5 Steps To Navigating Health Insurance When Retiring Before Age 65

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Are you dreaming of clocking out of the workforce for good and diving headfirst into the joys of early retirement? Halt that swan dive for just a moment to consider a crucial piece: health insurance. I'm here, with the esteemed Medicare insurance specialist Lyndia, to unveil the roadmap to securing your health coverage before you blow out the candles on your 65th birthday cake. In our chat, we dissect the nuances of COBRA, retiree plans, the Affordable Care Act marketplace, major medical, and faith-based alternatives, ensuring you have the knowledge to keep health insurance woes from stalling your early retirement fantasies.

Navigating the health insurance labyrinth can be as intricate as a game of chess, but with a trusted broker like me from Move Health, you're playing with an advantage. I lay out how broker-assisted health insurance selection can be the king's gambit in your strategy, offering tailored comparisons of carriers and plans—without the sneaky checkmates of hidden fees and conflicts of interest. Discover how income manipulation can be a strategic move for Affordable Care Act plans, and I'll guide you through this complex play to potentially capture significant savings.

Capping off, we take a magnifying glass to the American Rescue Act's healthcare tax credits, dissecting how this financial boon can benefit your pre-retirement planning. I walk you through five crucial steps to prepare for the healthcare side of your golden years, emphasizing the importance of a holistic approach to your financial and healthcare blueprint. Stay tuned for our next episode, which promises to dive deeper into conversions and healthcare connections, and remember to keep the conversation going by sending your questions for future episodes. So, grab a pen, jot down some notes, and let's turn your early retirement dreams into a secure and insured reality.

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Ari Taublieb, CFP ®, MBA is the Vice President of Root Financial Partners and a Fiduciary Financial Planner specializing in helping clients navigate the nuances of an early retirement.

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PS: Before anyone decides to move forward with our services, I want to ensure we're the best fit to help you reach your goals and I personally have the first conversation with you.

Transcript

Speaker 1: 0:00

If you've been listening to the show for a while, you know I very rarely bring on guests. Today is a special episode, as I want to bring on a health insurance expert who is going to help really clarify if I had to pick a word what you need to know and what you don't need to know, because there's a lot of fluff out there, and my goal is to make anti-fluff content where you are getting what you need and it's giving you a whole lot more confidence when it comes to an early retirement. Now, lindyia, she's a certified Medicare insurance specialist who you're going to hear from today. Now a lot of you are going wait, a second Medicare. Doesn't that start at age 65? I retire at 58. What's this going to do with me? She also works with people who are retiring early and helping them understand those options before 65. So this is definitely the episode for all of you. She just holds this additional designation that very few people have. She works in Indiana, but she helps clients all across the country. I don't get any commissions or kickbacks you guys know this by now but I am a fiduciary 2,000% of the time, and so what I mean by that is hopefully this is really helpful and give you some insight as to how to think through health insurance, both before 65 and even after, in the strategies that come along with that.

Speaker 1: 1:07

Today is part one of a two-part series. Next week is with another member of the team, but that's going to be going into more depth when it comes to Roth conversions and how that specifically can correlate to ACA planning, subsidy, all that good stuff. So Lindyia works for Move Health Partners. They are the premier healthcare insurance planning firm in the US. We partner with awesome people like Lindyia so that we can refer our clients and then have a collaborative relationship. So I don't get paid anything. I just want to make sure all of you are absolutely getting the value that you need. I created an ebook with Lindyia, who, in my opinion, is one of the brightest people I've ever met when it comes to health insurance specifically earmarked for people retiring early. So if this is helpful, you can download that ebook and you can reach out to Lindyia at Move Health, have a conversation with her, even if you're a few years out from retirement. If you're a few months out from retirement, if you just want to know, hey, how much is it going to cost me? If you're curious. They're really on the cutting edge when it comes to healthcare planning. So hopefully this episode is really helpful. It's exactly what you're looking for. Make sure to download that ebook so you get what you need ahead of time and you can follow along with some of the things we're going to talk about in today's episode.

