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Episode #631 - Healthcare Before Medicare: How to Lower Your Costs

“Life is really simple, but we insist on making it complicated.” - Confucius 

Roger: Welcome to the show dedicated to helping you not just survive retirement, but to have the confidence to lean in and rock it, to create a great life. That's the whole point. Create a great life. My name is Roger Whitney. I'm a practicing retirement Planner with over 30 years experience. Man, I've seen a lot over those years. 

ROGER INTRODUCES WEEK THREE OF THE FOUR-PART SERIES ON HEALTH CARE BEFORE MEDICARE, FOCUSING ON CONTROLLING HEALTH CARE COSTS AND UNDERSTANDING ACA SUBSIDIES. HE PREVIEWS NEXT WEEK’S STRUCTURED DECISION FRAMEWORK AND CONVERSATION WITH TAYLOR SCHULTE OF DEFINE FINANCIAL.

Roger: Today we're going to talk about health care before Medicare. This is week three of a four week series and today we're going to focus on controlling health care costs. Primarily we're going to focus on the Affordable Care act and the subsidy scheme. That gets so confusing, but we're also going to talk about some basic things that we can do. In addition, we're going to have a few comments from listeners and then next week we're going to wrap up the series to present to you. We're gonna have Taylor Schulte from Define Financial to share how he navigates it. And I want to share as tight a protocol as I can create for you via podcast of how to think through it in an organized way so you can feel comfortable that you made an informed decision. So that's what, that's the plan. But so today we're going to focus on healthcare costs. So let's get that party started. Foreign, health care costs. We're going to focus on the Affordable Care act and how the, the subsidy scheme works. But before we do that, I would be remiss if I didn't cover some basic ways to afford cost before we even get into the complicated ACA subsidy scheme. Now I'm going to talk about two or three things. Each one of these things are pretty simple, but they take energy and consistency and some education. So they're simple, but they're not easy. Going back to Confucius quote, we make these things way too complicated than they need to be. And the number one thing, I'm almost afraid to say it because we've heard it so often and we know it's true, but it is so hard to do consistently that sometimes we just tune it out. Maybe we've given up on it. Maybe I've tried. I've tried, I've tried and I just can't. Maybe we've given up on it. So this is a very simple thing that I, want you to hear. I want this for you. Is that a stay healthy or get healthy as healthy as you are able to. Easier said than done because it's so habit forming and we've Built a lot of different types of habits. I am struggling with this every day. But if we can stay healthy or get healthier, we likely could avoid 50 to 70% of our healthcare costs. So what is involved in doing that? It's moving that strength, that's cardio, walking that, that's mobility and stretching. Basics not complicated. Controlling your weight, getting to a healthy rate ratio can help avoid a lot of the major things that cause premature death. Smoking, not smoking, easy win. Moderating alcohol consumption, easy win screenings, making sure we're getting our annual checkups, we're getting a doctor going through a protocol to help identify things earlier rather than later. So we can get ahead of the curve a little bit in managing whatever things we have. And we all have stuff. And then lastly, when it comes to staying and getting healthy is if you have a chronic condition of some sort of which if you're our vintage of humans 60ish, you probably do. I have two or three that I'm managing and trying to figure out how to improve. I just recently got a trigger finger. These things just keep popping up, don't they? If you have something that you're dealing with is to not ignore it, but manage it. Even if those things limit the things that you're able to do with the, you know, the, the moving and all that other stuff. Because if we don't manage it, it will cascade and get bigger, which will impact healthcare costs. Now on this one, if we can face this dragon and re engage with it, if we've avoided it has the double benefit of it. It will slowly give us more agency in our life and it will slowly give us more energy to show up for our life. Okay, I had to say it. It's a big one. Okay, number two, compare choices. It's very easy to close off choices. We talked about lots of choices last week. Cobra, the Affordable Care act, part time work with benefits associations. What I didn't bring up, I used to be a member of the Cattlemen's Association. I don't know if I've ever touched a cattle but if you joined it, you could be part of that program. Company Retiree benefits. We had a listener email in that said he retired and he's in a graduate program. He's getting a master's and because he's enrolled in a particular school, they have some healthcare benefits related to that. Because he's a student.

