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Welcome to How to Retire on Time, a show that answers your questions about all things retirement, including income, taxes, Social Security, healthcare, and more. This show is an extension of the book How to Retire on Time, which you can grab today on Amazon or by going to www.howtoretireontime.com.
This show is intended for those within 10 years of their target retirement date or for those are are currently retired and are concerned about their ability to stay retired.
Welcome to How to Retire on Time, a show that answers your questions about all things retirement, including income, taxes, Social Security, health care, and more. This show is an extension of the book, How to Retire on Time, which you can grab today on Amazon, or you can go to www.how to retire on time.com. My name is Mike Decker. I'm the author of the book, but I'm also a licensed financial adviser, insurance agent, and tax professional, which means when it comes to financial topics, we can pretty much talk about it all. Now that said, please remember this is just a show so everything you hear should be considered informational as in not financial advice.
Mike:If you want financial advice, then request your wealth analysis for my team today by going to www.yourwealthanalysis.com. With me in the studio today, it's mister David Fransen. David, thanks for being here today.
David:Yes. Hello. Thank you for having me.
Mike:Yeah. David's gonna be reading your questions, and I'm gonna do my best to answer them. Now you can send your questions in right now or anytime this week. Just save this number, 913-363-1234. Again, that number is 913-363-1234, or you can email them to hey mike@howtoreontime.com.
Mike:Let's begin.
David:Hey, Mike. How do people navigate health care before they qualify for Medicare?
Mike:Yeah. David, I might need some of your help on this one, but here are some basics. So if you just lost your job or you just quit, COBRA can help bridge gaps. Right. That's up to a certain point.
Mike:COBRA is just basically, your employer can't just cut you off. You have the right to stay on for a certain period of time. I like COBRA for that sense. That's kinda nice.
David:Yeah.
Mike:Some employers may allow you to stay on their health care once you retire. This is not as common in the private sector, but, like, for certain government organizations, maybe that's possible. Education may be possible. Everyone's gonna be different here. If you are a partner of a practice and, like, let's say you get a pension off of k ones, which are active investments, active pensions under k one would qualify as active income, and that you could probably stay on there.
Mike:So just ask your employer, but some people can do that. Most, I have found, can't. And then you've got the Affordable Care Act. Affordable Care Act is basically well, it's not government insurance. It's just it's the the marketplace.
Mike:Right?
David:It's it's a marketplace that, you know, health care dot gov that the federal government created, but then all the private insurers are on the depending on what state you're in, they they list their plans that are available.
Mike:They're they're pitching their their plans to you through there.
David:Exactly.
Mike:But you can't well, you can go on health care dot gov yourself.
David:Yes. You could.
Mike:But it's it's nice to have someone walk you through it because Mhmm. It's it's the plan that you didn't understand had that restriction that gets you into trouble. Right. So it's the Wild West on there, but that's kind of the insurance marketplace for pre 65 years old.
David:Right.
Mike:And then once you turn 65, you you launch into Medicare
David:Mhmm.
Mike:Which that's its own thing unto itself. But before we do in Medicare, David, can you give a basic breakdown of Affordable Care Act? I mean, they've got these plan types. They use metals. Yeah.
Mike:There's the bronze. There's the silver. There's the gold. There's the platinum.
David:Right. Yeah. They call those metal levels.
Mike:Yeah. What what in the world's going on there?
David:Yeah. So, basically, the, the more you pay, then the the the higher the metal level. Right? So if you have a bronze of a plan, then maybe you're not getting quite as many benefits or not as much coverage.
Mike:But the cost is lower.
David:But the premium's lower.
Mike:And let me guess. The platinum, it's the highest cost, but you've got the lowest out of pocket, the most benefits.
David:You you guessed that correctly. Yes.
Mike:You can't manipulate health care? No. You can't pay little and get everything?
David:If only.
Mike:Now from a tax perspective, it's important to understand too that you can look like a popper. So if you can retire early and take income from, let's say, nonqualified sources, so you're not paying as much in taxes and you can kind of manipulate it to stay low, you could, in theory, qualify for, what what do you call it?
David:So the, they offer premium tax credits, they call them.
Mike:You're basically paying less Yeah. For your health care.
David:The government will pay part of your premium if, depending on how many people live in your household and how much money you make.
Mike:Yeah. Money you make is what's what's on the 10:40. Yes. And you can manipulate that.
David:You could.
Mike:Because they're not looking at how much you have in your qualified accounts.
David:That's exactly right.
