Ep.136 – Retirement Before Medicare

If you’re considering retiring before the Medicare age of 65, there are a few things you need to know.

When thinking of early retirement, it is important that you consult a financial professional to help you put together a spreadsheet on the factors to consider.

In this episode of the Secure Your Retirement podcast, we talk about retirement before Medicare and the factors to consider before doing so. Listen in to learn when it’s beneficial to wait for age 70 to take your social security and when it’s not.

In this episode, find out:

●     Understanding what it means by saying retirement before Medicare.

●     The factors to consider when it comes to your healthcare when you choose to retire before Medicare.

●     The difference between doing calculations on your own versus using a professional.

●     When you’re eligible to take your social security and whether or not you should wait to take it.

●     Don’t try to create a spreadsheet alone and instead consult professionals like us to help you make it easier.

Tweetable Quotes:

●     “If you retire before 65, you’re not eligible for Medicare.”– Murs Tariq

●     “When you’re doing this on your own sometimes, it’s hard to make those calculations.”– Radon Stancil

Resources:

If you are in or nearing retirement and you want to gain clarity on what questions you should be asking, learn what the biggest retirement myths are, and identify what you can do to achieve peace of mind for your retirement, get started today by requesting our complimentary video course, Four Steps to Secure Your Retirement!

To access the course, simply visit POMWealth.net/podcast.

Here’s the Full Transcript:

Radon Stancil:	Welcome everyone to our retirement in action. Today we are going to be talking about the scenario of retirement before Medicare. Now what does that even mean, when we say retirement before Medicare? Well, as most of you probably know Medicare for individuals in the United States begins at age 65.
	Now if a person comes to us and they’re talking about retirement, a lot of times the way that conversation goes is they’ll, “You know I really think I’m going to work until I’m say 65, 66, 67,” and we start running the numbers and we use a software program to start looking at how that’s going to play out throughout retirement.
	Then if they’ve been a really good saver they might look at the number at age 90, let’s say, and go, “Wow, I’ve got still a good amount of money there at age 90. What would it look like if I retired at age 62 instead of 65,” because they’re thinking I’ve got plenty of money it looks like at 65. What if I went ahead and called this two or three years earlier.
	We can easily go in and make those alterations to the plan, so we do that all the time. Now a couple of things come up though when we start thinking that through. So could you lay out maybe a couple of those things, Murs, as to what starts to occur when we start thinking about retiring early?
Murs Tariq:	Yeah. Yeah. So retiring early is always… It’s something that’s exciting to think about, and sometimes the excitement of the possibility of retiring early, we don’t think about things that happen at certain ages.
	One of the big ones right up front is if you retire before 65 you’re not eligible for Medicare. So let’s say you have a goal of retiring at 60 or 62 and you’re working for a company that provides you with subsidized health insurance, or maybe you’re only paying a couple hundred bucks out of your paycheck every pay period and that covers your entire family, so health insurance is relatively cheap when you are working.
	Then say you retire at 62. Well, you got a gap there that we got to fill to get to Medicare, and then you got another… When you hit Medicare now health insurance becomes more affordable again. So that’s one thing to think about, is how are we going to cover this health insurance expense to get from A to B, whether that’s 60 to 65, or 62 to 65? That’s one to think about.
	Then the other is if we’re retiring early there could be… Well, that’s a few years that we’re not saving anymore, or that’s a few years that we’re not allowing Social Security to build up anymore, or a few years that we’re not allowing our investments to make more returns, so a bunch of different factors when we retire early.
	Yes, it’s an exciting concept, but we just got to approach it a little bit differently than we would if we were retiring at say 65 or 70, because things just seem… A lot of things are answered if you retire after 65.
Radon Stancil:	One of the advantages that we like to talk about, and I just wanted to kind of go back through this, is that when you’re doing this on your own sometimes it’s hard to make those calculations. We’ve had some folks come in that have met with us and they have gotten and built some really good spreadsheets.
	But with a spreadsheet you’re still having to think through a lot of things, and you’re trying to think did I remember to add this? Did I take this away? What about the compounding effect, or how do I deal with these different variables, and how quickly can I do those things?
	Some people love spreadsheets and they can do a great job, but many times the folks that come in with their spreadsheets says, “I got to this point,” and we’re talking about people that are really good at spreadsheets. They say, “I got to this point but then everything didn’t work out right, because I didn’t completely have all my formulas right to be able to come up with the solutions.”
	With the software program that we use when we’re helping a client or somebody that’s even talking with us, is we’re able to go in and we can do all kinds of variables. Like Murs just said, we can throw in an extra expense. We can throw in what we call all the time a fun fund. That’s F-U-N fund, F-U-N-D, and say what if for 10 years I’m going to have this extra money coming in and then it’s going to go away?
	For us it’s really just a very easy process for us to be able to compute that with our software program. The way we do that that I make people love is that we do that right on the screen. We have a large screen and we have all their numbers up on the screen and we’re able to make those real time solutions.
	There are some other scenarios too that have to go into play sometimes, are what ifs. A lot of these… And we’re tying it in with this conversation around Medicare, but it kind of leads us into all these different topics.
	For example, what happens if I have a long-term care situation? What if Medicare insurance goes up? We want to plan for that. What if I want to buy a car? What if I’m going to redo my kitchen at some point? What if I’m going to help a grandchild in college? All these things are things that we can put in, and the output from that can be instantaneous, right in front of you, and then you’re able to actually get a nice report out of that.
	I will tell you that the other scenario that we go through is Social Security. So can you just walk us through, Murs, kind of that idea of how we would deal with Social Security kind of the same way we would deal with this idea of Medicare?
Murs Tariq:	Yeah. Yeah. Social Security, it’s always a big question, when do I take it? When is the right time? How does this all work, especially when we’re trying to relate it to a specific goal of retiring.
	Social Security, you can start it as early as 62, and the absolute time that you would want to take it is by 70. Your benefits don’t grow after you turn 70. So 62 to 70, every single year that you wait Social Security goes up, so that’s kind of the driver, to try to wait as long as you can.
	But we don’t really look at it that way. We look at it really for the individual. We say if we’re going to retire at say 65 does it make sense to take it early? Well, very quickly we can say it doesn’t make any sense to take it early. If you have plenty of incoming coming in the door, then let’s use that income and let’s have Social Security continue to build.
	Then the question comes all right, we’re at 65, now do we turn it on right away? Do we wait till 67, which is kind of around most people’s full retirement age, or do we wait till 70 to get the most benefit out of Social Security?
	The way that we handle that question is well, at the end of the day, and let’s say age 90, let’s simulate taking at all these different ages and what impact does it have at our own nest egg, our own money that we’ve worked so hard to save up? How does it impact the 90 number? How much do was have left at 90?
	So we’ll run it and we’ll say, “Okay, here’s your projection for 65. Let’s start it at 65 in the software and let’s play it out, and what do we have left at 90?” Then we’ll do the same and we’ll look at 67. Then we’ll do the same and look at 70, put it in for age 70.
	That means we’ve got five years, from 65 to 70, where we have no income coming in from Social Security, so we have to do what? We got to draw down our own assets to let Social Security continue to build. So sometimes it’s not always advantageous to wait until 70. We see that all the time, to be honest with you.
	A lot of times it makes sense to go ahead and take it, once again if we’re asking the question of how is it going to affect my own money. A lot of times we read articles about Social Security that says, “How can I get the most from Social Security,” not really relating to your own money at all, and usually that answer is easy. Wait till 70 and you’ll get the most in Social Security.
	But we just don’t look at it that way. We look at it from a personalized view. So with the software, and we were actually doing this the other day with a client in the room, and we were making these quick iterations, here’s what it looks like here, here’s what it looks there. The wife actually just kind of was like, “Man, this software is awesome,” and it is.
	It’s very robust. It gives us the ability to make these kinds of changes very quickly, live, in-person, so we can have a really nice conversation around these what ifs, around the Social Security what ifs, around the if I retire early how does my health insurance from Medicare going to impact it? What if a spouse pre-deceases the other?
	We’ll go through scenario after scenario to make someone feel very comfortable with their overall retirement finance plan.
Radon Stancil:	Yeah. And I think too, just thinking about that very person that Murs was just mentioning, they laid out a few things that they wanted to do. One, they said they wanted a house renovation. They wanted to do that in 2022. They wanted to plan for their daughter’s wedding in 2023. They wanted to buy a car also in 2023. And we had the health insurance scenario of trying to say what does that look like to get them to 65.
	All of those were simple things we could put right in and be able to see an outcome pretty quickly, and that’s why they thought the software was so awesome.
	I want to kind of conclude this kind of how we opened it, retiring before Medicare. What does that mean? It means basically what does it look like if I decided to retire at 60, 62, whatever the age, 55, we don’t care. Whatever that age, there’s a lot of different things that have to be thought through.
	So we would encourage you not to try to do this on your own, not to try to go out and try to build a spreadsheet. But if you bring that data to someone like us, we can put that in and you can get those solutions pretty quickly.
	We can do that in the office. We can do it on a Zoom call as well. So if you’re thinking to yourself I’d love to see my numbers and to be able to see those variations, then just go to our website, pomwealth.net.
	You can go to the top right-hand corner, you’ll see a little button up there that says a 15 minute complementary phone conversation that you can have with either myself or Murs. As soon as you click that button our calendar comes up. You can pick the date that’s convenient for you, and we’ll go through and just kind of talk to you about what we need, what kind of information we need.
	We’ll take that information, we’ll put it into our software program, and we’ll set up either a Zoom meeting or an in-office meeting and go through so you can actually see your numbers.
	I will tell you every time we do this, and I’ve been doing this for a long time, I’ve been doing it for over 20 years, Murs has been with me for 10, every time it is eye-opening and it makes the stress go down. It allows you to have peace of mind.
	So if you’d like to do that, go check it out. Go to the website, pomwealth.net, and schedule a 15 minute conversation with us. Thank you so much. We’ll talk to you again soon.