Roger Whitney: Didn't think about that. One, compare choices. Don't close them off without some examination. Put on your curiosity. Curiosity hat manage your benefits. Plan tier choice. There's bronze, silver, gold, platinum in the Affordable Care Act. You'll look at managing those tiers based on what you need for health. Now I misspoke and someone emailed in and we'll share some of these comments this week and next week that there are people that will help you navigate the Affordable Care Act. So I'm going to try to share some of those resources because this stuff is complicated. I do the, I do, you know, at least retirement planning for a living. When I look at the Affordable Care act site, I get totally confused. So there are people that can help with that. Maximize your in network coverage with whatever insurance you have that's going to be least expensive. Maximize the use of that batch. Your big years when you hit out of pocket expenses. So every policy, every standard policy will have a maximum out of pocket for the year. So if you have a mishap, say in the first quarter or two for the third quarter, where you hit your out of pocket maximum for annual, look at the rest of the year and see what you can do proactively to take care of that trigger finger you that's been annoying you or whatever it is because you're not going to pay any money for it. You already hit your out of pocket maximum. We don't want to miss those opportunities. And then last one I'll bring up is prescription drug costs. We have some agency there. I take a medication every day and my wife just this morning, she says, you know, Roger, that drug you take, it's less expensive on Amazon than it is when we go to the pharmacy with our healthcare plan. We're members of prime. So in this case it's not a lot, a lot of savings, but it's savings just by, oh, curiosity. Look around. We hadn't looked around. We didn't practice curiosity. We just kept doing what we were doing. And then someone, emailed this in. If you take a really expensive drug like my wife does, one of the biologics for psoriatic arthritis and a listener emailed in, the drug companies themselves have programs to help people pay those costs. And they're not, you know, my wife is getting, she just went on a new one and she's coordinating with the drug company. They're essentially going to cover the cost for the first year. They're going to cover her out of pocket for the cost of that drug for the first year. And no income, qualifications or any of that. So if you're on a, relatively expensive drug, explore those options. A lot of this takes work Just like the health stuff and putting on our curiosity hat and exploring these things rather than just, you know, getting tired head because it's so complicated and sticking with whatever we're doing. All right, Those are some basic things that we should be doing even before we get to ACA credits. Now let's turn the Affordable Care act and talk about the subsidy scheme that is in place to help subsidize health care premiums. Now, the Affordable Care act, when it was enacted, from my view, it was trying to solve for two things. One is making healthcare more affordable for those at lower income levels, making access to healthcare broader, and then dealing with this preexisting condition thing that if you get on healthcare after you leave your company, excluding all these preexisting conditions and leaving people uncovered for something that they're dealing with. And then. So the subsidy scheme, which is called the premium tax credit, looked at income to determine how much government subsidy you get for the health care premium. And it was based off of the poverty rate. We'll go into how this scheme works. But if you were below roughly 400% of the poverty, federal poverty level, you started to get subsidies for your health care premium. But. And if you're above 400%, then you didn't get any subsidies because you made enough to be able to afford healthcare. Well, that changed a little bit in 2001. In March, the American Rescue Plan act was enacted which said, no, we're not going to say if Your income's above 400% of the poverty level that you don't get any subsidies. We're going to take off that cap and roughly cap it at about eight and a half percent of whatever your modified adjusted gross income is. And so it lifted that. So it gave access to subsidies to a lot more people. And then that was set to expire because that was a Covid relief type of act. And then in 2022, August, the inflation Reduction act extended this lifting of the subsidy cap through 2025. Well, here we are. In February 2026, it expired. And now that subsidy cap is back on place and a lot of people lost subsidies that had income above 400% of the poverty level. That is what all the headline hubbub is about that you might have seen over the last, you know, quarter or so. If you've watched the news, healthcare subsidies are being taken away. They're being taken away. The ones that are being taken away are the ones that were enacted during COVID And this is a big deal now, because while that was in place, People retired and did retirement planning, assuming they would be there, and now they're finding themselves in a bit of a pickle. So there's a lot of policy risk around the Affordable Health Care act when you're trying to manage or manipulate the subsidy scheme to your benefit, because they might change the rules, they might change it to your favor like they did in 2001, and then they might take it away like they did December 31st. So there's a lot of policy risk here. So that's set up. So now we're back on the original subsidy scheme, which is the premium tax credit. So let's talk about how this works. So in order to get subsidies, you have to have income between 100 and 400% of the federal poverty level. And they published that number. And, it's important to know, as of January 1st, again, this is a cliff, meaning if you're $1 over on your modified adjusted gross income, $1 over the 400% of the federal poverty level, you're going to get nothing. It's not graduated, so