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Posted by HW \"Skip\" Weldon on September 4, 2008, 10:04 am
I'd like to see comments on the issue of early retirement.
First, consumers in their 50s and 60s spend more on healthcare than
youngsters, so they will need a good insurance policy. Around here
that costs around $1000/month. Ignoring taxes because I don't know
what they'll be a decade or more from now, using a 4% withdrawal
factor requires a present value sum of $300,000 just for health
insurance (that's for those who retire today).
Given that number, and looking at a 4% withdrawal factor, future
yearly inflation and obstacles to withdrawing from 401k and IRAs, I
question the practicality of a normal person trying to plan for an
early retirement that comes anywhere near maintaining their present
lifestyle.
-HW "Skip" Weldon
Columbia, SC
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Posted by PeterL on September 4, 2008, 12:03 pm
wrote:
> I'd like to see comments on the issue of early retirement.
>
> First, consumers in their 50s and 60s spend more on healthcare than
> youngsters, so they will need a good insurance policy. Around here
> that costs around $1000/month. Ignoring taxes because I don't know
> what they'll be a decade or more from now, using a 4% withdrawal
> factor requires a present value sum of $300,000 just for health
> insurance (that's for those who retire today).
>
> Given that number, and looking at a 4% withdrawal factor, future
> yearly inflation and obstacles to withdrawing from 401k and IRAs, I
> question the practicality of a normal person trying to plan for an
> early retirement that comes anywhere near maintaining their present
> lifestyle.
>
> -HW "Skip" Weldon
> Columbia, SC
>
Depends on your definition of "normal" dosen't it? For example a
large number of state employees have life time health coverage after
their vested retirement age (sometimes at 50 with 5 years of
service). So they would not be "normal" by your definition?
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Posted by John A. Weeks III on September 4, 2008, 12:07 pm
> I'd like to see comments on the issue of early retirement.
>
> First, consumers in their 50s and 60s spend more on healthcare than
> youngsters, so they will need a good insurance policy. Around here
> that costs around $1000/month. Ignoring taxes because I don't know
> what they'll be a decade or more from now, using a 4% withdrawal
> factor requires a present value sum of $300,000 just for health
> insurance (that's for those who retire today).
I find the same issue trying to run a small business as a single
person. I am getting to the age where my body is starting to
have issues. I looked at getting a personal medical plan, and
they quoted me $4200/month, the state maximum, due to a pre-
existing condition. I am too small of an operation to have a
group plan. It is starting to look like my only real option is
to give up on my business and find a day job with a medical
plan, or pin my hopes on some kind of government mandated
universal health plan.
-john-
--
======================================================================
John A. Weeks III 612-720-2854 john@johnweeks.com
Newave Communications http://www.johnweeks.com
======================================================================
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Posted by Dave Dodson on September 4, 2008, 12:25 pm
wrote:
> First, consumers in their 50s and 60s spend more on healthcare than
> youngsters, so they will need a good insurance policy. Around here
> that costs around $1000/month. Ignoring taxes because I don't know
> what they'll be a decade or more from now, using a 4% withdrawal
> factor requires a present value sum of $300,000 just for health
> insurance (that's for those who retire today).
Assuming that a 50-year-old male is just looking to fund the insurance
policy until Medicare kicks in at age 65 and his medical insurance
costs go down dramatically, immediateannuities.com says that he can
get a fixed annuity that pays $1,000 per month for 15 years for
$131,579, with the provision that if he dies before age 65 his
beneficiaries get the remaining monthly payments. However, the monthly
payments are not adjusted for inflation.
The same male can get an inflation-adjusted single life annuity with
initial benefit amout of $1,000 per month for $253,680. I haven't
found the cost of an inflation-adjusted 15 year annuity, but it
probably is in the $180,000 range.
The bottom line is that he would need to set aside far less than
$300,000 to provide for medical insurance to age 65.
Dave
Dave
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Posted by anoop on September 4, 2008, 2:07 pm
> wrote:
> > using a 4% withdrawal
> > factor requires a present value sum of $300,000 just for health
> > insurance (that's for those who retire today).
> Assuming that a 50-year-old male is just looking to fund the insurance
> policy until Medicare kicks in at age 65 and his medical insurance
> costs go down dramatically...<snipped>
> The same male can get an inflation-adjusted single life annuity with
> initial benefit amout of $1,000 per month for $253,680. I haven't
> found the cost of an inflation-adjusted 15 year annuity, but it
> probably is in the $180,000 range.
>
> The bottom line is that he would need to set aside far less than
> $300,000 to provide for medical insurance to age 65.
But what if they raised the eligible age for Medicare?
And even if he/she did have 300K for health insurance, we
already know that the rate at which medical expenses are
going up far exceeds the rate of inflation that the above
mentioned 4% withdrawal rule would allow for.
If at all, one should budget more than 300K for this, not less!
The cost of making incorrect assumptions is poverty
in old age...I'd err on the very conservative side.
Anoop
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to keep the conversations on-topic for financial planning. Other posting
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