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I've come across a few blogs lately about people exiting the work force early at age 35, 40, 45, 50, etc. They were able to pay off their mortgages, sock away money in retirement accounts, and eliminate all debt. They did not get inheritances, nor did they earn huge salaries. I understand they must have made sacrifices, lived frugally, etc., but how do they pay for health care without reducing their retirement accounts? Some of them work part-time, consult, etc., to cover food, gas (although most have only one car and walk or bike most of the time), utilities (no cable) and keep their earnings low enough to pay minimal taxes, if any.
But again…how is health care figured into all of this? Do they qualify for ACA subsidies and use their part-time earnings to pay the balance? I'm sure keeping fit and eating well can go a long way, but life happens and sometimes you end up in the hospital.
I'm intrigued by the whole concept. My husband is 59 and has faced possible layoff for the past couple of years. We have eliminated all debt except for our mortgage. We have steadily put away for retirement and should have about $1,000,000, barring economic crisis as in 2008. A million seemed like so much money when we were in our 20's and 30's, but it doesn't seem like much now. We figured eliminating debt and living simply will help in retirement, but health care costs (even with Medicare) are scary, and we fear it could be possible that much of our savings could be wiped out if one or both of us develop any medical issues.
How do they do it?
For that matter, how does anyone who waits until full retirement age avoid having retirement savings wiped out by medical costs?
I'm sure different people will have different answers to this question, but for sure it's something that you need to think about if you are planning to retire before Medicare eligibility.
I plan to retire next year when I will be 61. Fortunately, my company still has some level of retiree medical benefit. Unlike in the past it does cost us some money, but not as much as if I had to buy medical insurance on my own. That amount of money is planned into our retirement budget, and we have the savings needed to cover that cost.
The people doing it at age 35 or 40 are letting the rest of us pay for them. At that age, it's a fine line between "retired" and "welfare queen". There are very few people who can acquire the assets by age 35 or 40 without inheriting them to live the rest of their lives. It's hard to imagine them not receiving Medicaid and Food Stamps, at a minimum. From where I sit paying lots of Federal income tax to prop up their lifestyle, I think that is gaming the system.
Many of the more recent early retirees are using ACA subsidies. Basically they go into retirement with a large amount of cash savings and/or have Roth IRAs which are not considered taxable income and are not included in your Adjusted Gross Income (AGI) or MAGI. However you have to have some taxable income to get an ACA subsidy, otherwise you will be referred to Medicaid. A rule of thumb for a couple seems to be about $22K in taxable income (from traditional IRAs, Social Security, pensions, etc.) supplemented by cash savings and Roth IRA distributions to get the maximum ACA subsidy. It probably depends on your state. You just have to go to the ACA website and play around with their calculator using different AGIs or MAGIs. I'm referring to those who retire in late 50's or early 60's so are just a few years away from Medicare. Some of these couples claim to save about $10K a year on health insurance with ACA subsidies. Before ACA, these early retirees generally lived frugally and required lots of savings to pay for expensive health insurance. Other early retirees with health insurance were military retirees or government worker retirees, particularly law enforcement positions that can retire in early 50's. However many state and local governments no longer offer free or reasonably priced health insurance for retirees.
For the much younger retirees, I don't really know how they do it but assume they also rely on ACA subsidies. Like the previous poster, I agree that there are probably many answers. The younger retirees usually explain it in their blogs.
It previously was very difficult to retire before Medicare age (65) and pay for health insurance. I returned to work at age 60 primarily because I couldn't afford the health insurance premiums. For myself and my wife together we were paying $1.7K per month!
However, now, with the Affordable Care Act, premiums are controlled although still expensive. You can look up the premiums for yourself because they no longer are a function of pre-existing conditions.
For most people, retirement before 65 is still a big challenge.
last year we paid over $1,100 a month for the two of us. It was hard but we managed. We took early social security and can't wait for two more years to vanish and we can apply for Medicare. Spouse still works part time right now.
It previously was very difficult to retire before Medicare age (65) and pay for health insurance. I returned to work at age 60 primarily because I couldn't afford the health insurance premiums. For myself and my wife together we were paying $1.7K per month!
However, now, with the Affordable Care Act, premiums are controlled although still expensive. You can look up the premiums for yourself because they no longer are a function of pre-existing conditions.
For most people, retirement before 65 is still a big challenge.
I'm 57. I don't trust that ACA will survive the next Presidential election and it's pretty clear that what Medicaid covers is going to be slashed in the name of reform. The best I think I can do is 63 1/2 with 18 months of COBRA continuation from my employer before Medicare coverage kicks in. A corporate group policy with mostly younger workers is going to be far cheaper and better than what I could buy privately.
In order to qualify for insurance under the ACA the applicant must have income. Without provable income they get shifted onto state Medicaid.
Medicaid is riddled with clawbacks and asset seizure. If you own anything or have any savings, Medicaid will capture those assets before it assists in medical payments. The extent of the asset stripping varies by state.
Here is a very good article and subsequent discussion about the pitfalls of early retirement and the ACA:
I'm 57. I don't trust that ACA will survive the next Presidential election and it's pretty clear that what Medicaid covers is going to be slashed in the name of reform. The best I think I can do is 63 1/2 with 18 months of COBRA continuation from my employer before Medicare coverage kicks in. A corporate group policy with mostly younger workers is going to be far cheaper and better than what I could buy privately.
Don't count on COBRA being cheap. I was quoted $13K-$19K/yr depending on the extent of coverage.
Retired from NY state service at 51 , my law enforcement pension comes with health care provided to my wife and I until death... At 65 I must take Medicare part Band my current health plan becomes secondary /supplement (NY reimburses the part B costs)... We pay around 20 % of the plans monthly cost , some offset by accumulated sick leave that wasn't used ... Wouldn't have retired young/early without that
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