Guided Path 8-1 Pre 65 Health Care Options for Early Retirees

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Retiring early is a dream for many. However, people often hesitate due to a fear of high healthcare costs, given that Medicare doesn’t come into play until the age of 65. We address this concern today — in the first episode of our brand-new season about insurance! Zacc Call and Laura Hadley explore three options for pre-65 health care coverage: COBRA plans, retiree plans offered by employers, and plans obtained through the exchange. Zacc and Laura discuss how COBRA helps address any gaps in coverage (switching jobs, retiring early, etc.), tips on navigating to compare plans and identify potential subsidies personal experiences and anecdotes to illustrate the nuances of each option, a sneak peek into the upcoming episodes of this season, and more

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[00:00:00] Welcome to The Financial Call. We are financial advisors on

a mission to guide you through the financial planning everyone should

have. Whether you're doing it yourself or working with a financial

advisor, these episodes will help you break down complicated financial

topics into practical, actionable steps.

Our mission is to guide motivated people to become financially

successful. Welcome to The Financial Call. Today we're talking about

pre-Medicare healthcare, so pre-65 healthcare, and this is the first

episode of our insurance season, which is our last season. This is crazy.

This is so weird, crazy that we're already here.

I think we'll take maybe a little bit of a break or really strategize around

what do we do after this, but this puts a bow on the Guided Path series

when we finish season eight. All eight seasons are in this order for a

reason. We probably should have pulled in insurance earlier. I'm kind of

feeling a little guilty about that, if I'm being honest.

We just don't focus a lot [00:01:00] on selling insurance because I think

a lot of people feel like they get sold a lot of insurance. Mm-Hmm. But

insurance is something everyone needs. So, we probably should have

pulled this in earlier. Oh, well here we are today. We're doing it today.

So, we're gonna talk about healthcare insurance.

We're going to talk about pre-65, post 65. We're gonna talk about life

insurance for two episodes, term versus permanent. And then episode

four is when to get life insurance, when to drop it. Episode five will be

long-term care and disability. Episode six will be about property and

casualty insurance and other forms.

So, a lot of different types of insurance to be covered here. We talked a

bit about annuities in retirement income planning earlier. The income

planning section covers that. Maybe, Laura, you and I need to go back

and make sure we covered that enough. Maybe we need to add that

here, but sounds good. Today is gonna be healthcare before age 65,

and there are definitely options here.

It's changed over the last decade. I was just gonna say, this is such a

common question that people have and [00:02:00] probably one of the

biggest deterring factors for people retiring before 65 because they don't

know what to do about healthcare. And there are lots of options that can

make sense, so you don't have to stay at your job.

I mean, maybe your retirement plan looks fantastic and you just are

afraid to pull the trigger because you don't know what to do for

healthcare costs. So hopefully this will help paint a clear picture of the

options, what the costs are. I am amazed at how right you are about this.

Like how often people, you're amazed how right I am?

No, I was awfully, how right. Let's say it this way, by the way, Laura. I’m

just kidding with you, Zacc. Laura is incredibly good at stuff here. So

now I'm all like flustered. Flustered. Yeah. So, okay. But I'm amazed at

how often the retiree will just completely take retirement off the

table because they're not 65, because they're not 65.

So I guess it's not the retiree, but I'm amazed how often the worker in

the twilight of their career is like, well, I guess I'm working till at least 65.

Because they just had no idea there's an option out there [00:03:00] for

them, which there are quite a few options. We'll go over them today, and

Laura's right all the time.

Right? Zach's still feeling flustered. Okay. Just kidding with you. So, we

have about an 80-page document called Money and Mind that Terri Flint

and I spent many, many hours over a year working on. It's basically a

book. And this book is designed to help retirees understand, or near-

retirees understand the transition.

They're written in 14 articles. Seven of them are my style. They're very

nitty gritty, down to the numbers, technical side of how do you get

retirement done. And then the other seven are what matter more to

people, which is like, how do you actually feel about retirement? How do

you transition into retirement?

So, it's called Money and Mind, and my half is the money portion. Terri

Flint wrote the mind portion. If you would like, we'd be happy to give you

a copy of this. We don't sell it, it's just we have a bunch of copies

available. It looks like a magazine. I've got it in my hand, or we can send

you an e-copy and you [00:04:00] have a PDF of it.

But the reason I bring that up is the second article is healthcare.

