Sunday, January 06, 2008

Retiring early - pipe dream?

I'm about to say that, honestly I think my dream of retiring early is a pipe dream. Now why would I say that? First of all because I am unable to determine what I need to retire early. DH and I are super conservative when it comes to projecting returns on our investments, how much we'll need, etc. But the one area that we are unable to get a handle on and the most important area is health insurance.

What will we do if we retire at 55? Until then we'll be covered with employer provided insurance. We cannot be denied nor turned down. However at 55, we run the risk of being ineligible for coverage due to pre-exisiting conditions. This may mean certain health factors will not be covered. Also it could mean that we cannot buy insurance at any reasonable rate. So we'd be stuck without insurance or working until 65, when Medicare kicks in.

Of course, we've thought about this, and come up with a few different options. One, we work part-time in a job which provides benefits. Places like starbucks, borders, home depot are known to provide medical so many retirees work there for the prescription coverage. Or we could work part-time at our current jobs at that time.

Two, if we own a business, what is the likelyhood of buying insurance through our business? This is another possibility. Three, likely I should get a government or state job which might provide insurance after retirement like my mom.

My mom retired at 55 with free medical insurance for the rest of her life for her and my dad. The insurance premium is $1k/month for the two of them and she pays nothing. This insurance becomes supplemental after 65 (ie like my dad), so they pay nothing for his medical care. Also it includes vision, dental, and prescription coverage.

Fourth, move to Canada. This is something we've discussed more because of their universal health care. DH loves the idea of moving back, and after visiting Vancouver I'm more keen about it.

Maybe I shouldn't be so negative about retiring early. It could easily happen. However, I feel that the reality is it could be impossible. And this is why we are saving as much as possible for retirement. To be able to manage every curveball thrown at us, and plan for any unforseen circumstances.

The only way to reach a goal is to plan for it. It's great to say "I want to retire early." And even better to save money for it. But you also have to realize potential problems or issues that may arise, and how it will affect you.

I've spoken with many 30/40-somethings who want to retire early. But most, not in a health related field, believe they can do it being debt free and with little savings. Everyone who works in a hospital, health insurance, etc tell me no way. Most have not considered what they will do to replace employer provided insurance. They beleive something will magically appear, or say they will do a high deductible health plan (HDHP). But they have no researched at all or seen any estimated costs or coverage.

So in many cases retiring early might be a pipe dream. Even for me, I realize I won't really know if the numbers are enough until probably around age 50. I'll be able to at that time see if the medical system has changed, how much insurance is, and what we really have saved.

3 comments:

Andrea said...

Wow, do you mind me asking what your mom did for a living or what company she worked for? To get dental along with the regular health insurance is almost unheard of.

Jim ~ mydebtblog.com said...

I don't think I would want to retire early. Not that I would want to keep working at the same job, I just would rather do work hobbies and make some extra spending money on the side. My intention is to shoot for 60 to retire from a company.

Right now I have the health insurance with dental, vision, and even a pension plan. I don't understand all of it right now because I'm only 25 and healthy. Things start becoming more of an issue when they are used. My health insurance is not the greatest, but I also never have to use it. My dental insurance is wonderful and I have maxed out for the past 2 years to fix issues with my teeth. The vision insurance I don't use, but my wife does so it's nice to have.

I would not want to move out of the country for universal health care. The problem with that is it does not work. People in Canada, France, and the UK, all pay a lot more taxes in order to provide 'free' health care. Socialism is not something this country needs, and when considering retirement having long term care insurance is something to consider. We're all going to age to the point it will get difficult to take care of ourselves. The better we plan to offset the impact on family, the less burden has to be shared.

Living Almost Large said...

She was a state worker. The medical and dental benefits were fabulous.