It’s not uncommon for CMOs to start thinking about retiring in their early 50’s. I have several acquaintances who have chosen to take the early retirement path (before age 65) and pursue new and different non-career related opportunities. I find it fascinating how CMOs are tackling these life changes (see here for one example).
When you talk with financial advisors or people who retire early, there is one key challenge that people must prepare for – healthcare. Anybody who wants to retire “early” (before 65) no longer have healthcare coverage from their company nor do they yet qualify for Medicare (must be at least 65 to qualify for Medicare). Consequently, understanding how to navigate healthcare decisions after a career but before Medicare is not for the faint of heart.
I was recently talking with Heather Loisel, the former CMO of Ricoh, USA. What is interesting about her story is how she went about preparing to retire. She took the time to understand, plan, and prepare. As I listened to her story, I knew it was something that would benefit others starting to think about early retirement.
Preparing for Healthcare in Early Retirement
Healthcare is a critical topic in deciding to retire before 65. Loisel approached the healthcare issue by going through a pre-retirement “get ready” process: “Individual healthcare is expensive and something that I didn’t think a lot about while working. Sure there was a monthly payment via my employer, but it was a fraction of the actual costs. After doing some research about estimated costs, my husband and I created a new ‘healthcare’ fund 3 years before the target retirement date. By building up that fund, it felt like there was going to be money available when the time came. Somehow the mental comfort of having money set aside made a difference”
The Cost of Healthcare
Loisel found that researching healthcare costs required some healthcare strategy decisions.
1. Find out what healthcare providers have individual plans in your state. Loisel’s corporate healthcare insurer did not have individual plans available in her home state. Just because you have had the same insurer for years doesn’t mean you can just continue it once you leave your company.
2. Use your current and predicted health circumstances to inform your healthcare strategy. Since Loisel was relatively healthy, she considered a high deductible plan with a lower premium. While the costs can vary, she found that the cost was somewhere around an $850 monthly premium and an annual deductible of $5500 with an out of pocket (OOP) maximum of $9450.
Loisel indicated that she would have chosen a different type of plan if she had conditions that required ongoing treatment or was planning a significant healthcare expense (for example, getting a knee replaced). That type of coverage might be a $2200 monthly premium and a $2000 deductible with a $5000 OOP maximum. This has higher up front costs but mitigates risk in the event of an expensive health event.
As Loisel explained, it takes time to research the different providers and the different plans and then you need to figure out which program makes sense for your healthcare circumstances.
Advice on Preparing for Healthcare Costs in Early Retirement
While spending tens of hours doing research, Loisel indicates that she has received some great advice and has read some helpful articles.
1. Evaluate your COBRA option. This could cover you for the first 18 months. Be aware, however, that if your spouse was also on your company plan and is over 65, COBRA will not cover them.
2. Go online to research, but do not provide identifiable information. You can learn a lot without getting yourself on a list to receive 100’s of follow-up phone calls. There are many 3rd parties who are reseller brokers of your information. They aren’t the actual insurer. There is little-to-no value to a middleman.
3. Ask your friends who are in the same situation what they did, and if you are comfortable, what they pay. This was eye-opening, and there are lots of people in your situation.
4. Target one or two insurers that have individual plans in your area and call them directly to get information.
5. Consider healthcare in the context of the overall financial picture. Loisel and her husband downsized and relocated to an area with warmer weather and a lower cost of living. This provided some capacity for a new monthly cost.
Making the pre-65 retirement healthcare decision is hard because a person has to balance cost and predicting the future. Preparing and planning may not solve all future challenges, but it will put you in a better position for what is hopefully the next fulfilling phase of your life.
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