The Hidden Cost of Retiring Early

[REWahoo]

This Money article needs to be indexed under "stating the obvious" or under "examples of what financial writers come up with when faced with a deadline."

The hidden cost of retiring early: $51,000 in medical expenses - Jun. 12, 2014

Quote:

If a couple chooses to retire at the age of 62 instead of 65, they will face $51,000 in additional medical expenses, according to a report released Thursday by Fidelity Investments. The major cause: Medicare coverage doesn't kick in until age 65. So without coverage from a former employer, which is an increasingly rare benefit, the couple would have to pay for private insurance.

[ERhoosier]

Obvious, but still commonly overlooked. Even on this forum it's clear many seriously underestimate likely future HC expenses. HI, copays, deductibles, and uncovered expenses of serious illness can be devastating for lots of middle-class FIRE's. IMHO- Estimates from that Fidelity study seem rather low. In many regions, unsubsidized HI premiums alone for couple in their early 60's (inc ACA Silver or Gold Plans) exceed their $17k/yr overall HC cost est, not inc co-pays, deductibles, and uncovered expenses.

[Radicalfil]

My unforeseen cost are too many projects with too few dollars and too much time without distractions. Projects are creeping in size and costs as the years go by. It is kind of like the Winchester Mystery House where the owner had to keep building to stay alive. Oh yea I forgot, each project requires new tools to purchase. FIRE'd six years now and I might have to build another garage to store my new tools.

[Fermion]

Subsidized premiums and subsidized copay make that figure extremely high for some early retirees who know how to arrange their finances.

Something more like $18,000 to $21,000 for the 3 years would be a reasonable figure. Offsetting this is the elimination of paying SS and Medicare tax on your wages, possibly saving you more than the $18,000.

[W2R]

Quote:

Originally Posted by REWahoo This Money article needs to be indexed under "stating the obvious" or under "examples of what financial writers come up with when faced with a deadline." The hidden cost of retiring early: $51,000 in medical expenses - Jun. 12, 2014

Well duh!!

Even with great medical coverage as a federal retiree, and despite being unusually healthy and having started Medicare Part B a year ago, still my uncovered medical expenses have gone up each year simply due to the usual ravages of time and aging. It's a fact of life, folks.

[seraphim]

It's CNN - what do you expect?

[Live And Learn]

Quote:

Originally Posted by REWahoo This Money article needs to be indexed under "stating the obvious" or under "examples of what financial writers come up with when faced with a deadline."

Yep, that was my initial reaction. And then I thought about how poorly people plan for retirement (outside this forum, of course) and that this article might actually be needed ! And then I got happy - because I've assumed 81k in expense for this 3 year period and Fidelity estimates 51k.

[timeasterday]

Or move somewhere with decent, affordable healthcare (that's my plan).

[kcowan]

Quote:

Originally Posted by timeasterday Or move somewhere with decent, affordable healthcare (that's my plan).

Just make sure you qualify first. Mexico offers "universal" coverage for under $400/yr but you have to be young and healthy when you apply.

Similarly Canada requires you to qualify for their $70/mo "universal" plan that does not include eyeglasses, dental, pharmacy.

[sengsational]

Quote:

Originally Posted by kcowan Just make sure you qualify first. Mexico offers "universal" coverage for under $400/yr but you have to be young and healthy when you apply. Similarly Canada requires you to qualify for their $70/mo "universal" plan that does not include eyeglasses, dental, pharmacy.

Good info if you want/need to buy into the country's plan, but there are non-government plans too (hospital chain). They might just charge you more rather than disallowing you. And because they have the capability to deliver health care services on par with the US, but at rates 75% lower, you might be able just pay as you go, and only insure for the catastrophic events.

[daylatedollarshort]

Quote:

Originally Posted by Fermion Subsidized premiums and subsidized copay make that figure extremely high for some early retirees who know how to arrange their finances. Something more like $18,000 to $21,000 for the 3 years would be a reasonable figure. Offsetting this is the elimination of paying SS and Medicare tax on your wages, possibly saving you more than the $18,000.

+1. We are very aware of the 400% of poverty level O-MAGI cliff for health insurance subsidies and plan accordingly.

We have a subsidized Bronze plan with an HSA, and at our ages we can contribute the max (household max plus both over age 55) to the HSA, which in turn lowers our O-MAGI.

We use alternative medicine for minor aches and pains. We get glasses from Costco, contacts from online discount stores on sale, and most years no one has any cavities, so unless someone develops a serious illness or has an accident, this year our family health care costs will be under a few thousand for the year for insurance premiums and dental checkups.

Being home also provides us with less stress, more time to exercise, ways to avoid the sitting is a lethal activity lifestyle, and more time to cook from scratch, so those factors help to save on medical bills.

[Which Roger]

The article says "51,000 in additional medical expenses", but then goes on to say that they'd spend 17K/yr for 3 years, so it's really total medical expenses. To be accurate, they need to subtract the expenses the couple would have if they continued to w*rk for those 3 years.

[Live And Learn]

Quote:

Originally Posted by Which Roger The article says "51,000 in additional medical expenses", but then goes on to say that they'd spend 17K/yr for 3 years, so it's really total medical expenses. To be accurate, they need to subtract the expenses the couple would have if they continued to w*rk for those 3 years.

Good point ... I wonder if that the difference between my budget of 81k (over three years) vs their 51k ...

[Chuckanut]

It's obvious that there is a monetary cost to retiring early. It is equally obvious that there is a cost in time and quality of life to working longer.

Take your choice.

[gauss]

I'm shocked -- shocked that I will have to pay my own health care. LOL

-gauss

[seraphim]

Since I never contributed to Medicare, it makes no difference to me.

[jim584672]

The motto of this story, have some imagination when creating your income. They should have bought Berkshire Hathaway (no divs) to lower their income. Then they could lower the their income to the 199% FPL to get a 87% Silver plan with a max out of pocket of $2,200. Or better yet, get under 138% FPL to get free medical.

[Greencheese]

I do love some of the comments on that article

[LeavingOhio]

If you and your spouse retired at today 62 and you had income of just your Social Security right now and let's say it was $30,000 a year, here in Ohio, you would be eligible for major tax credits which would make your monthly contribution (total for both) as low as $126 per month or just $1,512 a year. Not sure how it figures in if you have a big retirement portfolio just sitting there, but if you had nothing and retired on SS alone with $30,000, you could get some pretty cheap health insurance.

[Senator]

I get free VA healthcare, all I have to do is wait for it... If I was on welfare, I would get it faster, and still free.

It's amazing we treat people that have never contributed a dime to society, to better health care than a veteran.