Medical Costs in year 1 of early retirement

As we get closer to FIRE, one of the things Mrs. 39 Months and I (and so many others) get concerned about is paying for medical costs prior to hitting age 65. In the US, Medicare picks up at that age, and though there are still medical bills, Medicare does help pick up a lot of the slack.

The current plan is to retire early at age 56 for me, 58 for Mrs. 39 Months, so that means 7-9 years in which we will have to pay for our own medical. I’ve written before about how, after reading “The Power of Zero”, I want to try to minimize or eliminate taxes for us in the first 5-10 years. If we do that and they keep the ACA subsidies in place, we should be OK. The problem is that first year.

The plan is to retire early in July 2019. Doing that, I would have several issues pop up which would make us ineligible for Obamacare subsidies:

  • Six months of pay at my six-figure salary
  • A deferred investment account my company has, which will yield me roughly $204K, all of which I will receive on the first day after I leave, and all it taxable
  • The need to live for the remaining six months, and thus to draw money from somewhere.

So my initial plan to use Obamacare won’t work for year 1 of my early retirement. I could use the Cobra to get my work insurance (Cobra is a program where you can get health insurance for up to 18 months after you leave a job, provided you pay both your part and your company’s part). Currently I’m paying about $9,800/year for my Silver plan at work, so I’m expecting that to pick up my company’s contribution, that would at least be double that = $19,600/year ($1,633/mo.).

I’ve spoken about using HealthSherpa before, to assist in your searches for healthcare. When I go online there and type in my expected income for year 1, I get no subsidies. I went with a silver plan (the most popular) and a PPO (we like the flexibility there. The system is showing me an Amerihealth NJ plan for $1,569/month (ouch) with an expected annual cost for medium usage at around $21,577 (or $1,798/mo.). Double ouch! So for that first year, I’m going to need to add an extra $1K a month to my expected medical costs, because I will make way too much money to get ACA subsidies.

Something to plan for and make part of our budget. Thanks to the FI community, at least I am aware of this kind of stuff, and can prepare for it. Also, just because we hit FI doesn’t mean we stop working. It’s possible that I find another position in my company or at another, or Mrs. 39 Months keeps working and gets a job with benefits. Either way, we’ll work it out.

It pays to know what is going on, so thanks to all those who write about this stuff (see links to right). I hope all your plans work out!


Mr. 39 Months

2 thoughts on “Medical Costs in year 1 of early retirement”

  1. Hey Mr. 39months,

    Getting all of this figured out ahead of time is definitely the right course to be taking. It’s quite different for us in Canada in terms of how health coverage is funded, but I can tell you as someone who works in the healthcare field that there are no shortest of horror stories.

    Nothing beats a healthy stockpile of cash on the sidelines for security.

    Take care,

    1. Thanks. Its amazing how healthcare is such a big retirement issue. Not just in the US, but in countries with government health care, the availability and quality of care for retired and elderly is still an issue (and probably always has been and will be).

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