Healthcare, as Laura put it, is one of the major contributors as to why

people hesitate to retire. So if you can get your income figured out, if you

can figure out how you're going to get healthcare coverage, and then

you figure out how to ensure that your money lasts, then you're pretty


And then from there on out, it's just, let's optimize taxes, let's optimize

your estate planning. But all of those are long-term things that we can

work on every year, but you cannot walk into retirement without a

good understanding of your healthcare situation. Okay, so go

ahead. I was just gonna say three plans.

This kind of boils down your three main options before Medicare at 65.

Those are COBRA plan, retiree plan, and just getting a healthcare plan

off of the exchange. And a lot of times you can get a subsidy through

that. So why don't we start off with COBRA? So COBRA, basically this

is continuing your current benefits that you get [00:05:00] through

your work.

Your employer's paying a big portion of your premiums, they

usually stop paying those premiums once you retire, so you are

then responsible for paying those maybe a little bit more to cover

their administration costs. It is one of the higher cost plans for you

to choose, but if you've already met your, maybe your out-of-

pocket maximum that year and you don't wanna switch over to a

different plan and reset your deductible and out-of-pocket max,

might be worth it just to continue paying those higher premiums till

the end of the year, especially if you're still needing to see the


That was exactly where I was when it came to Capita, by the way. Oh

really? Yeah. So I was working at a previous employer, had wonderful

healthcare coverage. And when I joined Capita, we were less

established than when you joined Capita. Mm-Hmm. Let's put it that

way. We didn't have a healthcare plan for employees, so I was on my

own to find my own private healthcare coverage.

So, I knew that was going to be expensive. Through the exchange? Yes,

exactly. I knew it was going to be expensive and I wasn't gonna qualify

for any subsidies or any [00:06:00] help, so I left my old employer in

October of 2015. This is also a little trick for people to know. If you work

at all during a month, then you get healthcare coverage for the full


They only cut coverage once a month. So, I worked a little bit into

October, had coverage through in the end of October, so I needed

coverage for November and December. I was eligible to sign up for a

new plan because if you have a work change, that's a life event, you can

sign up for an exchange plan. So I could have.

But I thought, you know what? I'm already through my deductible this

year. There's only two months left. I would be so frustrated if I signed up

for a new deductible and my new deductible was going to be $13,000.

And Murphy's Law, that would happen. Right? Exactly. Right. So my kid

would go to the ER or something like that.

So I'm thinking like, I don't want to have to pay another $13,000 if

something happened here at the very end of the year, so I decided I

would just take on COBRA for two months and then switch to my own

plan. Do you remember how much your COBRA premiums? I do. I'm

getting there. Probably too slow.

Okay. Jumping the gun. [00:07:00] No, I'm going way too slow. My wife

always says short story long, like just get there. It was over $2,000. This

was back in 2015. So, premiums have gone way up since then. Even in

the last year, they've almost gone up 20%. Last five years, they've

basically doubled. And this was eight years ago.

Wow. And I was paying $2,000 a month. And then I switched over to a

private plan on the exchange, and I paid a little over a thousand. It was

about $1,100 a month. Get this, it was $1,100 a month with a $13,000

deductible. So, I was paying, wow, about $13,000 a year for the privilege

to pay the first $13,000 of medical expenses without any help.

So, I knew I was $26,000 out of pocket before any help from anybody. It

was brutal. And that was you and your wife and three kids? Yep. That

was three kids. Yep. So yeah, it was not fun, but that's where we were

and we decided those two months, that was worth it because we'd

already been through the deductibles and that was a [00:08:00] pretty

low risk tolerance decision for us.

I mean, we could've risked it. It probably would've been fine. I don't think

we had any major medical expenses, so I probably wasted $2,000 in the

process. Because you paid it. Yes. It always works out that way. Right?

That's a good point. Okay. COBRA goes up to 18 months, so it's not a

long-term plan. You can't be on your old employer's plan forever.

They will continue coverage for up to 18 months. The idea behind this,

the COBRA law there was to help people bridge a gap. If they got let go

or if they had a change in work and they needed to get to new coverage,

that gives them a pretty good runway to find some other plan of some

type. Not a long-term solution, but can be a good short-term solution.

So I was paying, I think, $250 a month when I was working at that

employer, and it went from $250 a month to $2,000 a month. So, I didn't

know that at the time. I had to sign up before I got all the details. It's a

little bit of a surprise. If you are thinking about COBRA, that's a really

good option.