Mike:So it's it's what's on your tax, and this is where tax planning comes into play.
David:Exactly. They're gonna ask you to look at whatever line 20 whatever it is, 27, 20, whatever. That that line towards the first page of the 10:40 at the bottom where it says here adjusted gross income, that's what they wanna know.
Mike:Yeah. For all of those who are considering retiring before Medicare or before 65, you have to look at your accounts in 3 different buckets. You have your nonqualified account. Those are the after tax, the brokerage account. You've already paid on it.
Mike:You have to work it through on capital gains, but you can play around with it a little bit and maybe slide into some discounted health care insurance until 65, and then you start dipping into your IRA assets at that point or, you know, everyone's different. That's that's kind of what we're looking at. And then you've got, David, HMO, PPO, EPO. I mean, what in the world these three letter
David:Yeah. Yeah. So, I mean, you know, HMOs have sort of this negative connotation. It's it's just a more sort of restricted network. Right?
David:Health maintenance organization. In order to see a specialist, right, then you get referred. That's the only way.
Mike:You can't just walk in and see the specialist.
David:Exactly.
Mike:Gotta go through due process.
David:Right.
Mike:K. What about PPO?
David:PPO, again, there's still a network involved. But if you if you saw a provider outside of of the PPO network, the, the health insurance plan would still cover it, but they wouldn't they wouldn't cover as much. You'd have to pay more out of pocket. Yeah. But you could see somebody outside of the network unlike with an HMO.
Mike:Okay. And then EPO, the exclusion provider organization. Is that right?
David:Yeah. So a little bit newer, and they they seem like more of a PPO than an HMO, but they're just a little bit different. But, again
Mike:Are they, like, the hybrid or something?
David:It's it's sort of a hybrid. You still have a network of providers that that you sort of have to stay within, and they're just not as generous if you went outside the network as a PPO would be. So maybe it's somewhere in between HMO and PPO. And there's a lot of those on the health care exchange, by the way. The EPOs, there's a ton
Mike:of them. Everything is a spectrum of cost versus benefit.
David:Yes.
Mike:And then you've got POS point of service, which really just requires a primary care provider. It's the referral situation. You can see out of network providers, but it's just like a really high cost. You know, look into it. Within each of these groups, there's also, like, the different metals and the different blends.
Mike:Basically, finding someone that can help walk you through this Narnia of of options, it's overwhelming. Yeah. Having someone that can you can talk to and say, well, this these are the doctors I wanna see. These are the medications I'm taking. This is kind of what it looked like.
Mike:Okay. Well, what's the best bang for your buck for your situation? And what risks are you comfortable taking and not taking? So, you know, could there be heart issues in your family? Maybe you want a little extra coverage.
Mike:Yeah. Maybe towards that possible situation. Maybe you're you have got the genetics to where everyone lives to a 100 years old and then dies peacefully in in their home. Yeah. Everyone's different.
Mike:You just got to understand what you're signing up for. A lot of people blindly sign up for a cheap plan thinking they got away with it, and then they end up paying more later.
David:Right.
Mike:This is insurance. It's calculations based on probability.
David:And, you know, you might have a provider that you want to see, you wanna keep seeing, that you already you've been seeing forever and you like them. And so we can check to see if if that provider is is in the network for the plan that you're looking at because that might be, like, a a nonnegotiable. You're like, I'm gonna sign up for whatever plan that this provider is in because I like them that much.
Mike:Yeah. That's how I feel about my doctor. Yeah. Right? He's so blunt.
Mike:It's great.
David:Yeah. We like that. We need some of that sometimes.
Mike:Yeah. They could change, but you can change your health insurance every year if you wanted to.
David:You could. Yeah.
Mike:So, anyway and then Medicare, which is 65 on. So what what was the question? What was the original question? We kinda went down a fun rabbit hole.
David:Did. Yeah. So how do people navigate health care before they qualify for Medicare? So So
Mike:we answered that. Yeah. It's Affordable Care Act or you stay on your current employer's plan. Maybe you use COBRA to bridge it. Yeah.
Mike:Or maybe you if your employer allows it, you could stay on there for longer, but those are very unique situations.
David:Right.
Mike:But don't just not have health insurance.
David:That's a risk. You're rolling the dice there.
Mike:Get health insurance. Make sure you know what you're signing up for. You can't cheat it, you just need to understand the benefits you're willing to pay for and the risks you're willing to take with it, and then plan accordingly. That's all the time we've got for the show today. If you enjoyed the show, consider subscribing to it wherever you get your podcast.
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