it's a cliff. You're either getting something or bam, you're off. And so for 2025, I'm going to use 2025 numbers. If you're an individual and you're applying for health care through the Affordable Care act, if your modified adjusted gross income, and we'll talk about what that is, is between $15,000 and $60, for 2025 to $60,240, you're going to get some level of subsidy from the government to offset your premiums for healthcare. And if you're a married couple, it's $20,440 in 2025 to $81,760 on the high end. So if you're single and you make $60,241 in modified adjusted gross income, you get nothing. You're $1 less. You're going to get something. So those are the levels for 2025. Healthcare.gov and the Kaiser foundation have wonderful resources that talk about 26 and what the scheme looks like going forward. We just want to get the conceptual part down here to understand what the current law is. All right, so those are the levels where there's an availability for subsidy to lower your healthcare costs under aca. So how is this calculated? Well, it's a subsidy calculated, so you pay a capped percentage, and that cap percentage is between 2 and 8.5% of premiums. The government pays less. So let's use an example. We're going to look at a married couple and the setup is they're age 62 and 60. Their modified adjusted gross income is $88,000. Their benchmark healthcare plan is $1,900 a month. And these plans vary significantly from location to location because they look at zip codes. This is the Denver metro area. The federal poverty level for a two person household in 2025 is on the high end, $81,760. So the fact that they're going to earn $88,000 means they're 430% above the federal poverty level. So the result is they get no subsidies. Now let's take this same couple. Let's assume their modified adjusted gross income is $50,000. That equals 245% of the federal poverty level, which means they're going to get some subsidies. And let's say that's subsidies and that's 8% subsidy. So that means their maximum premium is 8% of their income, which is $50,000, which is $4,000 a year. So that means their monthly subsidy is going to be about $1,567 a month. Big difference from 88,000 to 50,000 in modified adjusted gross income, isn't it? That's how the subsidy scheme is. It's what is your modified adjusted gross income? Where does it relate to the federal poverty level for a single person or a married couple or a couple with children and based on the percentage above or below the federal poverty limit that's going to determine the subsidy. Now let's look at modified adjusted gross income because this is an important number, because it is what is used to determine where you fall at between the federal poverty level numbers to see if you get any subsidy. All right, so what's included in it? Well, it starts with what's called adjusted gross income. And this is wages and salary IRA, 401k withdrawals that are pre tax, pension and annuity income, whatever the taxable portion is. The Social Security benefits you get that are taxable, self employment income, interest, dividends, capital gains, rental income, business income, a lot of stuff that's adjusted gross income. But for modified adjusted gross income purposes for aca, there are some things added back into it. And, and that is tax exempt interest like municipal bond interest, foreign, that's the main one, foreign earned income exclusion, non taxable Social Security. Those are the things that are added back into it. And some notable things are not part of the modified adjusted gross income calculation. And that's Roth IRA withdrawals, cash savings, return of principal, HSA withdrawals, gifts, inheritance, life insurance proceeds, etc. Those things are not included. Also not included is reverse mortgage proceeds. So that is what the number is based off of. So how, how does this work in practice? Well, you're going to usually in the fourth quarter of the year when you're selecting your Affordable Care act plan during open enrollment, you're going to let them know what you anticipate your modified adjusted gross income to be for the next year. So in fourth quarter of this year, 2026, you would be letting them know because you're going to report this. This is what I think my income is going to be in 2027. And that is what they're going to use to determine whether you receive a subsidy from the Affordable Care Act. And this can be a little bit problematic because if you give them a number, let's assume we're this second couple and we say ours is going to be $50,000 and that means you get a $1,567 a month subsidy. They will give you that subsidy and apply it upfront based on what you said your estimated income will be. What will happen is when you do your taxes for that year, let's assume that's 2027. If your income is that, then perfect, you hit it on the mark because you've gotten your subsidy. So if your income is lower than what you estimated, they'll reconcile that and you'll get some money back. But if your income is higher than what you estimated, they'll reconcile and you'll have to. They'll recoup that during your tax filing. That can create an unpleasant surprise. Let's assume you're this couple. You get the subsidy, you're enjoying that nice low payment. And then somebody takes a job, they get a contract gig and they earn an extra $50,000. That means they're going to get no subsidies because they already had 50,000 modified adjusted gross income. They get a part time job or they get some payout from a company or something that they worked for of an extra 50,000. Now they're above the poverty line. Well, the IR the government's going to want their money back. So when they file taxes for that year, they're likely recoup that entire subsidy, which is about $18,804. So you got to be careful with this because remember, if you're $1 over now as of January 1st, you get 0 subsidies. There's no scale like there was when we had the COVID relief measures. See how problematic that Be so you can either apply and get the subsidy up front by giving them your estimated income