Medical insurance and Planning for an Early RetirementSubmitted by Mission Financial Planning on July 17th, 2017
Clients who want to retire before they are eligible for Medicare (age 65) are often concerned about how they’ll handle health insurance costs. Dental practice owners are probably used to paying this expense out of pocket already and have a better idea than most how much their coverage will cost, but the reality of paying the premium on their retirement income and realizing that the premium will now be paid with after-tax dollars* both must be factored in to an early-retirement decision.
Proposed changes to the ACA would allow insurance companies to charge more for people between the ages of 50 and 65 (up to five times premiums charged younger buyers), and until we know the outcome of health reform we have to assume the worst when predicting health insurance costs for the budgets of early retirees.
If this is making you look forward to getting on Medicare, be warned that starting in 2018 higher Medicare premiums will be triggered at lower income levels than are in effect today.
In the past a rule of thumb had been to earmark 5% of a household budget to medical expenses, we believe that number is only going up from here.
*Self-employed people who qualify are allowed to deduct 100% of their health insurance premiums (including dental and long-term care coverage) for themselves, their spouses, and their dependents. ... This deduction applies to your federal, state, and local income taxes.