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Welcome to How to Retire on Time, a show that answers your retirement questions. Say goodbye to the oversimplified advice you've heard hundreds of times. This show is about getting into the nitty-gritty so you can make better decisions as you prepare for retirement. Text your questions to 913-363-1234 and we'll feature them on the show. Don't forget to grab a copy of the book, How to Retire on Time, or check out our resources by going to www.retireontime.com.
Hey. Thanks for joining. Here's a question I was recently asked on my show, How to Retire On Time. Take a look. Alright.
Mike:David, here's the first question.
David:Okay.
Mike:Can you share how people who retire before 65 handle healthcare? Oh. It's a great question. Yeah. And it's a question that stems in the idea of how much is a year of your life worth?
David:Yeah. Explain that. Because I like I like the I like the the phrasing or the you're setting the table there for something good.
Mike:Yeah. I mean, your money's supposed to serve you. Uh-huh. So, what do you want to do? Well, it's supposed to support you, and if you have financial independence, then it it should pay for your time.
Mike:Right? Time's our most precious commodity. It's not money. It's not being the richest person in the graveyard, it's that your money can support the life that you Well, what if you could put a plan together, and your healthcare cost was like 20,000 a year. 30,000 a year.
Mike:That means that if you are refusing to retire because you don't wanna pay that extra 30,000 a year, you have put that your a year of your life is worth 30,000 a year. Right. Because you're unwilling to pay it to have complete control of your time. Now, you may enjoy work. And if that's the case, you're choosing to spend your time doing something that you love.
Mike:But not everyone loves their job.
David:Right.
Mike:That's that's the idea. How do people handle it? It's a tax planning conversation, just as much as healthcare planning. So affordable care act subsidies is typically where you would go. Affordable care act subsidies are based on your modified adjusted gross income, which means you probably shouldn't be doing IRA to Roth conversions, which means you probably shouldn't be taking a lot of money from your IRA.
Mike:It means if you were smart and and were had the foresight that you funded enough in your brokerage account, that you're taking income from your brokerage funds, taxes long term capital gains, that lowers your overall taxes for that time frame. And if you got like, you know, $25,000 showing up as taxable income, you might have many many more dollars. Mhmm. But that's what's showing up, you're gonna qualify for most of the Affordable Care Act subsidies, which means that, yeah, 20 to $30,000 that you'd be paying is now like 5, or less. Yeah.
Mike:Every state's a little different. But now you've just dropped it, you've kept more in your portfolio, the first couple of years are very tax efficient, and you've got more years of your life. So affordable care act insurance is typically where people go. In addition to that, you've also got the tax planning element on how to lower that bill. The sequence or the withdrawal, we call them the golden years.
Mike:60 to 65 years old, those are your golden years.
David:Mhmm.
Mike:Treat them with respect, with due diligence, with, if I'm a, could you quote George W, treat them with strategery. Yeah. Okay. Yes. Now that said, there are other options.
Mike:You could do like catastrophic insurance, and then go to, what's that like Christian Healthcare
David:Ministries. Yeah.
Mike:Yeah, like you could go to something like that, and it's not traditional insurance, not insurance actually, it's just
David:It's like a cost sharing Yeah. Community of people.
Mike:We take care of each other, and you pay in, and then Yeah. There's a reimbursement program. If you're retired, you can afford a reimbursement program. Mhmm. So those, there are alternative versions of healthcare that you could explore.
Mike:Everyone's different, so what's what's right for you, but Yeah. But as a general rule, that's kinda what we would see.
David:And what about I've heard some people say, I'm self funding. Right? Or is that what the
Mike:Self funding, that's yeah. Self funding insurance, you have you legally have to have insurance. But self funding is basically saying I'm gonna lower my insurance costs, whether it's healthcare insurance, whether you're taking a lower path on Medicare, for example, maybe you only do Medicare, traditional Medicare, not the Medigap or other things. And then also long term care insurance, that you just don't buy that, so that you're gonna pay out of pocket for the excess of medical costs.
David:Oh, okay. Yes.
Mike:Insurance is not an investment. Anyone who says otherwise is selling you something. Even the person that says it's not an investment, is still all insurance is sold.
David:Yeah. It's a product that gets sold.
Mike:Doesn't make it wrong, it's just Yeah. Insurance, by definition, is the transference of risk to an insurance company. Yeah. Do you want to pay so an insurance company takes on that risk when the odds are not in your favor? Mhmm.
Mike:That's what insurance is. You don't buy car insurance, and then play life like you're in Mario Kart, and you're just jamming and bashing all the cars, like no. At some point the insurance companies are gonna say forget this, we're out. Yeah. Right?
Mike:You don't buy home insurance, and then set your house on fire, collect the damages, and then buy another home and set that on fire, like that's not, no. Yeah. Insurance is a situation where you transfer the risk. Yes. That's how you handle healthcare.
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