45 days into retirement!

[Cincyguy63]

I've been lurking on here for years and have been enlightened by the thoughtful conversations and introductions from the group.

Little about me: 57 yo married guy worked for 33 years in the software business in sales and sales leadership. Living the dream in Austin TX. Took a retirement package that will allow me to fund 2.5 years of expenses (including COBRA for 18 Months) without tapping into nest egg (1.6m Pretax/ 2.1M Post Tax). Small 15 yr mortgage (120k) on our home with equity at 1.1M.

DW still works part-time as RN making around 20k net most of which goes to our youngest's college living expenses (529 covers the rest).

Medical seems to be the largest expense. Right now COBRA for family is $2,400 per month (company paid for the first 7 months thru Feb 2022). 2022 will be funded by cash so the only income I'll show is my wife's 20k so would plan to enter the ACA market for 2023 and optimize the subsidies.

Loving the freedom and the joy of slowing down a bit. Love any suggestions or guidance of the new found freedom.

 

[bloom2708]

What is your spending per year including health coverage and lumpy spend?

I would ship ACA and local plans before paying $2,400/month for Cobra. You have 7 months to get coverage. If your income is very low, you likely will qualify for ACA subsidies.

 

[Cincyguy63]

What is your spending per year including health coverage and lumpy spend?

I would ship ACA and local plans before paying $2,400/month for Cobra. You have 7 months to get coverage. If your income is very low, you likely will qualify for ACA subsidies.

Expenses run 12-15k per month including current COBRA payments.

2021 W-2 income will exceed 500k. Assume earliest I can shop for an ACA subsidized plan would be for 2023 but not really sure about the look back period.

 

[Aerides]

There's not really a look back, because the ACA realizes a lot of people sign up when they lose employment. You attest to your expected income. In some cases, support is requested. In mine it wasn't.

Let's say in 2022 with severance you'll make $500k, and be on Cobra. Then in November 22 you sign up for the ACA for 2023, but plan on making $50k in 2023. You say you'll be making $50k and that's basically all there is to it. Of course, if you made more, tax time will true up.

 

[Cincyguy63]

There's not really a look back, because the ACA realizes a lot of people sign up when they lose employment. You attest to your expected income. In some cases, support is requested. In mine it wasn't.

Let's say in 2022 with severance you'll make $500k, and be on Cobra. Then in November 22 you sign up for the ACA for 2023, but plan on making $50k in 2023. You say you'll be making $50k and that's basically all there is to it. Of course, if you made more, tax time will true up.

So, if I’m following you correctly , I can sign up for BCBS TX Bronze plan under our states ACA plan for benefit year starting Jan 1 2022 b/c I should only see 25k gross combined income for both me and spouse. I would than be eligible for a fully subsidized plan for my wife plus one dependent. I would than have the option to come off Cobra starting Jan 1 2022. Please confirm if I’m thinking this through.

 

[RetiredAndLovingIt]

If you were in California with that low of an income for 3 people you would be on Medicaid and you dependent on CHIP. I'm sure it's different in Texas, they're not so generous. Healthcare.gov is not updated for 2022 so I ran a quick check for 2021 for 2 adults 58 years old and a 16 year old dependent living in Houston area zip code. Your dependent would not qualify for the ACA and would be put on Medicaid or CHIP which you probably don't want to happen so you might want to increase the income slightly with a Roth conversion. Also check out the Silver plans as well as they are usually a better deal if your income is low.

 

[dukebound85]

hi loveland person! Assuming colorado?

 

[HawkeyeNFO]

hi loveland person! Assuming colorado?

Bad assumption. Guess why he is Cincyguy?

 

[Aerides]

So, if I’m following you correctly , I can sign up for BCBS TX Bronze plan under our states ACA plan for benefit year starting Jan 1 2022 b/c I should only see 25k gross combined income for both me and spouse. I would than be eligible for a fully subsidized plan for my wife plus one dependent. I would than have the option to come off Cobra starting Jan 1 2022. Please confirm if I’m thinking this through.

If you sign up for an ACA plan you need to end COBRA on 12/31/2021 and probably need to let your cobra plan administrators know. You can't carry cobra into 2022 and then turn it off. I believe your wife and your dependent also need to not have other insurance.

If your 2022 income is only going to be 25k then that is what you put on your ACA application. They may ask questions, but it's more attestation than super-documentation, because they can true up at tax time.

 

[Cincyguy63]

hi loveland person! Assuming colorado?

Actually Loveland OH but now living in TEXAS.

 

[Cincyguy63]

If you sign up for an ACA plan you need to end COBRA on 12/31/2021 and probably need to let your cobra plan administrators know. You can't carry cobra into 2022 and then turn it off. I believe your wife and your dependent also need to not have other insurance.

If your 2022 income is only going to be 25k then that is what you put on your ACA application. They may ask questions, but it's more attestation than super-documentation, because they can true up at tax time.

Thanks Aerides..I checked in with an insurance broker and he told me that we can still carry dental and vision on Cobra while moving the medical to ACA for 2022. If we move to ACA Dental there's a 90 day waiting period and he told me that if you run out COBRA on the dental and vision they typically carry it over to a private plan.

 

[SeattleRocks]

Medical

I am also 57 and from the software sales world and recently retired.

For health care, I immediately didn't take Cobra and got a large deductible HSA plan (Bronze) and fully funded my HSA (medical and dental, vision I am just paying out of pocket via my HSA).

Like you, I have a large investment portfolio so when I crunched the numbers I just found it so much more advantageous to fund a high deductible HSA plan and keep the monthly insurance premiums super low.