Speaker 1: 2:14

And let's hop in. So I know a lot of you listening right now are going. Where on earth is health insurance going to come from when I retire and if I'm going to retire early, before 65, a lot of you are in your 40s, 50s, 60s, going. How do I even think about this? How much is this going to cost? So we are very lucky because we have Lindyia on the podcast today and, as most of you know, I don't have a lot of guests on, but I want to make sure I'm getting you guys the most helpful guidance in the world. So, lindyia, I want to start with my first question, which is if you're in your 50s or early 60s, before 65, and you're going, you know what think about retiring and I don't know. The next year, three years, five years, what are my different options?

Speaker 2: 2:54

Yeah, absolutely so.

Speaker 2: 2:56

Right now, in the individual market pre 65, you really have five main options when it comes to purchasing health insurance coverage. One of those is Cobra, which is just a law that states that employers who have 50 or more employees have to allow an employee to continue their coverage for up to 18 months post separation from the company. You have retiree plans, so sometimes, depending on how long you are with a company, they have incentives where they will offer reduced cost health insurance or plans that are administered through their benefits administrator, available just to those employees. You have the Affordable Care Act marketplace, also known as ACA. These plans are sure to be affordable care at compliance, so they have to follow specific laws and guidelines regarding pre existing conditions and preventive care. You have the option of major medical, also known as short term health insurance coverage, and then you also have the option of faith based, which requires that you are of specific faiths to join and have a lot of pros in the individual market, especially for retirees, in this specific instance where you are looking to retire a little early.

Speaker 1: 4:11

Awesome. So I hope all of you just heard there are lots of options, and part of my job is the meanest early retirement advisor is to not simply let you go. Yeah, I don't know where health insurance is going to come from. It's going to cost a lot. Let me just keep working. The tough thing to do is say, yep, it's going to cost something and we can potentially keep your income very, very low and qualify for some cool stuff that we'll be talking about in the future. But what I want you guys all to really know is just because you're not going to have your traditional health insurance is not the reason to not retire early. So, lindy, that was awesome. So lots of options. What would you say are the most common options? And just even generally, what does that tend to cost? Is it $50,000 a year? Is it $200 a year? Just for a general range?

Speaker 2: 4:56

Yeah, absolutely. I would say I've been doing this for seven years and in my time here for this space, the most common has been the Affordable Care Act marketplace and then also that faith-based option that we discussed earlier is really common. It really does vary in cost depending on where you live, what income is, but I would say on average, when I talk to the early retiree, they're looking at five to six hundred dollars a month for their coverage.

Speaker 1: 5:22

Awesome, super, super helpful, because so many people are like it's gonna cost me five thousand dollars a month. I don't even know if I'm gonna retire and it's not. In the same reason, a lot of people reach out and go oh my gosh, I think to fund Social Security, I need to hit my 35 highest years of earnings and if I retire early, maybe I don't hit that. Yeah, it's less dollars, but it's the dumb joke that a lot of you listeners have already heard, which is one client came to me and said I think I'm gonna be your best client. I said why? They said well, I have a really low withdrawal rate and I have a lot of money. I said I think you'll be my worst client. They're like what do you mean? I thought that was good, like low withdrawal rate and I have to take a lot out. I go if you want to be the best in terms of withdrawal rates, go work 30 more years.

Speaker 1: 6:01

Your plan will look amazing, but your life won't, and so my goal is to make sure you are actually taking the most out of your portfolio without running the risk of running out of money, and that's why this health insurance conversation is so integral, because most people don't even know where to start. So, lindy, let's assume I'm 50 years old. I look just like I'm 50, obviously. So if I'm retiring in the next one to three years, is that one I should start looking? Do I look five years before? Is there a time where it's too early or too late?

Speaker 2: 6:30

Yeah, that's a really good question. So we always say it always starts with your financial advisor. So that's always gonna be your first step. If you think that you want to retire early, that's the first thing you want to do is you want to meet with your financial advisor, figure out, if you're able to do so, you know what funds that you're going to be living on. As far as the healthcare conversation, we can give really general quotes a year or so out, but really we want to stay within that six month mark because some of these costs are very much going to vary on the year that we are in the Affordable Care Act specifically, those plan costs change every year. The amount of tax credits or subsidies that are issued are going to change every year. So we really want to stay within that six month sweet spot. But you can do some planning beforehand.

