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VIDEO: Healthcare Options for Early Railroad Retirees

Retirement Financial Planning


Transcript:

Welcome everyone to the Railroad Retirement whiteboard. My name is John McNamara with Highball Advisors. And in this episode, we're going to talk about healthcare for early railroad retirees. So we know full retirement age for non-railroaders is 67. You can start collecting Medicare at 65 years old, right? So Medicare is the best option for seniors, for retirees, to pay for their healthcare, right? So 65.

However, as we know, if you're a 30-year railroader, you can retire at 60. Or even if you're not have 30 years, you might want to retire before the age of 65. So you're going to need health insurance to bridge that gap until you get to 65. So what I want, in this video, is just talk about some options that you'll have in early retirement to bridge that gap, so to speak. So let's start on my right here.

So some of the best strategies is, hey, you know, if the company will still cover you, that'll be great. Maybe that's negotiated in your contract or you're executive and management level. They continue to cover your healthcare, that's fantastic. Or maybe you can just continue to pay your premium that you are now until the age of 65 before Medicare kicks in. So that's the best deal, right? Keeping what you have right now or just paying a little bit more, that's the best deal.

Another option is maybe your spouse is working for a company. That person, your spouse hasn't retired and that person has access to to health insurance. Get on their coverage, right? So those are the two best. Now, if that doesn't work, okay, we have to now start looking at other things. And one of the things that we look at is the COBRA, right?

So COBRA is available to all employees after they've left the company. You have up to 60 days to elect COBRA coverage, which means that you can then have your existing healthcare insurance for another 18 months of coverage, right? So a year and a half. So let's say if you're 63 and a half, that will bridge you out until 65. However, it's going to cost you. You're going to have to pay the full premium. So the company is no longer going to subsidize your health insurance. You're going to have to pay 100% of the premium for the healthcare coverage. In fact, it might be a little bit over 100% because some insurance companies will put a 2% administration charge on there. So that's full freight. You do have an option here though is you don't have to pull the trigger on that right away. You have a 60 day delay before you have to declare that. So if you've retired and something has happened within 30 days and you say to yourself, "I don't have any insurance." Well actually you do just elect your COBRA coverage and that will help you out there.

If you're disabled, it extends out to 29 months. This is interesting also. You can fund your COBRA coverage with, with your HSA. Big fan of HSA. I've talked about that before. Triple tax free, right? Coverage so you can take the money out of the HSA and pay for your COBRAs coverage. Which like I said, it's only 18 months.

So let's say if you're longer than 18 months, now you have to start looking at other options. And now we're going to look at the health insurance marketplace, right? Establish where you can go and buy individual policies on your state exchange, right? So some of the things to think about is that they're cheaper than COBRA. You can use them when you've exhausted your COBRA after your 18 months you have to go out and get some insurance. And another interesting thing is, let's say you've retired and you're thinking of moving, right? Maybe your COBRA... Wherever you move, let's say move to another state. Maybe your new doctors at your new state might not accept your existing COBRA coverage. So you might have to go buy insurance inside that state so the doctors will accept it. So that's one thing to know.

And then also depending upon where you are in the income, there is premium assistance to help pay for the health insurance. There's not too many options on the health insurance, but you know, you can still get it. You can still get a policy.

So you have to start thinking about budgeting. So these things here, right? The price of health insurance as you know. It's all over the map if you're paying the whole thing, but you got to... In retirement, right, health care and taxes, those are going to be your two biggest expenses. So this is going to be a big part of your early retirement expenses until Medicare kicks in. And then your premiums will obviously go down significantly.

So these are just the insurance options that I talked about. There's other things that you can also look to do. I know there's a health insurance sharing that's kind of a religious affiliation. You can look into that. That's a possibility. Another possibility, I know you just retired, but you know, you can always go get a part-time job... I hate to say that, you know, at a Lowe's or Home Depot. You just retired, but you know, you can do minimal amount of time at those places for 20 hours. Usually it's the minimum and you can get access to healthcare. I know that's not exciting, but I just wanted to throw that out there.

So I hope you found this information useful as you're approaching retirement. Feel free to reach out to me if you have any comments. Please subscribe to my YouTube channel. I appreciate that. Reach out to me. Like I said, I do free meetings. So once again, I want to thank everyone for watching and everyone please stay safe, stay on track and take care until next time. 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.