As I get more serious about the idea of retiring early, I find myself thinking a lot about the unknowns, and it seems to me that two of the biggest are healthcare expense and the future of taxation. Which brings me to the point of this thread.
Has anyone given much thought to the implications of Medicare's medium- and long-term solvency issues and what the impacts might be on FIRE plans? (of course the same question could be asked about social security but Medicare is a much bigger issue so I'll restrict my topic to that) I find myself thinking about this more and more, especially as I'll need to plan for 40-50 years of retirement under my current plan.
Keep in mind there are two sides of this problem - the future of benefits as well as the future of tax policy - so even if you have lifetime care through another provider this could very much affect you.
Fundamentally, we've made promises that the current funding structure won't allow us to keep. Medicare Part A alone would require today a doubling of the current tax or halving of benefits to guarantee its solvency for 75 more years. Parts B and D are in at least as bad of shape, and are funded through general revenues, not the medicare tax.
I don't mean for this to be a political thread where we argue about who's fault this is or what we think should be done about it. That's an interesting topic, but at the end of the day its totally irrelevant to my point here. The fact is the next 20-40 years will see a big intergenerational battle between retirees and the working/asset owning population and its totally unclear what the outcome of that battle will be.
The possible outcomes include a large increase in taxation, a decrease of benefits, or (more probably) some combination of the two.
Its reasonable to assume that one of the first ways in which benefits would be cut is through means testing - that would likely mean that those of us who have saved enough for early retirement would be excluded from benefits or have them severely curtailed - thus healthcare could be a much bigger expense 25 years from now than we currently are planning for.
The other side of this is taxation - if tax rates were to rise across the board enough to solve all or most of this problem it would likely have a big impact on the ratio of assets to expenses that one needs to comfortably retire.
Has anyone given much thought to this? Not just thinking about it as an interesting political issue but rather how it affects your plan?
Has anyone given much thought to the implications of Medicare's medium- and long-term solvency issues and what the impacts might be on FIRE plans? (of course the same question could be asked about social security but Medicare is a much bigger issue so I'll restrict my topic to that) I find myself thinking about this more and more, especially as I'll need to plan for 40-50 years of retirement under my current plan.
Keep in mind there are two sides of this problem - the future of benefits as well as the future of tax policy - so even if you have lifetime care through another provider this could very much affect you.
Fundamentally, we've made promises that the current funding structure won't allow us to keep. Medicare Part A alone would require today a doubling of the current tax or halving of benefits to guarantee its solvency for 75 more years. Parts B and D are in at least as bad of shape, and are funded through general revenues, not the medicare tax.
I don't mean for this to be a political thread where we argue about who's fault this is or what we think should be done about it. That's an interesting topic, but at the end of the day its totally irrelevant to my point here. The fact is the next 20-40 years will see a big intergenerational battle between retirees and the working/asset owning population and its totally unclear what the outcome of that battle will be.
The possible outcomes include a large increase in taxation, a decrease of benefits, or (more probably) some combination of the two.
Its reasonable to assume that one of the first ways in which benefits would be cut is through means testing - that would likely mean that those of us who have saved enough for early retirement would be excluded from benefits or have them severely curtailed - thus healthcare could be a much bigger expense 25 years from now than we currently are planning for.
The other side of this is taxation - if tax rates were to rise across the board enough to solve all or most of this problem it would likely have a big impact on the ratio of assets to expenses that one needs to comfortably retire.
Has anyone given much thought to this? Not just thinking about it as an interesting political issue but rather how it affects your plan?