Speaker 1: 7:12

So helpful and I hope a lot of you just took away that you don't have to have it perfectly figured out and that five years from the day you retire, you don't have to know exactly what it's going to cost. And even if you did plan it out, that's where I'd come to you and say don't, because you're just wasting a lot of time. I'd rather you go got it Six months a year. That's when we start thinking about it. Get in some understanding of how much this is really going to cost, because if you try to plan it out five years earlier and some really crazy health stuff happens, well now, all that work you did was not applicable, so super helpful.

Speaker 1: 7:41

My next question is specifically around like how do I actually get coverage? And for a lot of you listeners, you already know this, but my parents were burned by four financial advisors and that is why they're still working Now. Luckily, they like what they do and they're working in their seventies. But I don't want you to be burned by paying any more than you ever need to. And so a lot of you are listening to this going hey, my advisor is not bringing up health insurance stuff and I'm having to bring this conversation to them. They should be bringing it to you. They might very well not be, which I recognize, but it seems like if I'm going to go get health care, I don't really know where to go. Is that a broker? Is there a marketplace? Is it a carrier? Like, how do I actually get health insurance?

Speaker 2: 8:21

Right, yeah, so there are several ways you could try to do it on your own, which I don't ever recommend because it is incredibly complicated. So don't ever feel silly if you get out there trying to do it on your own and you just feel completely lost. I think it's kind of designed to be that way. The other option is the broker, such as myself. A broker is contracted and licensed with lots of different carriers, so they're able to look at what all of your options are and help you make an educated and informed decision.

Speaker 2: 8:48

You can call the federal marketplace directly. Just know, when you call the marketplace directly, they are not licensed agents. They are not able to give you health insurance advice. They are able to fill your application out for you and enroll you in the plan that you choose. So you would have to do your own education on that regard. You can call a carrier directly. Downside of that is you're only seeing what plans that that carrier offers, so you're not going to be able to look at what all of your options are Same with a captive agent. There are agents that are out there that they only sell specific plans, such as Blue Cross, blue Shield, so then you're only going to see the Blue Cross, blue Shield options that are available to you.

Speaker 1: 9:27

Beautiful. So many of you know this as well. But there's a reason I don't work for Fidelity. Because if I did and Fidelity is not bad I'd go like this. I'd go hey, you've gotten to know me. You like my podcast. Maybe you've heard me on a video or so by this product. What you don't know is that would be paying me a kickback or commission that you don't actually see. It doesn't mean Fidelity is bad. It means there's a conflict of interest there. So when people are working specifically with you, linda, and your team at Move Health, what do the fees look like? Do they do take a portion every single month out of their check? Is it a big thing up front? What is the fees? And I think a lot of my listeners are very reasonable to go hey, I'm more than happy to pay for guidance, as long as it's justified. What are those fees look like to a broker?

Speaker 2: 10:10

That is what is really unique here at Move Health is that it does not cost the client anything at all to work with us. You would get the same prices through us as if you were to call the carrier directly. Those prices are set by the Department of Insurance, so we have no say in them. We are paid if we enroll you in a plan, and we are paid the same no matter what we enroll you in, and so that takes out us putting you in specific plans because they give us bonuses or they give us more money, and it allows us to really help you choose what option is going to be the best option for you and your family.

Speaker 1: 10:42

Amazing. So level one for everyone that reaches out to me, they'll go, hey, am I in a good spot to retire? I'm like, great. Level two is okay, how much can we spend? And level three is what are we doing to not get crushed by taxes? Same thing here in health insurance.

