of pocket. My 21k again doesn't look like enough.

I understand the 31k is worst case but when planning for ER I'm in the "you've gotta plan worst case" camp. (see my tag line !)

It's not clear why you feel your own estimate for health care is too low. You are budgeting 3k more than the cost of the premiums, which seems pretty reasonable to me.

 

[Live And Learn]

Simple answer --- I'm a worrywart when it comes to money. Probably comes from growing up well below the federal povery level.

 

[rbmrtn]

I put my numbers in and I get 1800/yr, way less than what I budgeted

It's a numbers game. Your income is way to high to benefit from this ( other than you can actually buy insurance and not be denied )

If You put in 60K it drops to 5700/yr. Can you get by on 60K instead of 84K. Maybe do some kind of bucket arrangement with pot of cash. Get 60k of income and take 24k from the cash pile. You'd almost come out even with difference in premium.

I don't know if has been determined what exactly will be counted as income. That might influence things also.

 

[Mulligan]

Simple answer --- I'm a worrywart when it comes to money. Probably comes from growing up well below the federal povery level.

I know a person cannot go without insurance. However, it is very sad that many people have to pay such high premiums, or not retire at all because of the expense. It sure seems the vast majority worry about paying for the actual premiums, not the actual expenditures of healthcare. It seems to me most people who are healthy around 50, stay healthy until Medicare takes over. It would be very demoralizing to me to write a big check to insurance company each month, that I am most likely not getting anything out of it.

 

[Live And Learn]

Yes, its very sad indeed. However with both our pre-existing conditions I am happy to be able to GET insurance if the Act isn't repealed. Like so many things in life, its risk vs reward.

I'm considering getting some sort of part time job after I leave Megacorp. I would certainly spend every single dollar on discretionary expense (ie: fund the dog, the vacation, and spending cash) - at least I'd feel that I was working for "fun money" instead of necessities. I would consider that FIRE'd and hopefully would have a more rosy perspective about getting out of bed in the morning. The only 'gotcha' is the part time job would need to be low stress and I wonder if I can BE low-stress about anything !!!

 

[jj]

Taking this thread off on a different tangent, I wonder if you are completely over-estimating taxes in early retirement.

You say your income will be coming from 'taxable' as if that means all that income will be taxed. It actually means it has already been taxed and return of capital is actually not taxed at all.

To allay your fears about taxes in ER simply buy yourself a copy of TurboTax and model your income tax return with your new sources of income. You will be too young to withdraw from 401ks or IRAs so everything must come out of that 'taxable' side where YOU can choose how much capital gain to take on what you sell to provide your cashflow, or how many bonds you sell for the same. With medical expenses projected as high as yours you will have quite a sizable deduction to take from your income. If you are like us you will be forced into doing Roth Conversions to generate taxable income to use up all the deductions you have!

YMMV - if you have huge pensions providing your income in ER - forget everything I've said....

 

[rbmrtn]

Some interesting numbers coming out of the calculator you linked.

At your income level a family of one pays 36% of what a family 2 pays. That basically says you could get 2 individual policies ~30% cheaper than family plan for 2. I don't know if you can get two individual policies in the same household, maybe it is related to your tax filing status.

At a lower income of 30K, it's reversed. Family of 2 is 70% of what a single premium is.

There is a "cliff" for premium support at 60K.

 

[Live And Learn]

Taking this thread off on a different tangent, I wonder if you are completely over-estimating taxes in early retirement.

You say your income will be coming from 'taxable' as if that means all that income will be taxed. It actually means it has already been taxed and return of capital is actually not taxed at all.

To allay your fears about taxes in ER simply buy yourself a copy of TurboTax and model your income tax return with your new sources of income. You will be too young to withdraw from 401ks or IRAs so everything must come out of that 'taxable' side where YOU can choose how much capital gain to take on what you sell to provide your cashflow, or how many bonds you sell for the same. With medical expenses projected as high as yours you will have quite a sizable deduction to take from your income. If you are like us you will be forced into doing Roth Conversions to generate taxable income to use up all the deductions you have!

YMMV - if you have huge pensions providing your income in ER - forget everything I've said....

You are absolutely correct but I try not to think about it. I've assumed that every dollar of spend has a tax implication. That will certainly be true when we got to the point where all spending comes via the 401k so I acknowledge that I probably have a significant overestimate.

Ditto for health care. DH will continue to w*rk for 7 years so my HI will be much less. And if Obamacare stays in place and I can keep taxable events to 60k or less then again I get a substantial reduction from my budget.

These, along with ignoring 5% of my overall portfolio, are my cushions. I try to ignore them and try hard to pretend that my portfolio and expenses are as reported in Firecalc and the other tools I use.

 

[Live And Learn]

Some interesting numbers coming out of the calculator you linked.

At your income level a family of one pays 36% of what a family 2 pays. That basically says you could get 2 individual policies ~30% cheaper than family plan for 2. I don't know if you can get two individual policies in the same household, maybe it is related to your tax filing status.

At a lower income of 30K, it's reversed. Family of 2 is 70% of what a single premium is.

There is a "cliff" for premium support at 60K.

WOW - thats amazing. With two policies at 40k income each I come up with a max spend of 13.9k assume both hit the out of pocket limit. Maybe DH and I should divorce and live together !

 

[panhead]

Just another quick observation that should be looked upon carefully as I've already had a couple of beers, lol!
I understand looking at worst case scenarios. What I don't think makes sense is to look at worst case scenarios happening while other things remain constant. In other words, you seem to calculate your health care spending by maximum out of pocket every year. That is likely already well over-inflated. That being said, do you think you would be eating out a whole lot or traveling while you are spending all that money on health care? Chances are if your health is that bad, you are not hiking around Australia. My "fun" category needs to be high enough to take into account max out of pocket health care spending, and that' s my trade off. Plus, if necessary, there are other places we both can cut.

 

[Live And Learn]

EXCELLENT point Panhead. Beautiful in its simplicity ! I've worst cased everything - gave myself a decent amount of spending cash and vacation, as well as worst-casing both healthcare and taxes. There will certainly be give and take among all those.