How to figure out health care expenses in retirement?

[heathpack]

Don't forget when you have to take RMD from your IRA, and those are treated as income.

But yes, you can retire and not worry about LTCI if you have backup $500K funds.

Not until age 73, right? That will be 11 years into retirement for me and 14 years from now.

 

[VacationForever]

Not until age 73, right? That will be 11 years into retirement for me and 14 years from now.

I think your RMD age is now 75 yo.

 

[rapmarks]

Don’t be snarky. Especially if you haven’t read my posts carefully

You hadn’t made the last post when I answered, but if you are not having income, what are you living on, it has to be savings. You may have enough savings to produce enough dividends to support you,but that’s all considered when determining IRMAA

 

[DrQ]

If you are currently insured through your employer, you should be able to get a COBRA policy with your employer for the first 18 months after you quit your job. It would most likely be cheaper than buying a policy on your own. Also, you wouldn't have the hassle of switching policies and/or insurance companies until later.

This does not apply to the OP, could be relevant to others. Check with the COBRA policy as it may be secondary to Medicare and if you are contributing to an HSA, Medicare part A looks back 6 months from when you file, so if you don't plan and stop your HSA contributions 6 months before you retire and file for Social Security (Which automatically files for Medicare part A), your contributions will become taxable.

 

[TolmiePeak]

Yes it seems like LTC policies are a terrible deal now days. I figure if I go into LTC I'll be spending less than I am now when I don't need it.

 

[Janann]

Don’t forget IRMAA. Medicare will cost extra if your combined income is above a threshold. And with an inheritance and savings for possible nursing home, you may hit the threshold

IRMAA is not impacted by any type of savings balances. IRMAA only looks at the income that is on the tax return from two years prior.

 

[rapmarks]

IRMAA is not impacted by any type of savings balances. IRMAA only looks at the income that is on the tax return from two years prior.

Of course it doesn’t, but it earns money which is taxed. Unless of course all Roth.

 

[sue1947]

No pension, no interest on investments (they’re all in retirement accounts), no capital gains, no annuity, some $ in Roth IRA

Any of that retirement income in regular IRA/401K (you said some in Roth which implies some not)? if yes, then that money is taxable when you pull it out or roll it over. It is also subject to required min distributions which frequently bumps you into a higher tax bracket. When you start taking social security, that income also determines how much of your social security is taxable.

Best strategy is to pull money from any taxable retirement accounts first. Delay social security. Leave the Roths alone until later. You can adjust how much you take out of the regular IRAs based on your income level and tax rates. If you don't need that money, you can take advantage of the lower tax bracket to roll over money into a Roth. You pay taxes on the money taken out but then not on the Roth income.
I retired at 53. At the time, COBRA was more expensive than the affordable care act. Check all options. Your income will impact the cost of your insurance, both for affordable care act and then for medicare. If you go with COBRA, that will be another reason to spend down the non-roth retirement accounts first.

My mother is currently in assisted living at $12,000/mo. I'm not a believer in annuities due to the costs. I'll keep that money in my own account along with control of the money.

He kind of said its a wild card and the best thing you can do is have as much money as possible and hope for the best.

Good advice.

 

[DrQ]

Here is the Cliff's Notes on Medicare Advantage (part C) VS Supplements (part G):

Medicare Advantage -

• Limited providers (networks)
• Procedure pre-authorization is the norm
• Changes yearly
• Pay as you go (determine your Max Out of Pocket Expense)
• Regional coverage
• May include Meds
• May include other benefits

Supplement -

• No networks
• Permanent insurance - nationwide coverage
• Procedure pre-authorization is the exception
• Prepay coverage whether you use it or not
• Limited window for guaranteed coverage, then underwriting required in most states
• Dead pooling of insured groups - as population ages, costs increases, but new, open pools, are cheaper
• If it is covered by Medicare, the Supplement will pay the difference - period.
• Have to buy Medicare part D for Meds

 

[rapmarks]

Here is the Cliff's Notes on Medicare Advantage (part C) VS Supplements (part G):

Medicare Advantage -

• Limited providers (networks)
• Procedure pre-authorization is the norm
• Changes yearly
• Pay as you go (determine your Max Out of Pocket Expense)
• Regional coverage
• May include Meds
• May include other benefits

Supplement -

• No networks
• Permanent insurance - nationwide coverage
• Procedure pre-authorization is the exception
• Prepay coverage whether you use it or not
• Limited window for guaranteed coverage, then underwriting required in most states
• Dead pooling of insured groups - as population ages, costs increases, but new, open pools, are cheaper
• If it is covered by Medicare, the Supplement will pay the difference - period.
• Have to buy Medicare part D for Meds

My Medicare advantage is nationwide. It covers me both up north and in Florida. It actually pays the same in and out of network
I have an $1100 out of pocket max, I always meet it. This year I met the max in August , last year I met it on January 10. The problem has been that when my husband needed a rehab facility, they balked at our insurance

 

[heathpack]

They look back 2 years. If you do ROTH conversions, you can get caught in the IRMAA swamp too. I our case we inherited some annuities which were over 50% taxable. We cashed them out the year before I was laid off and IRMAA bit us.

