Is retiree medical worth sticking around?

[pb4uski]

Figure it this way... the $500/month that you spend on medical insurance (and as TP points out could be much less if you are relatively healthy and can downshift to a bronze plan) is part of the price for freedom to do whatever you want.... IMO that is cheap (mine was $900/month for 2).

 

[Gotadimple]

Thanks, all. I think I've worked through my angst about parting ways with the company.
You are cheaper and faster than a therapist!

Great! We'll mail you our invoice. We appreciate your prompt payment!!

 

[Lakewood90712]

Online modeler for retiree medical is telling ................. snip I think the answer is clear.

Thanks, all. I think I've worked through my angst about parting ways with the company.
You are cheaper and faster than a therapist!

Just hold on a minute, if we have not collectively induced doubt and indecision, we still need to work on you a bit more

 

[meierlde]

Looks like I'll have lots to keep me entertained this weekend.

Some additional info:

Pension is non-cola'd and freezes this year so no need to stick around for that [astute readers probably have a pretty good idea of who cuts my paychecks ]

I didn't include SS in the pension number. SS website estimates $2600/ mo but that assumes working to FRA so the real number should be much less. I don't include SS in any of my calculations. I don't expect it to be there. If it is, so much the better. I see it as a hedge against rising healthcare/unknowns ect

I see the lack of taxable savings as an issue. This year I throttled back the 401k to just hit the pre-tax limit and funnel the rest into another brokerage account slated as retirement money.

I'm thinking I may be better off changing companies. A healthy raise siphoned off could replace the retiree medical. A 2nd career is certainly a possibility. It would be nice to do something you actually enjoy.



Sent from my iPhone using Early Retirement Forum

How close are you to the limit on Social Security taxes and for how many years? If you look at the social security benefit formula if your wage adjusted 35 year average monthly pay exceeds 5200 then your in the 15% bracket on social security. If your average monthly amount is 5157 you would get at full retirement age about 2125. Since you suggest the estimator shows 2600 that sort of implies wages at or about the cap. But if you do the calculation, it works out to about $42 per month per additional year worked once you top 5200 average monthly wages.

 

[Geld ist Freiheit]

School me on the calculating the SS benefit. Just reviewed the SS website and found the calculation sheet. If I remember correctly, the online estimator takes the current wage you enter and runs it forward to full retirement age. If I retire early, those years go to zero and the lower wages earlier on become a factor again, dragging down the benefit, so it would be less than that prediction.


Since my wages are plateauing, the incremental increase in benefit will be much less than if my wages were to continue to grow, correct? If you have many, many years of high wages, dropping out for the last 10-15 years wouldn't radically reduce your benefit. Sadly, that's not the case in my situation.


Between potential reduction in benefits, means testing, etc... it's all just sort of a curious exercise from my standpoint. Whatever check shows up in the mail will be mad/Vegas money. I don't intend to count on it in any meaningful way.


Switching gears, how does this sound for a plan, starting next year:
- continue to contribute to 401k and Roth.
- place 100% of what's left into account A, effectively sequestering my paycheck as if it was no longer there.
- pay expenses from account B, funded by quarterly transfers from taxable accounts based on projected expenses.
- monitor health of taxable accounts (i.e. are my returns keeping up with expenses).
- watch money pile up in account A, having full and ready access should the need arise.
- continue until it becomes apparent I really don't need the paycheck (subject to some reasonable minimum time, thinking year or two, not just a few months).


Sort of a practice early retirement with a safety net...

 

[Lakewood90712]

School me on the calculating the SS benefit. Just reviewed the SS website and found the calculation sheet. If I remember correctly, the online estimator takes the current wage you enter and runs it forward to full retirement age. If I retire early, those years go to zero and the lower wages earlier on become a factor again, dragging down the benefit, so it would be less than that prediction.

Since my wages are plateauing, the incremental increase in benefit will be much less than if my wages were to continue to grow, correct? If you have many, many years of high wages, dropping out for the last 10-15 years wouldn't radically reduce your benefit. Sadly, that's not the case in my situation.

Sort of a practice early retirement with a safety net...

Not sure how to calc ss benefit , maybe talk to ss directly.

One potential downside, if you stop contributing payroll taxes, eligibility for ss disability and medicare prior to 65 if disabled will go away , IIRC 10 recent quarters ss covered earnings are needed for ss disability, and medicare for a disabled person is linked to ss disability. You will end up with a gap. not a factor , unless you became disabled prior to 65 .

 

[Chuckanut]

In two words: Probably not.

I had thought I would work until at least 66 since I was in very good health and had long lived ancestors. In a period of 5 years I lost three friends/family to unexpected sudden illness as well as suffered some health issues myself that fortunately have not been that bad.

pb4uski is right. $6000 a year, if you have it is a small price to pay for each each additional year of freedom to live life as you wish, control your time, and generally be happier. Oh, did I mention that since retiring I now have more time to take care of my health? No small factor, IMHO.

 

[Geld ist Freiheit]

That is a good point about the disability. That keeps slipping my mind. No one thinks it will happen to them until it does.