to receive the subsidy, or you can just not receive any subsidy throughout the year, pay the higher unsubsidized premium, and then when you file your taxes, you'll get the premium you should have received or subsidy you should have received in that tax filing process. Which the downside to that is you got a bigger premium every month, which might cause you to take money out of an IRA or something. The positive of that, it can reduce unforced errors. But the ultimately, you're going to want to pay attention to what this number is if you're trying to manage for ACA subsidies because you can have some unexpected surprises. Why is this such a big deal? It's a big deal because there's substantial dollars here if you choose to optimize for subsidies from the aca. And it may cause you to withdraw money in different ways in order to manipulate your modified adjusted roll gross income in order to fall in those percentages. So how much money is on the table potentially for someone that has the opportunity to do this? Well, let's take a couple. Let's say they're 60, they're both 60 years old and they have the choice of a, 90,000 modified adjusted gross income, which would cause them to pay the full health care premium in year one. That would be about $22,800 or $1900 a month. Or because they're using techniques to manage their modified adjusted gross income, they could get it to 50,000 modified adjusted gross income, which would give them a substantial subsidy. At 50,000 modified adjusted gross income, their premium would be capped at 8% of that number, which is $4,000 a year. Compare that to 22,800 per year. Now let's apply that over five years from age 60 to when they turn 65 using some inflation on premiums, et cetera. Potentially they could save $126,000 over those five years by managing their modified adjusted gross income. To get within the subsidy scheme by drawing say $200,000 out from sources HSAs, Roth cash, etc, they could save 126 grand over, over five years. That's a lot of money. Now, how do you set yourself up for this strategy? Well, pre retirement planning is you want to. The intent would be to increase your optionality of where you can draw money from to pay for your life so that you can draw money from places that aren't counted as modified adjusted gross income. So you can keep that number as low as possible or as low as you want. That would mean, number one, building up after tax investments or cash. That would be savings accounts, joint savings accounts or individual savings accounts, CDs, investments, building up after tax money. And that's money that we mean like in your bank accounts, not in an ira. It's not in a Roth. It's just money you have around after tax investments, building up tax free investments. And that would be Roth assets. Those are, tax free investments. Roth 401, Roth IRA, health, savings accounts would be one. Those would be. Now you're creating some diversification of your tax categories because if you draw money from your cash savings, that's not counted as modified adjusted gross income, you pull money from Roth assets, that's not counted in that calculation. And if you pull money from health savings accounts, that's not counted. So now you have more levers to pull money to pay for your life so you don't have to create income that would increase your premiums. So the earlier you can start on that diversification of tax buckets, the better. And for many of us of our vintage, if you're 58, well, you may only have a year or two to do it, but that might get you a year subsidy. If that's what you're targeting. You know, you might not have a lot of time to do it. But if you're in your 40s or your early 50s now, you can maybe make different investment or savings decisions to set yourself up for this later on. Now in retirement. The strategy, main strategy is strategic withdrawals. Manage your modified adjusted gross income and know what it is. Just so you know where there might be an opportunity. Because if you're close to the edge of that cliff, a simple decision might save you a lot of money. So manage, you know, that would be rather than take money from an individual retirement account that's pre tax, use your cash in your taxable account, delay taking Social Security, maybe use health savings withdrawals to help pay for life rather than your ira. And that's why we want to make sure you're saving, you know, if you're saving in your health savings account and not taking the money to pay for health care expenses, save the documentation for those health care expenses so you can submit them later because there's no time limit, on when you can get reimbursed for them. Because if you take that health savings withdrawal to cover those expenses, that can help offset maybe money income generated from an IRA withdrawal. Now remember, you can't pay for ACA subsidies with healthcare savings accounts as an expense, so that's excluded. You could do strategic Roth IRA withdrawals in order to pay for life rather than from an IRA because that will help you get subsidies. You could sell capital losses and taxable accounts. You could use a heloc. Even if you want to get, really get yourself into a pretzel. Use a HELOC and borrow from your HELOC to pay for life, to bridge the gap before you get age 65 in order to save substantial amounts on your healthcare. And you can just go down the rabbit hole of optimization here. Now the recent retirement plan Live Couple is a good example of this. They've been building, they're very young, they've been building after cash savings with the intent of using that to save substantial amounts of money, 20,000 a year on their healthcare premiums. Now as you're thinking about these things, you can decide for yourself how far you want to go down the rabbit hole of optimizing this. But we can avoid some unforced errors. Number one, unforced errors. Know the cliff. Know that $1 over 400% of the federal poverty limit for a single person or a couple means a lot of money. So if you're near that 400% of federal poverty level, you want to pay attention to that