Who is looking back 2 years? Medicare? By the time I can apply for Medicare, I will have been retired for 3 years so my income for the prior 2 years will be social security and whatever I take out of my retirement accounts.

I don’t know that we will do any Roth conversions, whether we do or not will be upon advice of our financial planner. However by the time I retire I will have 5 years of maxed out 403b and 457b contributions in Roth accounts. It should be several hundred thousand dollars. I have not yet heard FP discuss Roth conversions. He just asked us to put whatever we could into Roth accounts now, so that he could minimize the tax (and maybe IRMAA) implications of our withdrawals in the future. We could afford to do 100% Roth, so that’s what we’re doing.

I am the beneficiary for most of my Moms retirement accounts, and for most of those we have to take the distributions over 10 years, so that could definitely put us into a high income situation if it happened soon. But I guess if that happened and I therefore was taking nothing out of my own retirement accounts until age 70+ and benefiting from all that growth, I guess I wouldn’t have to financially worry about whatever it is would happen if I were impacted by IRMAA because we’d be in a very strong financial situation.

 

[Janann]

Who is looking back 2 years? Medicare? By the time I can apply for Medicare, I will have been retired for 3 years so my income for the prior 2 years will be social security and whatever I take out of my retirement accounts.

Yes, Medicare looks back at the income from two years ago. So 2026 IRMAA payments will be determined by 2024 tax return income.

 

[rapmarks]

Really fortunate to have Roth. When we retired no Roth, $2000 a year in an IRA limit
We paid off the mortgage our last year, no more deductions either.

 

[DrQ]

My Medicare advantage is nationwide. It covers me both up north and in Florida. It actually pays the same in and out of network

If you MOVE, your MA may or may not be available in the new place where you live. Medicare plan G will follow you. In any case, you will have to get a new MA policy at your new location.

 

[SmithOp]

Yes it seems like LTC policies are a terrible deal now days. I figure if I go into LTC I'll be spending less than I am now when I don't need it.

So are you single going into LTC, what will spouse or dependents live on?

We were lucky to have a financial plan started in our early 40s, so the LTC policy payments are still affordable. My wife and I pay roughly $300 a month for both of us.

The policies are terrible deals if you wait until close to retirement to consider purchasing one.

 

[rapmarks]

If you MOVE, your MA may or may not be available in the new place where you live. Medicare plan G will follow you. In any case, you will have to get a new MA policy at your new location.

My policy it will be. I am on a state retirement plan. They moved the retirees to a Medicare advantage plan. It is a good plan, it didn’t change our coverage, but it is good in all the states.
The first year I retired, we were on a terrible hmo plan. We were stuck the first year and got off it as soon as we could. We retired so we could travel, and it didn’t cover us except for emergencies when we traveled. We were in our fifties, and we paid double rates until we got on Medicare just so we could go wherever we wanted.
So some MA plans are restricted, but mine is not.

 

[Luanne]

My policy it will be. I am on a state retirement plan. They moved the retirees to a Medicare advantage plan. It is a good plan, it didn’t change our coverage, but it is good in all the states.
The first year I retired, we were on a terrible hmo plan. We were stuck the first year and got off it as soon as we could. We retired so we could travel, and it didn’t cover us except for emergencies when we traveled. We were in our fifties, and we paid double rates until we got on Medicare just so we could go wherever we wanted.
So some MA plans are restricted, but mine is not.

I have a couple of friends who are covered by a state plan from California. Both of them have moved to different states and say their coverage is very good. I didn't have that option so dh and I both went with Medicare Supplement Plans. We have Plan F, which isn't offered any longer.

 

[heathpack]

Any of that retirement income in regular IRA/401K (you said some in Roth which implies some not)? if yes, then that money is taxable when you pull it out or roll it over. It is also subject to required min distributions which frequently bumps you into a higher tax bracket. When you start taking social security, that income also determines how much of your social security is taxable.

Best strategy is to pull money from any taxable retirement accounts first. Delay social security. Leave the Roths alone until later. You can adjust how much you take out of the regular IRAs based on your income level and tax rates. If you don't need that money, you can take advantage of the lower tax bracket to roll over money into a Roth. You pay taxes on the money taken out but then not on the Roth income.
I retired at 53. At the time, COBRA was more expensive than the affordable care act. Check all options. Your income will impact the cost of your insurance, both for affordable care act and then for medicare. If you go with COBRA, that will be another reason to spend down the non-roth retirement accounts first.

