Obamacare might help make retiring early possible
If there is one thing we learned from 2020 it’s that having adequate health insurance is not a luxury but a necessity.
A close friend of mine who was in otherwise good health found himself hospitalized for several months this fall with COVID. Without health insurance this type of hospital stay would bankrupt most people. Sadly, the cost of insurance has continued to rise drastically in recent years, especially for those who are self-employed or not receiving it through their employer.
Because of these high costs, many seniors who are not yet eligible for Medicare are being forced to continue to work, not for the paycheck but for the insurance benefits. It is especially sad to see people who have physically strenuous jobs continuing to work despite the harm being done to their bodies, simply because they cannot afford what it would cost to pay for it out of pocket.
This was the very predicament that one of our clients faced recently. He was already enrolled in Medicare, but his wife would not be eligible for another year. He had chosen to continue to work just to keep his health benefits, but the taxing nature of his work was having a serious impact on his health.
They came to me to see if I had any suggestions because the best health insurance rates they had found on their own were over $800 a month just for her. This kind of large expense was going to certainly require them to dip more into their retirement accounts than they wanted to, and hoped I might be able to provide a better option.
Talking with them, I discovered that their monthly expenses were relatively low, and because of this, as long as we kept their adjusted gross income for 2021 low they could qualify for rather large credits through the Obamacare marketplace. This would result in a drastic reduction in their out-of-pocket costs for a quality private health-care plan. After crunching all the numbers the client was able to get the health care they needed at an approximate 90% discount. This allowed him to stop working almost immediately without risking their financial future.
I would guess that many of you reading this, or someone you know, is in a similar situation, ready to retire, but waiting until age 65 to stop working because of the need for health benefits. If that is you, an Obamacare plan might be the perfect stopgap solution until Medicare kicks in.
By requesting a quick quote on healthcare.gov I found a non-smoking individual age 64 in Jackson County with a taxable income of $40,000 a year would qualify for nearly $800 per month in premium subsidies. With these credits, a person could get reasonable coverage for around $50 a month. For couples with a similar income, the out-of-pocket costs would be even lower.
Obviously, many factors should be considered before making this kind of life-changing decision. I would suggest consulting with both an experienced health insurance broker and a financial adviser before doing anything. However, for those of you whose monthly expenses are low, and have ample retirement savings, Obamacare could be the answer you have been looking for. It certainly was for the couple I helped.
(Past performance is no guarantee of future results. The advice is general in nature and not intended for specific situations)
Luke Davis is the director of operations and compliance at Stewardship Capital in Independence.