Speaker 1: 10:56

Most people, as I see it, reach out and go, hey, do I need a policy? What policy do I need? Do I go faith-based, do I go short-term health insurance? Like, what do I do? And then level two is okay, can I be creative and try to pull from a certain account over another account to start qualifying for tax credits and pay less taxes? And then, well, how do we weigh that against these future RMBs required minimum distributions that are going to crush us? So what are some of those things? I know we're even going to be talking about this in more detail next week, but what are some of those things, when it comes to income specifically, that I think people, just as a rough summary, it would be helpful for them to hear like wait a second, I can like choose my income and that changes like income I'll get from the government. How does that work?

Speaker 2: 11:38

Yeah, absolutely so, when the income piece comes in. We are only specifically talking about the Affordable Care Act and policies that you can purchase through the marketplace. That is the only place that you can manipulate income to help offset the cost of your premium. The way that that works is the federal government asks you to project your income for the year in which you are seeking coverage. So if you are seeking coverage in 2024, we have to calculate your modified adjusted gross income for this year from January 1 to December 31. The really great thing is they're looking at taxable income. So if you have things that you're pulling out of that are non taxable, if you have savings that you're living on, if you have assets, they're not looking at any of those things. They're looking at what you file taxes on and you add back in things like if you're receiving Social Security benefits. Those have to be added in as part of your gross. But that really allows you to manipulate your income to qualify for these tax credits. These tax credits work on a sliding scale.

Speaker 2: 12:41

There used to be something through the Affordable Care Act marketplace called the income cliff. Essentially, if you made more than 400% taxable income for your household size for the year you didn't qualify for any assistance at all. You're paying full price for these plans. As a part of the American Rescue Act during COVID, that income cliff was lifted and that is no longer a thing. The way that they now calculate tax credits is that your plan cannot cost you more than 8.7% of your income. If the plans available in your zip code do, they adjust the cost of that plan down to match 8.7% and then take the difference. That is your tax credit. That is the amount that is being sent to the carrier on your behalf to offset the cost of your premium.

Speaker 1: 13:24

Amazing. Now, part of this is I'm actually just completely curious, but I also think everyone would be interested to hear what's the best case that you've seen. So let's assume someone, super simple, has $4 million and is just sitting in cash and they're like I'm retiring at 60 and I just want to max out tax credits. Yeah, I don't care about RMDs and conversions and any of that fancy stuff. That's like Portuguese. I just want to absolutely get as much as I can from the government. If they're just in a super basic plan and they're like I'm living off cash, my income is zero. What would that look like and what are some of the best cases you've seen?

Speaker 2: 14:01

That's actually a really good question and it's really important to address that. A part of the affordable Care Act marketplace is in order to qualify for these subsidies, you cannot be eligible for health coverage anywhere else, whether that's an employer or Medicare or Medicaid. Medicaid is for low income individuals and the way that the federal market place is is they look at it like if you are under a certain income you are Medicaid eligible. Not always the case, because every state runs Medicaid and they have their own qualifications. States like Texas don't do Medicaid for adults unless you're pregnant and there's some other reasons they don't. But if you put your income less than a specific threshold, it's going to say you don't qualify for subsidy. You're paying full cost for your plan because you're Medicaid eligible, even if you get denied well, not qualified.

Speaker 2: 14:50

So it's important that we keep you at a minimum income. Some states that's 100% of federal poverty level. Some other states it's 138. But let's say we have somebody that's right over that. They would actually have plans available to them through the Affordable Care Act that would not cost them anything and they would have zero to dollar deductibles, thousand dollar maximum out of pockets, really low co-pays because they fall into a category that qualifies them for something called cost sharing reductions on top of the subsidy assistance that they're getting on premium. Cost sharing reductions bring down deductibles out of pocket maximums, co-pays on silver level plans only. So, depending on where you fall, you could have really amazing options available to you if you have those incomes within those limits.

