Q&A: Paying for a younger spouse’s health insurance until Medicare kicks in

Dear Liz: My husband and I have started discussing when he’ll retire. I’d like him to retire somewhere around 65 or 67. He thinks he’ll have to work until at least 70, if not longer, for health insurance coverage for me. (It’s possible that he could do so, since his is an intellectual job where experience is highly valued. Several of his colleagues are in their 70s now, and one retired last year in his 80s.) My husband is 51, and I will be 41 this year.

We’ve used retirement calculators, and even restricting the rate of return to 3% or 4%, we’ll have at least $800,000 in his 401(k) by the time he’s 67. If we use the historical return rate, we get well over $1 million. We then made a rough guess of what minimum distributions would be based on current IRS tables. This number alone will cover 70% or more of our retirement budget.

I think we can do this, even if we have to pay for my health insurance, and even if we have to start withdrawing from the 401(k) at 65. Is this a bad idea? If he gets there and wants to keep working, then no problem, but if he’s fed up at age 64 and 355 days, I want him to feel able to walk away.

Answer: That’s a wonderful goal, but you may be underestimating the cost and difficulty of securing health insurance for your future self.

Currently, people without employer-provided insurance can buy coverage on Affordable Care Act exchanges, but the future of those is in doubt. Congress ended the ACA’s individual mandate, which requires most people to have insurance, so costs are expected to rise sharply next year. If enough healthy people opt out, the exchanges will collapse.

It’s not hard to imagine a future that looks like the past, where people had to keep working at jobs that offered employer coverage until both they and their spouses were old enough for Medicare. Under current rules, that would mean your husband working until he’s 75 and you’re 65.

Your husband might be able to quit a bit earlier thanks to COBRA rules, which allow people to continue employer-provided coverage for 18 months if they can pay the full cost of the premiums, plus a 2% administrative fee. The average annual premium is $6,690 for single coverage and $18,764 for family coverage, according to the Kaiser Family Foundation. The cost is likely to be substantially more in the future if medical cost inflation isn’t brought under control.

If you really want to give your husband the option to quit at 65, you may need to look into employment for yourself that includes health insurance benefits. Another option is to move abroad to one of the many countries that offer affordable healthcare for expatriate retirees. Sites such as International Living at www.internationalliving.com and Live and Invest Overseas at www.liveandinvestoverseas.com can help you identify potential options. You could plan to return home once you’ve qualified for Medicare.

Monday’s need-to-know money news

Today’s top story: Keeping your money safe while you see the world. Also in the news: How one couple retired early, why Millennials should care about Medicare right now, and using liability insurance when driving abroad.

Keep Your Money Safe While You See the World
Enjoy your trip without money stresses.

If You Retire Early, Life Can Be a Beach
How one couple pulled it off.

Why Millennials Should Care About Medicare Right Now
Before it’s too late.

Do You Need Special Car Rental Insurance When Driving Abroad?
Looking at liability insurance.

Why Millennials Should Care About Medicare Right Now

Medicare provides basic health care to one out of six Americans, most of them 65 and older. Even people decades away from retirement, though, should be concerned about Congress meddling with the program.

Lawmakers understand that cutting current retirees’ benefits is a political nonstarter. Older people vote, and they have one of the most powerful lobbyists, AARP, advocating on their behalf.

Younger people? Not so much. Politicians will be tempted to foist the biggest cuts on people farther away from retirement (who are presumably paying less attention).

In my latest article for the Associated Press, why it’s crucial that Millennials begin to think a

Wednesday’s need-to-know money news

Today’s top story: Mad at Equifax? Use that fuel to boost your cybersecurity. Also in the news: What to weight when considering a secured credit card, what not to do on your Facebook small business page, and 3 mistakes to avoid when picking a Medicare plan in open enrollment.

Mad at Equifax? Use That Fuel to Boost Your Cybersecurity
Batten down the hatches.

What to Weigh When Considering a Secured Credit Card
Things to watch out for.