My mother is currently in assisted living at $12,000/mo. I'm not a believer in annuities due to the costs. I'll keep that money in my own account along with control of the money.

Good advice.

Most of our retirement $ is in regular 401K, a small proportion is in Roth retirement accounts. The money in a 401K, 403b, or 457b is not taxed when you roll it over- only when you withdraw it.

At the time I retire, I will have 13 years before RMD are an issue. Literally our combined SS income per month if I elect to take SS at age 62 is what we are living on per month right now. We can up our lifestyle and still withdraw very little from our retirement savings. Our biggest expense those first three years will be health insurance but I believe that money will not be subject to taxes since its coming out of an HSA.

I just don't think we're going to be in some terrible tax situation in early retirement.

 

[Passepartout]

Most of our retirement $ is in regular 401K, a small proportion is in Roth retirement accounts. The money in a 401K, 403b, or 457b is not taxed when you roll it over- only when you withdraw it.

At the time I retire, I will have 13 years before RMD are an issue. Literally our combined SS income per month if I elect to take SS at age 62 is what we are living on per month right now. We can up our lifestyle and still withdraw very little from our retirement savings. Our biggest expense those first three years will be health insurance but I believe that money will not be subject to taxes since its coming out of an HSA.

I just don't think we're going to be in some terrible tax situation in early retirement.

I think you will be just fine. I retired at 62 and had been providing health insurance for my self-employed wife (also 62). We were both fairly healthy, so we just bought a low-cost 'catastrophic' plan in case something very unexpected happened health-wise for 3 years and Medicare could kick-in. We did as much of the diagnostic testing and got new glasses and any dental work caught up while we still had employer coverage then 'coasted' and were careful for 3 years. Of course, there is always a chance one will step out in front of a bus or something, but it wasn't hard to pay for immunizations or a check-up well within our budget.

This is opinion, not advice.

Jim

 

[rapmarks]

You are going to be in an excellent tax situation.
I was shocked when I did our taxes for out retirement year, we owed a lot of money!
The school paid our sailers over 12 months, so we got our paychecks all summer but we also got our pension all summer. And we didn’t withhold enough.

 

[amycurl]

the best thing you can do is have as much money as possible and hope for the best

Basically, the American health care system in a single sentence. I would also not expect to have Medicare or Medicaid available in any form within the next decade, and plan accordingly.

 

[TolmiePeak]

So are you single going into LTC, what will spouse or dependents live on?

We were lucky to have a financial plan started in our early 40s, so the LTC policy payments are still affordable. My wife and I pay roughly $300 a month for both of us.

The policies are terrible deals if you wait until close to retirement to consider purchasing one.

No married. LTC will probably cost about $10 to $15k per month. I'm not too worried about LTC costs. It is what it is. Well just spend down any inheritance if we need to. If our offspring end up getting zero. So be it.

 

[amycurl]

And, honestly? I would take SS benefits as soon as you are at all eligible, because I don't think there will be SS anymore in the next 10-15 years, either.

 

[heathpack]

I think you will be just fine. I retired at 62 and had been providing health insurance for my self-employed wife (also 62). We were both fairly healthy, so we just bought a low-cost 'catastrophic' plan in case something very unexpected happened health-wise for 3 years and Medicare could kick-in. We did as much of the diagnostic testing and got new glasses and any dental work caught up while we still had employer coverage then 'coasted' and were careful for 3 years. Of course, there is always a chance one will step out in front of a bus or something, but it wasn't hard to pay for immunizations or a check-up well within our budget.

This is opinion, not advice.

Jim

Even though I would not be eligible for a pension if I retire at age 62, I think I can still buy health insurance at a group rate through the state pension system. I need to get details on that. I think it would be a little less expensive than private coverage but more comprehensive than Obamacare coverage.

Right now we have high deductible health insurance to minimize our currently monthly OOP healthcare costs and maximize our HSA contributions. I hate to miss out of 1.5 years of HSA contributions but its possible for me to switch to a traditional "cadillac" health insurance plan in the last 6 or 18 mo of my employment and then "tank up" on every test and preventative procedure possible. When I've run the numbers in the past, this plan was too expensive to justify even doing a bunch of procedures. But at that point Mr. H will be eligible for medicare so I need to look at those numbers again if I am just needing to pay for a plan for 1 through work vs paying for employee + spouse.

However that HSA money is invaluable. Its money I'm never going to pay taxes on, so I hate to pass up an opportunity to put $ into my HSA.

 

[rapmarks]

Medicare was like having a Cadillac after having an Edsel for the ten years between retirement and age 65.