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How To Get Healthcare Before Railroad Medicare "Kicks In" Thumbnail

How To Get Healthcare Before Railroad Medicare "Kicks In"

Video Retirement Budgeting Financial Planning


Learn how to fund your healthcare before Medicare kicks in.

Welcome, everyone, to another addition of the Highball Advisors Railroad Retirement Whiteboard. My name's John McNamara of Highball Advisors. And today, we're going to talk about healthcare options for retirees. So we know railroaders, they can actually retire pretty early before Medicare kicks in. Medicare kicks in at 65. But however, if we're leaving the railroad at, let's say, at 60 and 30, or maybe even somebody's leaving at 57, 58, they're retiring, you got to bridge those years with some healthcare insurance until Medicare kicks in. So let's talk about how we can plan for that.

So some railroaders have the option, maybe their railroad might have retiree healthcare insurance. Fine. All right. Turn off the video, go back to retirement, whatever you're doing. Don't worry about that because that's probably going to be the best option after I lay this out. But for those who don't, let's go over some ideas on how to cover you with some healthcare.

So the first one up is the federal marketplace, run by the exchanges, better known as Obamacare, that type of thing. Each state runs an exchange. So some of the pro are it might have similar coverage to what you're currently having. You can select a policy that's like what you have right now. Same doctors' coverage. That's important. However, what's also nice is because you'll be retired, you'll be in lower income, you might be eligible for subsidies based on income. So if your income's lower, maybe the healthcare won't be that much. So that's a great one. However, if you don't have the subsidies, it can be expensive. And then, the final negative about it is the laws are changing. So Congress constantly changing things, qualifications. So you never know, "Hey, if I retire 57, eight years from now, is this going to look same?" Probably, not. So you've got to keep an eye on that. So that's the first option.

The second option is COBRA. You familiar with this? This is going to replicate what you're currently on, and it might be cheaper than the exchange if you're not getting the subsidies. So you don't know about that. However, it only lasts 18 months. So like I say, you retire at 60, that ain't going to bridge it all the way out, or 57, it won't bridge it. And it could even be more expensive, it's going to be more expensive than what you're currently paying on your employer insurance because the employer's picking up some of your insurance costs right now. You might be paying some, but they're picking up the bulk of it. Now you've got to pick up the whole thing. And plus, I think they even add 2% on top of that, so that can get expensive.

Final option is a private health insurance plan, which not part of the exchanges. Could be customizable and cost effective because you could select what you want to get covered, that type of thing. However, if you have a preexisting condition, they're not going to ensure you. They're not going to give you a cost-effective policy. They'll go broke. So preexisting, they're not going to cover. So if you have a preexisting, probably your best bet is COBRA or the exchange.

So let's look at what we should be doing now to plan for this. So first thing is start playing for it now, right? Hey, how much does it cost? I got to put this into my retirement budget, so to speak. Call your HR department. First see if they have that retiree employment healthcare insurance. That's the best way to start. Then say, "Hey, what's COBRA look like? What's those options on Cobra?How much is that going to cost me?"

And then another thing to do is beef up your HSA. If you have a health savings account, really great place, put money in there and then you could use that money to cover your out-of-pocket expenses. You can't pay your insurance with it, but those out-of-pocket things, prescriptions, all those things can be picked up in the HSA. Then finally, you can load up on your Roth IRA right now, and then use that income because what's nice about Roth IRA, that income doesn't show up on your 1040. And why is that important? Because your income is going to be used for your exchange subsidy. So if you're using your Roth per se, your income's low, hence you get a bigger subsidy on the federal marketplace. So that's something to think about also.

Hopefully, I've given you some great ideas about how to prepare for healthcare before railroad Medicare kicks in. Reach out to me. This stuff, I go through in my boarding for railroad retirement process, free process. So take a look at that. Subscribe to my YouTube channel. Click on the notification bell to get the latest video. And until next time, everyone. Please stay safe, stay on track, and take care. So long, everybody. Bye.

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Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. Highball Advisors encourages you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Highball Advisors, and all rights are reserved from Highball Advisors, and all rights are reserved.