Tag: insurance

Old and dangerous?

The Minnesota Marine Art Museum (Winona, MN) is hosting an ‘eagle’ collection for the National Eagle Center (Wabasha, MN).  MMAM is an outstanding museum which usually does not allow pictures, however they did allow the eagle collection to be photographed.  One of the eagle items that caught my eye was this 1918 WW I logistics poster from James H. Daugherty for the Emergency Fleet Corporation:

ships are coming

The AAA says…

Per the AAA, “With the exception of teen drivers, seniors have the highest crash death rate per mile driven, even though they drive fewer miles than younger people.” Part of this is due to the more fragile physiology of the older person, but part is from driving skill (or lack thereof).

Good news, there’s a class

A number of organizations offer senior driving classes which allow you to refresh your driving knowledge, learn some new tricks, and save some money.  AARP notes, “By taking a driver refresher course you’ll learn the current rules of the road, defensive driving techniques and how to operate your vehicle more safely in today’s increasingly challenging driving environment. You’ll learn how you can manage and accommodate common age-related changes in vision, hearing and reaction time.”

You save money, too

In my state, completing a state approved defensive driving course (8 hours) saves to 10% off your auto insurance for three years, and then you can take a renewal course (4 hours) to extend the savings.  The discount is on applicable coverages, which I think means collision.

More good news, you save you and others

Even more important than the cash you will save on your auto insurance is the flesh you’ll save by not getting in a vehicle accident.  At the minimum accidents are a huge inconvenience and eat up time and money.  At the worst, accidents maim and kill.  A defensive driving refresher could save someone’s life or limb.

Some defensive driving course links

The National Safety Council (Green Cross for Safety!)

(Look for discounts on the NSC class.  I know that the GEICO and the Minnesota Safety Council links to NSC cut the cost.)

AARP Smart Driver  There’s a 25% discount of the AARP class right now with the code ‘25OFF’.

Check with your agent to make sure a given course works for a discount with your insurer.

Ironically, when we researched the classes we found we’re both out of date, as you need to take the refresher within three years of completing the full class!  Mrs. NoSurprisesRetirement is signing up for the 8-hour AARP class right now.

We had the chance to visit the French monastery island of Mt. St. Michele in the off season. Here’s a picture of Mt. St. Michele with a helicopter ferrying out detritus from the cloister garden as it was renovated.  Last time they did it with hundreds of monks on the steps…

mt st michele

It turns out that Nationwide actually is on your side…

A friend of mine told me about a professional development class he took from Nationwide on their retirement health care estimator.  It is a free and interesting tool that your agent can have the Nationwide home office run for you. Nationwide worked with some actuaries to have a minimal set of questions that give some quality results back to you, like your overall monthly Medicare and supplement costs. Oh, and your life expectancy.  (Humming Nationwide tune…).

What, you don’t want to call an agent?  Nationwide also has a decent, free DIY tool to estimate your healthcare costs in retirement (and your life expectancy).  This one has a lot less detail, but you don’t have to talk to anyone.

Actions you can take include:

-Take a defensive driving class (or a refresher) and go get those auto insurance discounts.

-Try the Nationwide healthcare cost estimator.  Then call your financial professional and have them do the full version for you.

And if you have not seen the “Why you should read this blog…WIIFY” post, it’s here. 

Questions, comments, or suggestions for retirement surprise areas you want to know more about?
-Leave a comment
-Use ‘Contact’, above, to send an email.

Ouch – a bad surprise ate my retirement!

Remember – the goal of this blog is to help you avoid bad retirement surprises. Another way to say bad surprise is ‘unplanned significant expense’.  Here is the equation – you can do the math, I promise:

Planned retirement income (and standard of living)   chicken-beach-cartoon-illustration-hen-suntan-cream-34831754

minus bad surprise =

lower retirement income (and lower standard of living) Bus Bench

Real life example

I have a friend who had a bad retirement surprise happen with her healthcare.  She retired with an employer-provided post-retirement pre-65 healthcare plan.  Good news – the employer still provides a pre-65 plan that guarantees coverage.  Bad news – the premiums went up very substantially, which ate into the friend’s retirement income.  Her budget teeter-totter suddenly tilted left.

Budget Teeter Totter-left tilt - v2

There are a few factors at work here:

  • There was a surprise – the friend had an significant unplanned rate increase (think over 50%).
  • Thank heavens the friend is guaranteed fairly good coverage which will help avoid additional bad surprises.
  • Regardless of what you might be paying for healthcare, the overall cost of healthcare in the US continues to inflate, so we can all expect increases, especially as the baby boomer cohort ages.
  • The earlier you retire before 65, when Medicare kicks in, the longer you are exposed to the potential impact of premium surprises. Retire at 59 and increases are potentially a severe problem.  At 63, the problem is potentially less severe because you only have two years until Medicare.

