FIRE Now vs. Working to Obtain Health Insurance Benefits

[GMueller]

For the past several years I've focused on building a nest egg sufficient to support early retirement. As I was building my nest egg, I really didn't give much thought to health insurance -- at least not until I began participating in this forum. Now I am struggling with whether it is wise to stick to my original plan to "pull the plug" next summer. At that time I will have achieved my financial goals in terms of a nest egg and a small, but cola'd pension. Next summer I will turn 58. The issue, however, is that I will forfeit my employer-sponsored health insurance (Federal employee) if I don't continue working until I reach age 60. Have others faced a similar decision and, if so, how did you work your way through it?

 

[astromeria]

uh, errr, I made persuaded encouraged allow my husband to keep working at a semi-retirement job he enjoys. I have mixed feelings about this...I would love for him to be fully retired too, but so far more than he does--he likes this job and is content to play retired 4 months a year. While he's working we feel we can spend more on travel (like a month in Italy plus 2 weeks in Florida this year, and a safari in Africa next year).

You could apply for individual insurance now and see what happens (can you get it, what does it cost, do you have dependents and can they qualify?). If you & yours qualify for a decent and inexpensive plan, I'd go for retirement soon.

 

[tryan]

If the employer coverage is "forever" after 60, I'ld work another 2 years. Too many unknowns looking forward to pass this up.

If not, apply for an individual (+1?) plan while working and plan accordingly. Current health will weigh heavily into this one.

 

[Robert the Red]

You could go part-time, if your position allows it. Fed employees can still get FEHB if they are part-timers (just pay a bigger fraction of the premium). Then when you have your 5 years of continuous coverage by FEHB -- which is what you need to be eligible to continue FEHB into retirement -- then you can jump ship.

http://www.opm.gov/Employment_and_B...andbooksguides/PT_Employ_JobSharing/index.asp

And check with your HR representative.

 

[Khan]

I retained FEHB at 54 taking an early out offer.

 

[Martha]

Have you priced individual policies? How is your health? What state do you live in and what protections does your state give you? How much "give "do you have in your budget? These all have to be evaluated to make the decision.

 

[GMueller]

I work for the federal government. The coverage I will forfeit if I quit before age 60 is "forever" coverage. I'm generally in good health, but there have been many threads on the Board that leave me with the impression that health coverage is a "must have" in retirement. My options at this point are to 1) work 2 more years (which is very unappealing from a mental health standpoint); 2) self-insure; or 3) try to find a family policy to cover me, my wife and 2 teenage daughters. When I do pull the plug the plan is to relocate to the Philippines -- at least for the first few years. Self insurance is probably "doable" in the Philippines because the cost of medical care is so low. However, I worry that should we move back to the States our FIRE budget might get stretched too thin if we had to pick up health insurance (assuming it were available) after I was 60.

 

[Spanky]

I work for the federal government. The coverage I will forfeit if I quit before age 60 is "forever" coverage.

Should this be available for everyone?

 

[heyyou]

Tough as it is, I would keep working for the retiree insurance since you are so close to eligibilty. Don't let the SOBs stop you from that lucrative benefit. Get a price, since some pay $10K annually for pre-65 health insurance. That is a $50K benefit for the first 5 years of retirement. That is the critical period for your portfolio. Retire the day after your 60th birthday. Once I decided to retire, work seemed to drag on until i chose a date. I've been gone a year now, this is the first time that I've thought about those dark days. I'm on the sunny side of the street now.
Joe

 

[tryan]

3) try to find a family policy to cover me, my wife and 2 teenage daughters.

We're also a family of 4 ... BSBC coverage just inceased to ~$650/mo; add the co-pays and the fact that we have no dental insurance and we're looking at a grand/mo.

 

[azanon]

You want the insurance. One of the main reasons im not shooting for a really short ER is because I'm a fed employee and the benefits of pension and FEHB are just too good to bail early. If you can get an early out, that's the easiest path, but other than that, put in the extra 2 years.

 

[donheff]

My options at this point are to 1) work 2 more years (which is very unappealing from a mental health standpoint);

I believe you will get retirement and HBI eligibility credit for up to 6 months in a given calendar year for periods of leave without pay (check the HBI credit carefully). Any chance you can get your agency to allow you to take six months off without pay next year? Can you get your doctor to support the need for six months recuperation? Sort of a mental health sabbatical. Then you go back to work for six months and repeat again in 2008.