because just with a very small tweak in how you're paying for your life, you may be able to get some subsidies. Know your income sources if you're trying to do strategic withdrawals. And we've had instances even in our practice where, you know, we're basing forward, you know, forward estimates on what income's going to be. Somebody gets the job, somebody has something, you know, happen that creates income that they didn't expect. And all of a sudden they get a negative surprise at tax sign. It's no fun. Trust me, I've had the conversations. So know your income sources. Build cash flow projections out a few years to estimate what you think your income is going to be. Now you gotta pay attention to mutual fund capital gains, interest and dividend distributions, especially open end mutual funds. And in the last few years, say three or four years, they've been higher than normal and they're generally not distributed until December. And all you have to go off of what they've done previously and they can be surprising. And all of a sudden you have this big capital gain distribution that you didn't know was coming and it knocked you over the cliff. And all of a sudden you don't get any subsidies. So you want to pay attention to those Generally, open end mutual funds are going to come out with their expected distributions in late November. Sometimes they don't come out with them. So that is something to pay attention to. If you own treasury bills, there is imputed interest because you buy it below a dollar and it matures at a dollar. There's imputed interest that we don't really see, but that's taxable vesting of, RSUs or other stock options at a company when they become vested, you have constructive receipt which makes it taxable. Pay attention to that. Stock dividends, sales with capital gains, inherited IRA distributions that you might have to take throughout the year. These are things that you just got to pay attention to. know what counts towards modified adjusted gross income for the Affordable Care Act. And if you're planning to optimize this, have a buffer, give yourself some margin below the cliff or before the cliff or all of these unexpected things, you know, so that's the Affordable Care act income scheme or subsidy scheme. On a high level, it's got. There's a lot less opportunity here since the cliff came back into effect as of January 1, 2026. Prior to that, during the COVID relief years, you can make a lot more money and still cap your premiums at some level. So there's a lot less opportunity here. But it is still something that we want to be mindful of in our planning. But that said, let's talk about inflation related to health care. We're going to share a war story from a wonderful listener and also talk about some of the philosophical comments related to should we be taking advantage of this subsidy given what the intent of the legislation was? All right, in this section we're going to just share some comments from listeners, maybe answer a question or two. If you have a question or comment, you can go to askroger me and type it in there or leave an audio question. The first one is from Joe, who has real world experience dealing with healthcare before Medicare as it relates to inflation.

Joe: Hey, Roger, this is Joe. first thing I want to do is say, thank you for, your program and your podcast. I retired at 53 and it's been three years. and I feel like I'm rocking retirement and I owe a lot of that to the information you've been giving. I've been listening for about five years and so thank you. I also love, the topic you're covering right now, because retiring at 53, I have definitely lived, what you're talking about with Sarah Barris, the three Headed dog when it comes to, medical insurance. so I don't have a question. I just want to share some information with your listeners. A war story, if you will, so maybe they can learn, if they're deciding to potentially retire before 60, 5 when Medicare kicks in. So for me, I absolutely confirmed that the Sara Barris dog is true. Those three things, about medical insurance are absolutely true, what you said, and they're all a big pain in the rear. The one I'd like to focus on in my war story is the first one, and that's the expense. So I do feel you'll absolutely have sticker shock, even if you research it before you retire, the day you actually get that medical premium, even on cobra. But after cobra, you're probably, going to put your head in your hands and so be prepared for that. But for context, you have to include inflation. I didn't hear you mention that in the last episode. You may have, and I may have missed it, but the inflation on those premiums, is not your standard, inflation like you get with CPI. It really is. in my experience, in my three years has been somewhere between 30 to 50% per year. And to give context to that, just taking round numbers, if your insurance premium starts at $2,000, when you retire and fast forward three years, for me it's up 100%. So that means it's up to $4,000. And so, it's a huge leap. And to m Me, the inflation on those premiums is more important than the premium that you are going to pay when you start your retirement before you're 65. And the final thing on context for me is I think for everybody, but certainly in retirement, the big three in expenses are housing, taxes and medical. And for me, when I started retirement, medical is number three on that list based on where my premiums were at. taxes were first, housing was second, and then medical was first in terms of percentage of outflow of income and money. And so now after three years, it's number one. It moved into number one, medical did, to be the largest expense I have. And so it is foreseen to change and my wife and my plans and goals and how we manage. So ultimately back to your advice or your perspective. It's a complex problem and has to be managed. But for all the listeners out there, remember the sticker shock and include 30 to 50%, inflation. love your show and thank you for listening. Hopefully it gets this, this gets posted thank you, Joe.