We're gonna go into exchange, but I'm just gonna throw out a retiree

[00:09:00] plan, and that's one where we probably won't cover it too

much because they vary by employer, but a lot of employers, if you're

over a certain age, usually around 60 years old, they will offer you a plan

of some type between 60 and 65.

Some even offer a plan after 65 as a supplement to Medicare. A lot of

employers, these are employers from the eighties and nineties actually,

where this is going away. But if you were at a company for a really long

time, it's worth asking. I was working with a client that worked for Utah

State University up in Logan, in Cache Valley, Utah, and I just suggested

they ask, just find out.

She went and asked, and it turns out she was eligible for healthcare

coverage that was basically like a hundred percent covered for her. I

can't remember all the details, but it was really, really robust, like a really

rich plan. And she was eligible because she had worked at the university

for so long and she had no idea.

Nobody had ever told her about this plan, and she found out about it

about a year before she retired, and she'd been there for decades. So

it's worth just [00:10:00] checking in to make sure that your company has

or doesn't have a retiree healthcare option. If they do, throw it in the mix.

You've got COBRA and then your retiree healthcare plan from your


The last one is the exchange. So this one's more involved because of

subsidies and limits. Laura, how would you describe the exchange? Like

the general exchange? This came about the Affordable Care Act through

what people call Obamacare. How do we explain this to everybody?

How does this work? I feel like this is just finding health insurance that's

not tied to an employer.

Anybody can go out and find a coverage plan that works for them. It was

through the Affordable Care Act, Obamacare a lot of people know it as.

There are subsidies attached to it, so if your income is low enough, you

can get a pretty good subsidy to help cover these premiums. It used to

be a cliff for your income.

I think it was around 69,000. If you earned a dollar over that, you would

lose all of your subsidies. So, it was a pretty important number that we

had to make sure we didn't go over. That got changed I think in 2020

[00:11:00] with COVID. I think you might be right. I can't remember. It's

been a couple years at least.

Yeah, they changed it, so it wasn't so much a cliff. If you went over, that

was okay. Your premium still went up a little bit, but you didn't

completely lose the subsidy. It was super helpful. I had a family member

who barely went over. Luckily, he was able to put money inside of an

HSA plan and reduce it back down and sneak back in.

Oh, it would've cost him about $12,000 if he couldn't have brought his

income back down a little bit. But a lot of times if your income is low

enough, you can get a pretty darn good subsidy and even have a

low deductible, and you can choose lots of different plans. You

know, you can have a high deductible plan that's gonna be lower

cost or a low deductible which is gonna be higher costs, and

choose what works best for you.

A lot of times you can strategize around your income, your taxable

income. Let's say you do retire or are trying to bridge the gap to

Medicare, you get on a healthcare plan through the exchange. And

we're trying to keep your income below, let's say 60,000. Well, if we

draw from your Roth account or from an HSA, that's not gonna

show [00:12:00] up as taxable income, so you might actually be

spending more than that $60,000 number, but it's still showing as

60,000 so you can keep that subsidy.

Yeah. We see a lot of people who have a few different account types,

and they can bridge that gap for two or three years, keeping their income

low, and then once they get on Medicare, they're okay to let it go a little

bit higher. The Medicare income limits are for a couple closer to

190,000, where you start to have higher costs on your Part B premiums.

But now that number that Laura said was back at 69,000, it's now about

78,000. Inflation. They ratchet it up a little bit each year. So there are

four different tiers with this. Right now, for a couple, I just put in two

people in Utah, and I'm on If you are trying to figure this

out, I would mess around with

I'm gonna give you a couple clicks to make. Then

at the top, there's a spot that says, see topics, hover over that.

Then click on the button that says, find out if you'll save. Takes you

to a page where you can put in your state, how many people

[00:13:00] are in your family or need coverage, and then it will give

you dollar amounts.

So, I did Utah and two people. If you are below 19,700, you may

qualify for Medicaid. If you're between 19,000 and 49,000, I'm

rounding by the way, not gonna give you the exact numbers 'cause

you're just listening, but about 19,000 to $49,000 you can get a

lower premium. And on top of that, they're going to make it so that

when you actually use your healthcare coverage, the deductible is

likely to be lower and you may get extra co-payments and help on

top of it.

