Early Retirement Health Insurance?

[The AD]

You didn't mention it so I'm guessing either employer doesn't offer a retiree health care benefit after a certain number of years of service and a certain age, say 15 years and age 55, for example? And if so, doesn't provide some sort of assistance either in the form of a finite account expressly for that purpose or a reduced premium? If you don't know the answer, you need to check. Its always nice to have that money later, but using some of it now for your plan seems worthwhile.

I'm so glad I have this in my job because it certainly makes [my plan for] early retirement a bit more stress free. If I wait till 30 years of service I'll have 100% of my medical paid by the company. My plan is to retire when I hit 29 years, so I'll have 97% and that seems good enough to me. So other than the 3% I'll have to pay something like $20 per month. I can handle that.

I've even got a decent pension. I feel like a dinosaur.

[zion zig zag]

Didn't we have a thread for general retirement questions? I may be making that up in my head. To the original question about MAGI including investment income, it only applies to income realized, right? As in, you would only count the withdrawals from 401/457k, etc.? Or are you talking about investments such as rents paid on real estate?

[riser4]

I'm so glad I have this in my job because it certainly make early retirement a bit more stress free. If I wait till 30 years of service I'll have 100% of my medical paid by the company. My plan is to retire when I hit 29 years, so I'll have 97% and that seems good enough to me. So other than the 3% I'll have to pay something like $20 per month. I can handle that.

I've even got a decent pension. I feel like a dinosaur.

I'm not as lucky as you. My benefit is more like a single bump of coke at the bar. It gets you up for a little while and then you just go on with your life. It's not like getting to smoke an ounce of blow per night indefinitely. I certainly don't have a defined benefits pension. I got hired a couple of years too late for that and I still wouldn't have met the minimum age cutoff for the old plan. "Welcome to Walmart!"

[singlecross]

And just to pull back the curtain a little further, my wife and I are planning on bicycle touring long term across Western Europe/Balkans/Turkey and back again.

First of all, Congrats! Sounds like a great way to spend some time.

Secondly, I was hoping that your extended “slow travel” was buying a sailboat and cruising the world. Maybe after the bike trip!

[The AD]

I'm not as lucky as you. My benefit is more like a single bump of coke at the bar. It gets you up for a little while and then you just go on with your life. It's not like getting to smoke an ounce of blow per night indefinitely. I certainly don't have a defined benefits pension. I got hired a couple of years too late for that and I still wouldn't have met the minimum age cutoff for the old plan. "Welcome to Walmart!"

The benefits are pretty good and I'm definitely ready to jump ship.

[frorider]

Straight outta grad school my first real engr job still had a pension program (pretty much the last employer in that industry to do so). They axed it & went full 401k route soon after but it’ll give me a little something until I die.

Found a great online calculator that helped me assess whether to cash it out & invest when I get to the age of eligibility. With reasonable / conservative estimates on inflation, market returns etc it essentially told me the pemsion actuaries are assuming I die by age 90…as you’d expect they would.

[skaredshtles]

I'm not as lucky as you. My benefit is more like a single bump of coke at the bar.

Heh - I have a tiny pension coming from Boeing. It'll be beer money by the time I start collecting it.

[jono]

DISCLAIMER: I am not a tax attorney, accountant, or financial planner. I did utilize ACA subsidies for ~5 years.


What is your anticipated MAGI? ACA subsidies are available up to 400% of the federal poverty level. They are also tied to inflation and go up every year: https://www.goodrx.com/insurance/aca/aca-income-limits

The subsidies and plans vary by state, but my understanding is that they are all based off a percentage of a Silver plan premium. So, if you can live with a Bronze plan they can be a substantial portion of the premium (my average subsidy was in the 80-85% range). High-deductible Bronze plans are also HSA eligible and HSA contributions are deducted from MAGI. So, max out the HSA, drive down your MAGI (2025 limit is almost $10k if you're over 55), and you get to keep the money for medical expenses. At 65 anything in your HSA converts to an IRA. HSA funds can also be invested.

I assume you claim no dependents on your tax return?

IRA contributions are deducted from MAGI, so you could potentially convert money from cash accounts into IRA contributions to avoid losing your subsidies if your income may be a little too high. Depends on how far over you might be and how your savings are allocated. I assume you're over 50, so between you and your wife you could drive down your MAGI by up to $15k.

Do you have Roth IRAs/401ks? Withdrawals of principal from Roth accounts are not taxable income (well, Roth withdrawals are are not taxable income period, but if you withdraw gains prior to age 59.5 you pay a steep penalty), so if available you could preferentially draw on Roth accounts until you hit Medicare eligibility.

If you go over the ACA income limit by $1 you have to pack back all your subsidies, so make sure you have everything accounted for. If you did not max out an HSA and/or IRA, contributions can be made for the prior year until April 15 of the following year.

A couple of things that are worth double checking here: there may be no reason to actually convert an HSA to an IRA unless you have no past, present or future source of qualifying medical expenses. Reason being, you can keep your receipts and reimburse yourself for medical expenses later, while leaving the HSA money in the account earning tax-free interest until you need it. That interest doesn't contribute to MAGI (and neither do reimbursements).The HSA is probably the most tax advantaged account there is, especially if you can leave the money in there and have good investment options.

Second, I'm definitely not any sort of tax pro, but when I sat down with my CPA and ran some simulations through his software, we didn't find any sharp cutoff where you'd suddenly have to repay all of the advance tax credits for health insurance if you got some up front. Certainly not just from going over by $1, as I had expected. It tapered as income went up, at least smoothly enough to discourage any reason to intentionally cap your income (not to say managing it won't help).

For savings not in retirement accounts, buying some long term US savings bonds that don't accrue interest until maturity or re-sale (including I-bonds if you can stomach the return) may be useful in managing MAGI. I assume you'd want to have a few in small enough sizes to let you sell them if needed without selling too much/realizing too much interest.

Disclaimer again, I'm just a standard maggot with no sense of lane lines, DYOR etc.

[schindlerpiste]

My benefit is more like a single bump of coke at the bar. It gets you up for a little while and then you just go on with your life.

Quotable