 

[brewer12345]

I work for the federal government. The coverage I will forfeit if I quit before age 60 is "forever" coverage. I'm generally in good health, but there have been many threads on the Board that leave me with the impression that health coverage is a "must have" in retirement. My options at this point are to 1) work 2 more years (which is very unappealing from a mental health standpoint); 2) self-insure; or 3) try to find a family policy to cover me, my wife and 2 teenage daughters. When I do pull the plug the plan is to relocate to the Philippines -- at least for the first few years. Self insurance is probably "doable" in the Philippines because the cost of medical care is so low. However, I worry that should we move back to the States our FIRE budget might get stretched too thin if we had to pick up health insurance (assuming it were available) after I was 60.

Hmmm, I am not sure we have enough info here. Looks to me like you are contemplating a gp of 7 years between potential FIRE at 58 and medicare at 65. So what will this gap cost you to fill? Go get a quote on a family policy for the four of you to get a feel for what things look like.

 

[GMueller]

Here's the rule I have to live with as a Federal employee:

You may continue your FEHB coverage into retirement and continue to receive the full Government contribution towards the cost of your coverage if:

1) You retire on an immediate annuity (an annuity that begins within 31 days after separating from the Government), and

2) You have been continuously enrolled in the FEHB program, or covered under your spouse's FEHB enrollment, for the 5 years of service immediately preceding your retirement. If you retire on FERS disability with less than 5 years of service, you must have been enrolled for all service since your first opportunity to enroll.

I hate to forfeit the Government's contribution towards health coverage, but on the other hand, I hate to work two additional years if the only reason for continuing to work is to qualify for health insurance. I realize that in the end it is a personal choice, but I wanted to hear from others who have faced a similar situation. It appears that a consensus is growing that the working two more years is worth the price, i.e., health coverage is that important. I really appreciate the responses as this is a difficult decision for me.

 

[brewer12345]

Have you been there for over 5 years? Then it sounds like all you need to do is buy an immediate annuity to qualify. Easy enough to do.

 

[MooreBonds]

GMueller - just to double check, where/who provided the information that you have to work until age 60? Is it a set age, or age+years, or what? Ask your HR dept to give you a black-and-white document that spells out what you have to do to reach full retirement age, etc.. The text you posted in red only references if you choose the immediate annuity when you retire, without mentioning what that official age (or other calculation) is.

 

[Robert the Red]

It may also be useful to ask questions at the http://community.federalsoup.com/4/OpenTopic message boards -- there is a great deal of knowledge there about Federal retirement systems, which have a lot of obscure rules. I take it you are under CSRS, since the "age 60" rule you mention is for that system, not FERS.

If your supervisors allow it, you could take LWOP for up to 1000 hours in a year, and not lose pension accrual. Or you could drop back to a lower-level job to get the last 2 years in with some sanity left.

I'm in FERS, and eligible to retire under MRA+10 in 4 years. Financially, I'm in pretty good shap, but will keep working until then (a) for health insurance in retirement, and (b) because my wife is still working.

 

[kaudrey]

Azanon says: You want the insurance. One of the main reasons im not shooting for a really short ER is because I'm a fed employee and the benefits of pension and FEHB are just too good to bail early. If you can get an early out, that's the easiest path, but other than that, put in the extra 2 years.

-------

I am also a federal employee, but I'm only 37. I'd have to work until 57 to get FEHB bennies, but I am shooting for 52. The extra 5 years is not worth it for me. Would 2 years be worth it? Maybe. I'm just saving extra and have health care costs factored into my future expenses. It's a big decision, but I've opted to plan for not having that coverage.

Brewer - by the "annuity" GMueller means that he can only keep his FEHB if he retires when he is eligible to receive his pension immediately. Sounds like he is under CSRS, but I'm in FERS: for me, at 52 I'll have 30 years in, so I get full pension at 57, but no health bennies because the pension is deferred 5 years from when I leave, as compared to starting right away.