So there are different tiers of this. 19,000, I'm gonna round again,

20,000 to 50,000. That's the range where you not only have a

subsidy on your premium, but you get extra help on the actual

healthcare expenses. Then about 50,000 up to that 79,000, that's

where you get the subsidy. You're not gonna get the extra help on

deductibles and copays and things like that, but you do get the full


And then above 78,000, this is, goes back to what Laura said, where

it used to [00:14:00] be, you were out of luck entirely. But now they

phase that out more gradually. So there's a little button that you

click on to see the plans and you can put in your zip code. And I'm

doing this as we're talking, by the way, so we'll give you a couple of

examples, but you can put in your zip code.

And then it has you put in your family, so you'll say it's me and

somebody else. If you're doing these two people, you know, in this case

I'm saying we've got a couple that's married, no dependents. Normally

we're talking to people who are about 60 years old and they're trying to

figure out how do I bridge this gap to 65.

So I'm just clicking through and putting in ages. We've got a man and a

woman that are both 60 years old exactly to make things simple. And

they need healthcare for five years. Let's say they make $95,000 a year,

and when I say make, I mean they show $95,000 a year. That couple

gets a subsidy of $1,189.

It is November 22nd in 2023. That's gonna change in the future,

[00:15:00] but as of today, that person gets almost $1,200 towards their

healthcare premium every single month. That's a pretty big deal, and I

think that is enough to get some people over the hump into retirement.

That subsidy right there. So if you are super healthy and you're willing to

take a really high deductible plan.

You could have the two of those people covered for $174 a month.

That's hardly anything, but your deductible in that case is $12,000. So,

you're on the hook to pay the first $12,000. Now remember, I was paying

about 1,100 a month and had a $13,000 deductible, so the subsidy

makes a big difference here for those people.

Huge. By the way, there are 76 plans popping up right now for them to

choose from. So, if you say, I'm just not that comfortable with a

deductible that high, start scrolling because it'll go through and you'll

eventually get to lower deductible plans and they'll end up costing $500

or [00:16:00] a thousand dollars a month, but they normally would cost

two to 2,500. 2000 to $2,500 a month.

You'll get the idea. But the point is this might be a reasonable solution

for you to prevent the risk of like, oh my gosh, what if one of us had

cancer? Or what if one of us gotten a really bad accident? The worst

case scenario is maybe 10 or $15,000, maybe 20 at most out-of-pocket

maximum. Not that that's a small amount of money, but that's not ruin us

to most retirees, that's gonna be okay.

And for that, they may really appreciate the ability to get their life back.

And we know a lot of people in their seventies and eighties that really

slow down and that wish they had retired earlier. So, if healthcare is

the one thing stopping you from retiring, go to, plug

in your information, see what type of subsidies you can qualify for.

Yeah, here's a Molina plan for $3,100 deductible. So as soon as you've

met $3,000 worth of medical expenses, the [00:17:00] plan starts to kick

in and help with coverage, and it's $995 a month. After the subsidy?

After the subsidy. Good point. Not the end of the world. Not cheap, not

exciting, not fun. But hey, if you get to retire because of it.

Good for you. Yeah. So, Laura, let's recap our three main strategies. So,

COBRA, if you have a retiree plan that your work offers you to bridge the

gap, and the exchange. Anything else we need to cover on pre-65? I

think that's about it. The only other thing out there that I know of are

health reimbursement plans, like Christian ministry type plans.

Those were really big deal when everybody was required to have

coverage through the Obamacare Act, they forced it. And so, some

people who just didn't want any coverage at all would do that. I've heard

that isn't great to try to get reimbursed. It can be difficult, and so you end

up getting stuck with the bill for some healthcare expenses, so just be a

little bit cautious of those.

I'm not saying that they're bad and I've never been on one, but I've heard

stories that they can be difficult to actually get [00:18:00] paid later.

Whereas, you know, we don't love insurance companies, but it sounds

like they've been more responsive than those reimbursement group

plans. That is pre-65 healthcare.

Next episode, we'll do post 65. We're trying to keep this simple and help

you in 20 minutes today to get a really good feel list, at least what you

should be looking into. There are private healthcare agents. If you need

somebody, let us know. Especially if you're here in Utah. Insurance is

state by state from a licensing standpoint, but a lot of them will be

licensed in many states.

So, if you are in any state and you need somebody, give us a call. We'd

be happy to make an introduction. At least ask our people if they're

licensed in your state, and then they can help you navigate this. With 76

plans, it can be helpful to have somebody to say, okay, what kind of

medications do you take?

What kind of doctors do you see? In what network? Great. Now there's

really only three options. Here they are. Okay. Thank you. This podcast

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