Roger Whitney: Thank you so much for highlighting the importance of the inflation aspect of health care before Medicare in the last four years have been very acute when it comes to the inflation rate. It has been significant. We've experienced that personally. This has to be navigated. You know, honestly, this system is not working, and that's a problem. And the you and I are caught in this system, this whirlpool, as we're navigating, trying to create a great life and make, take advantage of the early years when we know we're the healthiest and do it financially as a good financial steward. We're caught in this whirlpool and it's very easy to say, well, it's so bad I have to work until I'm age 65. And that's a reasonable decision, especially if it could blow up your plan. That's reasonable. And that's the tension that we're all facing between that and. Yeah, but because of this, that, and the other, I want to take advantage of these healthier years. I think we all are going to have to make that assessment and manage this to find the right balance between those two competing interests. This huge healthcare cost that's increasing currently at an unsustainable rate, and our life ticking, the, asymmetry of our life. And we want to be able to end that season. I'm glad that you're rocking retirement and the two of you are able to manage that. And the key thing here in my mind, Joe, is go into it with a proper framework to make a decision with all the facts, rather than just defaulting to working or going in blindly and thinking that it'll all be okay. So you can practice as much agency as you can, because we only get one shot at this lifewise. And unfortunately, we have this whirlpool of health care before Medicare that we're trying to navigate in order to create that great life. Thank you so much for sharing that. Our next comment is from Mick related to ACA providers. Mick says, hey, in today's show, you said there there were professionals who helped choose Medicare and plans, but not aca. There are still health navigators, but it depends on your state. great point, Nick. Now, according to the Kaiser foundation, the ACA Navigator program got its funding cut, significantly, but they're still out there. Now, if you go to aca.com there is a tool, I think it's called Find Local Help that can help connect you with people that will navigate this for you. You can do that straight through healthcare.gov, you enter your zip code to find nearby navigators. We'll, we'll have a link to that in our noodle email. And then if you're, if you're in a state that has their own healthcare marketplace, they may have their own navigators as well. but it's definitely, they're out there but it's definitely not as robust as the Medicare system. So thanks for correcting me there, Mick. Our next comment comes from David. Just a couple of thoughts to pass along after listening to your podcast on Healthcare. Before 65, I faced having to get insurance on my own for the first time in 2026. I retired at age 62 and had two years of Cobra coverage. With Roth conversions and a little consulting income, I am not able to get an ach, subsidy. Without a subsidy. The insurance options were 5 to $10,000 more than my COBRA coverage. But obviously you had good COBRA coverage which is nice. David. I ended up talking to an insurance broker and was able to get a couple's policy for less than 18,000 doll. Different options for different folks. The lower premium would cover a lot of uncovered medical costs. That's a great example David, of practicing curiosity and looking at different options. Talking to a private insurance broker, going through healthcare.gov looking at your state, looking at employment or education options if it's something that you're interested in doing. Recently someone corrected me. At least with Texas you had two years of Cobra. It sounded like David, that in Texas it's now two years for Cobra cover, it's not 18 months. So it's looking at these things to understand what the options are. We'll try to bring this together in a protocol, next week. Our next listener comment comes from Gene, who is experiencing the policy risk of the Affordable Care act scheme and the expiration of the expanded subsidies that just happened on December 31st or on January 1st.