My family is very healthy and hardly ever uses doctors or prescriptions so my thinking is "why give away a ton of money every month to insurance companies" when I can just fund an HSA and invest it. It works beautifully.

I pay $1200 a month for my HSA policy and put in $8200 a year into my HSA account that rolls over every year (I dont touch it, I pay all medical expenses out of pocket). There are great tax benefits from doing this too. MUCH, MUCH, MUCH cheaper then Cobra or low deductible regular medical insurance.

I keep track of every medical/dental/vision expense and will pay myself back when I turn 65 - all completely tax free, all the while allowing that HSA to just grow from being invested with no taxes and will continue to fully fund it every year.

The HSA is amazing and I highly recommend you investigate it.

 

[Cincyguy63]

I am also 57 and from the software sales world and recently retired.

For health care, I immediately didn't take Cobra and got a large deductible HSA plan (Bronze) and fully funded my HSA (medical and dental, vision I am just paying out of pocket via my HSA).

Like you, I have a large investment portfolio so when I crunched the numbers I just found it so much more advantageous to fund a high deductible HSA plan and keep the monthly insurance premiums super low.

My family is very healthy and hardly ever uses doctors or prescriptions so my thinking is "why give away a ton of money every month to insurance companies" when I can just fund an HSA and invest it. It works beautifully.

I pay $1200 a month for my HSA policy and put in $8200 a year into my HSA account that rolls over every year (I dont touch it, I pay all medical expenses out of pocket). There are great tax benefits from doing this too. MUCH, MUCH, MUCH cheaper then Cobra or low deductible regular medical insurance.

I keep track of every medical/dental/vision expense and will pay myself back when I turn 65 - all completely tax free, all the while allowing that HSA to just grow from being invested with no taxes and will continue to fully fund it every year.

The HSA is amazing and I highly recommend you investigate it.

Thank you SeattleRocks! I like the strategy. I am a little confused over the multiple HSA reference. Assume it's what I have as well - Health Savings Account. You made mention of getting on an HSA plan. I assume you mean ACA plan?? I like the idea to continue to fund the HSA account early in your retirement while you and your spouse are healthy... We are healthy here as well but do use more health services annually so plan on using Texas BCBS Silver plan starting 2022.

 

[HenryD]

Thank you SeattleRocks! I like the strategy. I am a little confused over the multiple HSA reference. Assume it's what I have as well - Health Savings Account. You made mention of getting on an HSA plan. I assume you mean ACA plan?? I like the idea to continue to fund the HSA account early in your retirement while you and your spouse are healthy... We are healthy here as well but do use more health services annually so plan on using Texas BCBS Silver plan starting 2022.

In order to fund a health savings account (HSA), you must be covered by a high deductible health plan (HDHP). Your BCBS plan should indicate if it qualifies.

 

[Cincyguy63]

In order to fund a health savings account (HSA), you must be covered by a high deductible health plan (HDHP). Your BCBS plan should indicate if it qualifies.

Thank you...Did not know this but clearly an important detail!!

 

[SeattleRocks]

In order to fund a health savings account (HSA), you must be covered by a high deductible health plan (HDHP). Your BCBS plan should indicate if it qualifies.

Exactly. Don't confuse the employer sponsored Flex Spending with an HSA - totally different things.

I found this good explanation of an HSA:

https://www.fidelity.com/go/hsa/why...VmBitBh0HvgEeEAAYASAAEgIdLfD_BwE&gclsrc=aw.ds


And you do need a "qualified" HSA health plan - not just a high deductible plan. It must spell out HSA qualified in the plan itself. That caught me when I was first shopping for plans. But I found a Blue Cross plan that was HSA qualified and went with that and it's awesome.

My Cobra would have been >$2000 a month and my Blue Cross HSA plan is $1200. I get to stick $8200 a year into the HSA bank (I use Optum, but you can use Fidelity as well) which I can invest (100% in Wellington) and is 100% tax deductible off the top.

You dont get that with Cobra or a low deductible plan.

When medical expenses come in, I simply pay cash for them. If I get something catastrophic, the most I am out of pocket is $14,000 which I can handle with my post-tax savings. I want to let that HSA account just continue to invest and compound. I keep track of all my medical expenses and when I turn 65, I am simply going to write a check back to myself and that is 100% tax free.

Its a beautiful thing. I dont know of another investment that gives you the triple tax benefit and still protects your family. Why give money to an insurance company and not use it when you can do something like an HSA?

I have gotten my HSA account >$30K now and this year I have spent about $3000 on medical expenses out of pocket. But I get all that back when I turn 65. And my HSA account can then be pivoted to cover Medicare expenses which is going to be great.

Hope this helps.

 

[HenryD]

Exactly.

When medical expenses come in, I simply pay cash for them. If I get something catastrophic, the most I am out of pocket is $14,000 which I can handle with my post-tax savings. I want to let that HSA account just continue to invest and compound. I keep track of all my medical expenses and when I turn 65, I am simply going to write a check back to myself and that is 100% tax free.

You can write yourself a tax-free reimbursement at any age if you are using up your previously incurred qualified expenses. Of course, then it's no longer growing tax-free. At 65 you can make penalty-free nonqualified withdrawals taxed as income if you wanted/needed to.

I used to fund mine before anything else and typically had it maxed in February each year. Now we use DW's megacorp one. If we still have a qualified plan and she's still with megacorp when I hit 55 we'll throw the $1k catchup in mine.