What Not to Do on Your Facebook Small-Business Page
Setting the right tone.

Avoid these 3 mistakes when picking a Medicare plan during open enrollment
Choose wisely.

Wednesday’s need-to-know money news

1381460521Today’s top story: 7 ways to cover the cost of emergency home repairs. Also in the news: How to buy a home with a low down payment, breaking up with your credit card company, and 5 ways to save on Medicare.

7 Ways to Cover the Cost of Emergency Home Repairs
What to do when something goes kaput.

Beyond FHA Loans: How to Buy a Home With a Low Down Payment
Thinking outside the FHA box.

Are you using the wrong credit card?
Breaking up with your credit card company.

5 Ways to Save on Medicare
Mastering the Medicare maze.

Tuesday’s need-to-know money news

shutterstock_62636899Today’s top story: Getting your credit ready for holiday shopping. Also in the news: Keeping your Social Security plan on track despite higher Medicare premiums, 3 points to add to your year-end financial checklist, and shopping tricks to make your budget last longer.

How to Get Your Credit Ready for Holiday Shopping
And make January bills a bit less painful.

Don’t let higher Medicare premiums derail your Social Security plan
Keeping your plan on track.

Add these 3 points to your year-end financial checklist
Three more to-dos.

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Stretching your dollar.

The 10 Best States To Enjoy An Early Retirement
Is your state one of them?

Thursday’s need-to-know money news

Zemanta Related Posts ThumbnailToday’s top story: Getting the most from Medicare. Also in the news: Tips for smart student loan borrowing, the mistake single Americans are making with their retirement, and how to get the most from your credit card rewards.

Medicare’s Maze – How to Maximize Benefits
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Choose your loans wisely.

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Getting the most points/miles from your cards.

What 11 Successful People Wish They Knew About Money in Their 20s
If they could turn back time.

Monday’s need-to-know money news

Zemanta Related Posts ThumbnailToday’s top story: How to save money on your upcoming tax bill. Also in the news: Tracking your wasteful spending, how to get the best deal on car insurance, and why it pays to shop around for Medicare insurance plans.

7 Money-Saving Tips to Cut Your Tax Bill
How to make tax season a little less painful.

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Shame yourself into frugality.

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Parents of special needs kids can bank on trusts
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News you can use for retirement

seniorslaptopReuters news service has posted its “Retirement Roadmap 2014,” a collection of good advice on topics that don’t get as much attention as they should. My favorite of the bunch is Beth Pinsker’s piece on choosing a rehab facility after surgery, either for yourself or a parent. It’s not a sexy topic, but if you’ve ever been in this situation you realize how little information is out there to help you choose well. Another important topic is choosing a new Medicare plan, since open enrollment is coming up and most people just stick with what they have–not realizing they’re paying more than they should.  This would be a great article to pass along to anyone you know who’s 65 or over.

And then, for fun, read about a couple who sold their house to travel the world…and dream a little.

Here are the links you’ll need:

Video: Guide to Healthcare Costs
From Medicare to long-term care to health savings accounts. We explore the options – and the possibilities – in episode one of our 12-part series.

Stern Advice: Should you tap your 401(k)to buy a house?

Why it pays to pore over your Medicare drug plan – every year

How to choose the best rehab facility after a hospital stay

It happens: Seniors with student debt – and smaller Social Security checks

Extreme retirement abroad: How one footloose couple sees the world

Q&A: Medicare premiums

Dear Liz: I wanted to comment on the person who was wondering why her multimillionaire friend receives less Social Security. One reason could be that higher-income people pay more for Medicare, the health insurance program for people 65 and older. Instead of the standard $104 a month that most people pay, my wife and I pay about $375 each per month for Parts B and D. So if the person writing to you is thinking about net Social Security checks, Medicare would make quite a difference.

Answer: That’s a very good possibility. Some people don’t make the distinction between Social Security and Medicare. They’re separate government programs, but Medicare premiums are typically deducted from Social Security payments.