Speaker B: Hello Roger. Longtime, listener. I started listening back in 2019 and put together a plan of record. and then I retired from my full time position in July of 2023. and then we had a plan together and it was working out just great. and my wife actually I'm 64. I just turned 64 in December. My wife will be 62 in February of 26. My question to you is with the loss of the ACA credits, I've been listening and I went back to listen in December as well and I didn't hear anything about any suggestions what people are to look for? we have to come up with another $850 a month in order to compensate and get back to a balanced budget. with my retirement back In July of 23 I got a pension, I have a part time work that I've been doing for 30 years and now I'm doing it in retirement. So I guess you call it pre retirement. And then unfortunately my wife's mother passed away this last year. However she did get an inherited IRA that's about 200,000, an inherited Roth and then also an inherited brokerage account. So my question is to make up for that $850 more a month, should we be drawing from that inherited ira, starting now I know we're going to have to do that in order to drain it for 10 years to get down to zero. or should we my wife start collecting her Social Security at 62 and I know it's going to be penalized. and then when I collect at 70, that's the plan. she'll get half spousal ah support because she was a stay at a home mom with our kids. So that's kind of dilemma. I know there's a lot there but to unpack. so hopefully you can simplify it for me. where should we be drawing that money to make up for the loss and the ACA credits. And again I'll be 65 in December of 26. so thank you and thanks for all the work that you do. Bye now.

Roger Whitney: Gene, thank you so much for hanging out with me since 2019. I'm so excited that you are having a great retirement. I'm sorry that you're dealing with this $850 a month whole in your budget as a result of the expiration of the expanded subsidies. That sucks. I know it sucks. It's an example of policy risk. The government changes the policy scheme and it impacts a lot of people that made decisions based upon it. and unfortunately you got caught in the crosshairs of that. So how do you navigate this? Well you look at your options. So let's think of what options you have. You have modifying your goals in order to fill that 850amonth. That may be delaying some vacations or moderating modifying some vacations so they're not quite as expansive. Obviously looking for the basics of cost cutting anywhere you can when it comes to health care in terms of accessing premiums or in other places. But there's only so much you can squeeze from that. There's only so much you can get out of cost savings. Although it's good, it's a good exercise to have part time work is one. It sounds like you're already doing that. The fact that you are going to be 65 in December means the time frame is short for you. Once you turn 65, that should substantially lower that gap because your wife is going to be 62, so she has a few more years but the cost should go down significantly once you get on Medicare. So you looking for you know one option would be if you were a lot younger is looking for part time work that has a health care option available to it. Like some of the, some of the opportunity sets that we talked about. That is something to put on the table. You could look at private insurance, go contact a private broker and see if there's something that can help fill the gap outside of the aca. That is something that you could do. In this case it sounds like you, you had the blessing of inheriting an IRA and a Roth IRA from your wife's parents or she had the blessing of that. That likely will be a good gap filler to help cover that budget gap. Don't know whether how much you were expecting or if you were expecting anything, but I think that is reasonable to start looking to those things earlier. And based on your particular situation, do you, you're already not getting any, any health care benefits. So do you go to the pre tax IRA because you're still able to be within the 12% tax bracket and pay the tax at a reasonable rate or do you look at doing the Roth inherited IRA to start draining those earliers to help fill the gap. I think all or some of those are options that you should evaluate now which one it is for you? It's a little difficult to say. Hopefully next week when I outline a basic protocol, you can at least think through it in a logical way to figure out what dose of any or all of those do you use to help fill that gap. It's not going to be perfect. There's no perfect optimization for it because it's so intricate Gene. But at least you can do it in an organized way to get to a decision. So hopefully I can help give you you know, some framework to do that in an organized way related to her taking Social Security early. It is one of the opportunity sets. Given that she's just about to turn 62, I would have to know more of the situation. How important is that lifetime income for you and her if she waits until Full retirement age because she won't step up to a, spousal benefit of 50% if she takes early, which may be okay, but that may be a lever that you can do. I'd be a little bit more careful with that, but I think that's one that you should consider as well. Last thing related to listener comments that I want to share is when I was debating sharing or not. But I think it's a worthy discussion on the philosophical view of using Affordable Care act subsidies if you don't have to. If you have the resources to pay full boat, should you modify your adjusted gross income in order to receive subsidies? Got a couple of listener questions around that. And if you think of the ACA, it was established to, broaden the availability of healthcare for those and make it more affordable for those that couldn't afford it to fill the gap. And so there's a view that, hey, using