Speaker 1: 15:38

Unbelievable. Now we're talking my language, so when people are reaching out and I hope all of you are either doing this with your advisor or your advisor is bringing this to you say here's where you're going to go for health insurance. Great, here's the plan, here's what we're going to do to maybe make it so you're literally paying $0 in health insurance premiums. At the same time, maybe you've got this brokerage account and you bought Apple stock for, call it, $1,000, and now it's worth $10,000. Well, can we do other strategies to also keep your income at a certain level and pay 0% taxes on those gains? So there's a bunch of different tax strategies that have to connect to your health insurance. I'm very rarely seeing people connect those dots, but I think it's crucial. Awesome, awesome, lindy, this has been more helpful than you could ever imagine. And these I'm telling you, I get so many emails about oh my God, where am I going to go for health insurance? I know I need to get it figured out, but you know I've also. I am supposed to get a will and I'm supposed to get a trust. I'm supposed to do all these things. I should have done it yesterday. It's like, yeah, we all could do things better. But, like the truth is here, you are listening right now. So if we were to summarize in five steps, this is what Lindy and I talked about even before. We're recording so all of you guys can hear. This is number one educate yourself, like that's what you guys are doing right now by listening to this podcast. We try to keep it anti-fluff as much as possible, and a lot of you know my dumb joke, but I went to a doctor. This was like a few months ago. I said, hey, doc, that sounded great. I think you think that sounded great. I don't know what you just said. It's like, can you try again, please? And that's the type of stuff that I, hopefully you guys, are taking away, which is well, this actually made sense to me.

Speaker 1: 17:13

Number two is understanding your options. There are a lot. I think I talk about every single one and do a whole episode and go oh my gosh, when does Medicare turn on? I think it's 65, but then at what point do I actually get the coverage and who do I go to? Is it my neighbor who signs me up? There's a lot to talk about there.

Speaker 1: 17:29

Number three, hopefully you can recognize, is talk to a professional. Now I tell all my clients I go listen, if you're obsessed with tax law and prospectuses and just that's what you want to do in retirement, I'm like, great, don't pay me. Other people are like, hey, it turns out I really just want to optimize what I want to do in retirement. I want to travel, I want to have fun. At the same time, I don't want to talk about healthcare and deal with that all day. That's why people like Lindy exist and I'm an advisor, and the same reason my parents were burned by multiple advisors. There's a risk of bad ones and a value of good ones, so have someone in your corner to make sure they're helping out with this.

Speaker 1: 18:05

If it turns out you're not obsessed with the idea of looking into every aspect of insurance and spending your retirement doing that. Number four is enrolling in that right coverage for you. Lindy, just like me, think about it like that fiduciary Everyone kind of calls themselves that, I find, nowadays but a true fiduciary should come and say you know what? I don't care what policy you pick, I get paid the same, which is zero. So which one do you want? And then finally, number five know when and if you need to renew your coverage and how to use coverage on an ongoing basis. So, lindy, any other pro tips or anything you want to leave your listeners with regarding healthcare, move health, anything along those lines.

Speaker 2: 18:46

I really want to hammer in on that Do your research, educate yourself. If you don't understand, there's somebody who does. I always say there is no such thing as a stupid question whenever it comes to health insurance or whenever it comes to finances. These things are very difficult. Let us be the experts so that you don't have to be the expert, and that's exactly what we exist to do. You don't move health. Our whole goal is making health coverage simple and clear. We want to create educated and informed consumers. So heaven forbid I get hit by a bus. You know how to use your coverage, when you need to renew it, and you know how to advocate for yourself.

Speaker 1: 19:21

Beautiful, beautiful Lindy, I seriously thank you so much again. And next week we have another fun surprise where another member of Move Health is coming on the show to talk that next level, in real depth, about conversions and healthcare and how all the dots connect. So if this episode was helpful, make sure to stay tuned for next week. Thanks, lindy.

Speaker 2: 19:40

Thank you.

Speaker 1: 19:41

Ari, thank you for listening to another episode of the Early Retirement Show. If you have a question that you want answered in a future episode, you can always go to my website, earlyretirementpodcastcom. That's earlyretirementpodcastcom, and you can go ahead and submit a question that I'll look to answer in a future episode. Thank you all for listening. Please do rate it, review it and share it with someone who you think would benefit from this information. If there's anyone out there that you know, I certainly appreciate it and I will see you all each week.