 

[GMueller]

Clarification: in the fed system eligible to retire with an "immediate annunity" means that you have both reached retirement age and have a sufficient number of years of service. That usually means 30 years of service at age 55, or 20 years of service at age 60. If I retire at age 58 (next year), I will have 22 years of service. Accordingly, I will be not be eligible for an immediate annunity (pension), but I will be entitled to take a deferred pension to start when I reach 60. Thus, I would not be entitled to health benefits. The pension is worth 1% for each year of service, i.e., in my case 22 percent of an average of my highest 3 years of service. That translates into a pension of about $18K. I will have about $1.3M tucked awayed by then (including 401K and everything else). I figure the pension plus the nest egg plus social security will support me and my family in retirement. The only piece of the puzzle is health insurance. If it were not for the health insurance issue, retiring next year when I turn 58 would be a "no brainer." The temptation to pull the plug and get on with my life has become very strong, but I don't want to do anything I will regret later. Again, thanks for the comments!

 

[Patrick]

You're so close, I'd hang in there to get the insurance unless the job is just untenable.

 

[martyb]

I'm a CSRS Fed too, age 49, mandatory for me to retire in 2013 at age 55 because I'm a military technician who will have maxed out on the military part at that time. To me, working just 2 more years in your case for the FEHB is a no-brainer. That's a huge benefit that many people would love to have. It's worth a great deal of money, not to mention the peace of mind for the rest of your life. As much as I'm sick of my job, I know for sure I'd stick it out for the FEHB. Best of luck to ya, I wish I was within 2 years instead of 6 .

Marty

 

[RP]

The biggest issues I see here are the idea of living overseas versus the US and the fact that there are still children involved.

Health care in the Philippines is so cheap that anyone with a million plus in their portfolio might well consider self insurance. It costs about $8.00 to see a specialist and peanuts per day in the hospital. One of the reasons I moved to the Philippines is the long-term care issue. If I should wind up needing an assisted living/nursing home environment my wife, who's substantially younger than I can hire ['round the clock nurses in our home for cheaper than the monthly premiums for LTC.

However there are teens involved and If they remain in the US and attend school there could be some big issues there.

At 65 Medicare kicks in and most insurance policies take a secondary position ... but Medicare can't be used overseas, so that's a factor I don't see addressed. In my own case I'm covered by a military retirement health plan (TRICARE) which works over seas and is free until I reach age 65. Then I'll have to avail of Medicare Part B even though my TRICARE will continue.

It's really hard to make a call, though, because I worked several extra years past my Federal retirement and my only regret, nearly 4 years after 'pulling the plug' is that I waited so long.

 

[haha]

I hate to forfeit the Government's contribution towards health coverage, but on the other hand, I hate to work two additional years if the only reason for continuing to work is to qualify for health insurance. I realize that in the end it is a personal choice, but I wanted to hear from others who have faced a similar situation. It appears that a consensus is growing that the working two more years is worth the price, i.e., health coverage is that important. I really appreciate the responses as this is a difficult decision for me.

Health care is vital. US health insurance is very expensive, or not available. You re talking about 2 years working - I assume not in Iraq- for a lifetime benefit for you and your wife, and I would guess coverage for your children until they are of age.

I can't imagine not doing the 2 years. Look at all the time you have already logged. This is a big part of the payoff.

Ha

 

[jdw_fire]

Clarification: in the fed system eligible to retire with an "immediate annunity" means that you have both reached retirement age and have a sufficient number of years of service. That usually means 30 years of service at age 55, or 20 years of service at age 60. If I retire at age 58 (next year), I will have 22 years of service. Accordingly, I will be not be eligible for an immediate annunity (pension), but I will be entitled to take a deferred pension to start when I reach 60. Thus, I would not be entitled to health benefits. The pension is worth 1% for each year of service, i.e., in my case 22 percent of an average of my highest 3 years of service. That translates into a pension of about $18K.

GMueller, the pension you described above is a FERS (not a CSRS) pension. With FERS you can retire with an "immediate annuity" at your MRA (or any time after) with 10 years of service. There is a penalty to the annuity, which if memory serves me for you (@58yo) would be 4% or about $720/year. You would more than make up for this with the Gov's share of your health ins. Therefore there is no need to stay longer than you planned or give up the health insurance, you can have them both!