the subsidies when you don't need them because you're intentionally manipulating your income in order to get them. Is that right? It's a reasonable question to hold up. Just like is it reasonable to do long term planning to move assets out of your estate so if you go into, if you need high cost medical or long term care expenses later in life that they don't tap your assets so the assets can be there for someone else or for your family? Reasonable strategy, but also isn't that what that money's meant to be there for? We all face these ethical or philosophical decisions. Bill wrote in I'm. I turned 70 this month, so the fire steam doesn't resonate with me, he said. I was aghast when Sarah said they were counting on government subsidies to reduce the health care costs, until Medicare. It amazes me so many do not connect how these programs are funded. I paid into Medicare for 45 years before I claimed the benefit. The program is not long term solvent. And then he went on to share. He did this in a positive way, but just raised the question he wanted to share. My word for 2026 is centered. I'm retired for two and a half years. Some of my priorities have changed, but I caught myself going after some shiny new objects. So remaining centered. Well, good luck with that, Bill. The second one I received, I didn't write down the name of this person. They said comedy is just not something I have ever done before in a podcast. Actually listening to this one, my mouth dropped open at the point where the couple who seemed nice was expanding on how they don't want to work and they want to do what they want to do and they are going to depend on government subsidies that are intended to help those that cannot help themselves in order to pay for health care. And this person said I was shocked at the selfishness and the lack of consideration for the greater good. So many people, this person says, work their fingers to the bone and cannot make ends meet. That is what the subsidies were created for. Not someone who just wants to retire early from their well paying careers because they're tired of working. Now the subsidies have gone away for those poor people who can barely afford a roof over their head. Just makes me disappointed. So there's a counter view to using ACA subsidies if you don't need them. And I'm just going to share one One reply to one of the the last comment Share my reply to the last comment Just to give you my perspective. Thanks so much for your feedback. I understand the sentiment you shared. How does one balance creating a great life for ourselves and our family? That's the only life we have. Playing by the rules that are set by governments or whatever programs they are, helping others, creating a better society, being a good citizen. Each of us, including you and me, make countless decisions for ourselves and balance these trade offs. Just a few examples. We all take deductions on our taxes even if we can afford to pay more. We buy a bigger, nicer car that we don't need because we enjoy it. We spend time on ourselves that could be serving ever others. We spend money on gifts for people that have everything. We take Social Security even if we could do without it. Yeah, we paid into it, but not totally. I don't begrudge someone from doing any of these things. And then my I continue. I struggle with this balance. One thing I've noticed on the show is I we can put too much emphasis on helping people lean into feeling confident and spending more, et cetera. That is important to create memories and create a great life. But that's not all of it. Part of getting ourselves to feel comfortable with our own financial position is to empower us to not just live more, but to give more money, time and energy to those who are less fortunate financially. Henry and Lucy may have said it a bit bluntly in the moment because they were focused on the conversation of what do you want? And I don't know their spirit of giving. And after talking to them a little bit, I think they do want to give back in many ways to their community. But it's a reasonable question to ask. The key thing is there's no right or wrong answer that we can say universally. But for you, you just want to answer for yourself and feel comfortable with it. With that, let's go set a smart sprint.

On your marks. Get set. And we're off to set a baby step you can take in the next seven days to not just rock retirement, but rock life. All right, in the next seven days, I want you, and it doesn't even have to be in the healthcare area. I want you to choose one thing that you can do to pay attention to the costs. It could be how often you go to Amazon. I, I tend to shop out of boredom. I've been paying attention to this. But controlling costs is a habit, or being conscious of what we're paying for things is a habit where we want to apply some intentionality. Now, we don't have to go all the way down the rabbit hole and drive 40 miles to save a cent or two on gas, but we can usually find some very easy wins in controlling costs, whether it's in healthcare or in groceries or in our consumer shopping, et cetera. And that compounds over time, and building those habits can make a huge difference. All right, so next week on the show, we're going to try to bring this all together to help you think through this in an organized way, knowing that you're not going to get it wrong and you're not going to get it right, but just so you can make a informed judgment of how you're going to approach healthcare. Prior to Medicare and Gene, I always felt like we went through all the options, but what is the answer for you? It's very difficult on my end to give you an answer because I don't know anything about you, Gene, really. But hopefully this framework will help you get to a decision that you feel that you made in a reasonable way. So hope you all have a great week. We'll wrap this up, next week.

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