$6000 is a small price to pay for freedom. The escalating rates are the danger. $6k this year could be $7.5k next year and $10k after that.


Sent from my iPhone using Early Retirement Forum

 

[OrcasIslandBound]

I like to "bracket" SS by running their estimator with my salary until I retire and then run it again with a salary of $1 per year. This produces two different estimates which turn out to be surprisingly close to one another. You have to use the estimator that doesn't give you the report. There are two different estimators within SS and only one allows this method of estimating.

You can also get different estimates for ages 62, 65, 67, & 70 or any age you wish.

Sent from my Nexus 4 using Early Retirement Forum mobile app

 

[ivinsfan]

That is a good point about the disability. That keeps slipping my mind. No one thinks it will happen to them until it does.

$6000 is a small price to pay for freedom. The escalating rates are the danger. $6k this year could be $7.5k next year and $10k after that.


Sent from my iPhone using Early Retirement Forum

Bingo, start paying some max out of pocket for any health problems and the number could escalate rapidly...it isn't the actual 6K, it's giving up the subsidy portion of the premium.

 

[Diver]

Nah, he can do a Roth pipeline.

Let us assume the $300k in taxable has a 50% basis (so he pays long term cap gains on 50% of withdrawals from that).

Year one he takes $50k out of the taxable, converts $25k of the 401K to Roth, pays tax on $50k of income (some LTCG) which likely would be no more than $5k, net $45k to live on.

Keep doing this until year seven, when his taxable is now close to zero.

In year seven his Roth now has at least $350k ($200k + $150k of new contributions). He takes out $50k of the contributions and converts $50k of the 401K to Roth. He pays tax on the $50k, probably still netting $45k.

He can continue in this manner until age 60 when he can directly access the 401K if he desires.

If his taxable currently has a better basis than 50%, he can probably work his taxes a lot lower than $5k a year. He could fund a HSA which would remove $3300 from taxable income while still giving him some access to that money.

Thank you Fermion! I think I now understand how to model converting to a Roth in our low/no income tax years. We are updating DH's spreadsheet to play with this option now. Sorry for hijacking this thread!

To OP, as someone else mentioned, go to the ss.gov estimator. When your results come up, click on the button "Add Another Estimate" and it will take you to screen where you can put in next year as your retirement year and list $0 as your income between now and then, and it will spit out what your benefits would be at 62, FRA and 70 you stopped contributing/w*rking now. You can model all sorts of scenarios. Good luck! (BTW, I worked for a company that terminated free retiree medical coverage in the 80s and won a lawsuit over it, which case I think is the legal precedent for it not being protected like pension benefits!)

 

[meierlde]

Not sure how to calc ss benefit , maybe talk to ss directly.

One potential downside, if you stop contributing payroll taxes, eligibility for ss disability and medicare prior to 65 if disabled will go away , IIRC 10 recent quarters ss covered earnings are needed for ss disability, and medicare for a disabled person is linked to ss disability. You will end up with a gap. not a factor , unless you became disabled prior to 65 .

create a SS account and download your benefits statement (to get amounts credited up till now, and download the anypia app from ss. Then take the amounts from the statement and enter them into the anypia app. If you just enter what is there and the last years that have not made the form, you will be able to get your benefit at any age, that you already have. Then add estimates for the future and recalculate the estimate. Change the estimates and recalcute etc.

 

[lhamo]

I believe you can estimate your social security benefits with no further income using the link provided on this page -- but the link is currently not working (probably because all the file and suspend people have overwhelmed it):

https://www.ssa.gov/retire/estimator.html

 

[Lakewood90712]

"$6000 a year, if you have it is a small price to pay for each each additional year of freedom to live life as you wish, control your time"

Wow, that line should be on the startpage of E-R.org

 

[OrcasIslandBound]

If risk of running out of life is greater than risk of running out of money, retire sooner.

 

[Geld ist Freiheit]

I decided to implement my simulated retirement plan for 2016.

This consists of redirecting my paycheck to a separate account and funding my living expenses with quarterly installments from taxable investments.

Needless to say the first 6 weeks were a wild ride. Nothing like seeing the equivalent of 1/2 year's salary evaporate in 2-3 days.

I've been tracking my expenses pretty closely, making a conscious effort not to change my spending habits as I want an accurate depiction of the numbers. There has been a fairly wide variation month to month. I've been tempted to not book some things because "that's a one off thing that doesn't happen every month". The reality is there is ALWAYS something that happens each month so it all gets booked.

My expenses have run 20-30% higher than my initial guesstimate so I upper the amount for Q2. I was lamenting having to withdraw the money for Q2 since the portfolio hadn't fully recovered. I did it anyway and recouped all of Q2's amount over the following 2 days. LOL.

The good news - putting the annualized Q2 spending into firecalc yields:
91% success omitting pension & SS
94% when including pension
100% when including both.

I noticed that there are 5-7 "bad actors" on the firecalc chart that seem to take a lot of extra cash to eliminate and reach 100% success.

If I up the spending number to drop the success rate and ignore those 5-7 scenarios, it allows enough to cover the additional healthcare expense if I were to retire.

At this point all seems good but the year is still young. I'll continue to plod along, see how things shake out and let the money pile up.





This is your life....and it's ending one minute at a time.

 

[Sunset]

Seems to me you could have simply taken the equivalent amount from your paycheck , put the rest into separate savings account, rather than pull from your investment accounts.

It's a bit disruptive to your investing what you are doing, and money is fungible so no benefit from the method you picked.

 

[gauss]

I haven't revisited this thread in a while and feel the need to explicitly state some important points.

#1) You can go to the Social Security and use the Estimator. It is available at https://www.ssa.gov/retire/estimator.html No need to setup an account for this. No password is needed Just provide SSN, name, place of birth, birthdate and Mothers maiden name. On the 2nd screen enter '$0' for last years income. This is the figure that they assume that you continue to earn until you are in your 60s. By entering $0 you are tricking it into showing what you have already accrued. After that you will be shown monthly payment amounts starting at age 62/FRA/70. Note the significant increase by waiting until age 70.

#2) You provided a yearly pension estimate in your original post. Is this a traditional pension where the payout is based on your final average salary and number of years served. These types of pensions tend to accrue exponentially in the last years worked. If you are accruing $20,000-$25,000 in pension value for each additional year worked, the retiree medical may really be the small potatoes in this analysis.

#3) Why would you want a GOLD plan. Consider an ACA BRONZE plan unless you are sick and know that you will be requiring lots of medical care. You can change this on a year to year basis. With a GOLD plan you are pre-paying even if you aren't sick. With a BRONZE plan you don't nearly as much up front but will have higher deductibles if you are sick. The big advantages of any of these plans are twofold a) you will get the discounted ins co. contracted prices for in-network medical services as opposed to the retail values which can be 2X to 10x times the discounted values. The second advantage is b) you will limit your maximum yearly out of pocket expense to a defined number. Above this the plan will pay 100% of covered costs. Gold plans and Bronze plans both have these same features. Go for Bronze unless you know that you will have significant on-going medical expenses in the next year

I originally was planning to work to age 55 to get retiree health care and the retirement pension. The pension was frozen when I was 47 or so. With the passage of the ACA, and currently the spouse of someone who still have retiree health care, I decided to pull the plug and have not looked back.

Also, a comment on your experiment about simulating retirement income. This may be useful for a test of your emotions, but you may also wish to do a financial study on your spending. What I did was track and categorize all my spending for years before retiring. When adjusting for things like vacation, furniture or vehicle purchases, capital improvements to house etc, the baseline spending was very consistent year to year. This spending was not based on any type of budget -- it was just on what I felt was worth it each year. Bottom line was that I had years of validation data about how much I like to spend each year. SS pensions and savings were more than enough to cover.

I have never been happier since pulling the ER plug back in 2012-2013 or so. I hope it works out for you too.

-gauss

 

[Geld ist Freiheit]

The SS number I used for the latest runs assumes zero future earnings. If I continued to work to FRA, SS + pension would exceed my expenses.

The pension is now frozen so that number will not change whether I retire tomorrow or 10 years from now.

The gold plan was picked as a worse case scenario. In reality, I'd probably go with a bronze plan as I only see the doc 1-2 times a year for routine stuff.

I have several years of quicken data that are inline with what I'm spending so as an overall number it's pretty consistent on an annual basis.

By sequestering my paycheck, I've effectively quit my job from a financial standpoint and am forced to get by with what I have, bringing the emotional aspect into play while still having the safety net of the accumulating savings.

I will continue to work for a few more years to raise SWR and provide more buffer but it's interesting to see my paycheck become less and less relevant.



This is your life....and it's ending one minute at a time.

 

[hnzw_rui]

#3) Why would you want a GOLD plan. Consider an ACA BRONZE plan unless you are sick and know that you will be requiring lots of medical care. You can change this on a year to year basis. With a GOLD plan you are pre-paying even if you aren't sick. With a BRONZE plan you don't nearly as much up front but will have higher deductibles if you are sick. The big advantages of any of these plans are twofold a) you will get the discounted ins co. contracted prices for in-network medical services as opposed to the retail values which can be 2X to 10x times the discounted values. The second advantage is b) you will limit your maximum yearly out of pocket expense to a defined number. Above this the plan will pay 100% of covered costs. Gold plans and Bronze plans both have these same features. Go for Bronze unless you know that you will have significant on-going medical expenses in the next year

Interesting observation, the spread between Bronze and Platinum plans on Kaiser Permanente is smaller compared to the spread on other HMOs. For someone already on maintenance medications, Gold/Platinum plans look much more attractive.

Besides, for the purpose of estimating medical expenses, probably safer if you use either Platinum premiums or Bronze premiums + max OOP instead of just looking purely at the lowest cost Bronze premiums.

That said, if someone can reduce "income" to 150-250% of FPL, Silver with Cost Sharing Reduction are the best option.

 

[23window]

I decided to implement my simulated retirement plan for 2016.

Very interesting idea. I'm probably 3 to 4 years from retirement, but I may try something similar as I get closer.