What hints does my friend’s example give us on how to avoid an insurance premium surprise pre-65?  My opinion is that pre-65 retiree health insurance from any source other than a Federal Government plan (FEHB, CHAMPUS) is a risk that could cause either high premiums or lack of coverage.  If you’re not covered under FEHB or CHAMPUS, follow along below.

A budget try-it for you!

Here’s a budget planning activity for you to try, ideally before committing to retirement.

  1. Review how changes in things like insurance premiums might affect your income. Try some scenarios.
  2. Look at your budget with your insurance premiums and other healthcare expenses as planned, then use a stress test or two (or three). What if health expenses went up 25%, 50%, or even 150%? What would it do to your budget and your lifestyle?
  3. Ask yourself how you would pay for the increase. Would it come from savings? 401(k), IRA, or other qualified money? Second mortgage?
  4. Look at what paying for a bad retirement surprise now would do to your long term income plan.

Assuming you found that at some level of increased health insurance (and overall out of pocket healthcare) cost increase your retirement standard of living would be significantly impacted, what are your options? Let’s use an old project management risk planning method to find out.  Our choices are accept the risk, mitigate the risk, or avoid the risk entirely.

  • Accept it – If costs go up, pay the increased cost (perhaps out of retirement savings) and just live with the lower standard of living.
  • Mitigate it – You might search for a cheaper plan and take more risk on yourself (danger here!).  You might go to back to work, primarily for health insurance.
  • Avoid it – Plan to retire later.  Retire somewhere where medical insurance is cheap, like Ecuador.  Seriously, see the Miami Herald Cuenca article.

Actions you can take include:

  • Learn about any pre-65 health insurance your employer offers.
  • As of right now, it looks like the ACA will be going for another year, so if you don’t have a Federal, Union, or employer pre-65 retiree health plan, go on your exchange and see what your costs (remember – premiums + deductibles/co-pays and out of pocket maxes!) might be when you retire. (If you do have a Federal, Union, or employer pre-65 plan, check out those premiums.)
  • Think about what your personal strategy will be for any pre-65 retiree health care.

Questions, comments, or suggestions for retirement surprise areas you want to know more about?
-Leave a comment
-Use ‘Contact’, above, to send an email.

It’s about time…

Retired or working, you have expenses.  Some are optional (coffee at the barista’s place, new pine tree air fresheners for the car) and some are required and non-negotiable (water, electricity, gas, property tax).  Good news, some expenses are mostly required but are negotiable, so you might be able to help yourself to a positive retirement (or even pre-retirement) surprise by negotiating!

My wife is full-blooded Dutch and the Netherlanders are noted for being careful with money.  A couple of years ago, she renegotiated many of our mostly required expenses and ‘It’s about time’ for her to do it again.

It all started when I noted that our satellite TV service bill increased, a lot (it might have been DirecTV at the end of the promotion period).  The service was fine, but competitors were offering pretty similar service with much better deals.  My wife called around and saved us 50% on a new service.  It required a new installation, but a couple of hours supervising the installation was well worth the savings.

Later while we were discussing retirement planning and expenses, I noted that we had monthly trash, insurance, and phone bills, too.  The Dutch culture kicked in and soon my wife was calling firms, stating, “We’ll be retiring soon and we’ll be on a fixed income, so I need to bring these expenses down…”  Before I knew it, she had us saving significant amounts on trash, insurance, and internet.  Like over $1,000/year in savings (in all fairness, we did have a Cadillac trash plan, we just were not generating unlimited trash weekly…12 years of that – ouch!)

WIIFY?*

You too, can take advantage of these savings, but as usual, TANSTAAFL*; it will require some work:
-Find your semi required bills.
-Determine alternatives (Dish and Comcast were TV alternatives for us.)
-Call some alternatives and see what they offer.
-Call your preferred provider (perhaps it’s the one you have now) and let them know you’re retired (or nearing retirement) and will be on a fixed income and need a better deal. Let them know what the competition offered.
-Make your choice – stay with the deal your preferred option offers, or switch to the new one.
-Count your savings and use the money for other things that are important to you.

Now, here’s one you may not know about – life insurance. Talk with your trusted financial professional, because if your health has improved since your whole life or UL policy was issued (blood pressure under control, quit smoking), you might be able to get re-rated to lower premiums without having to get a whole new policy. If you have a term life, you may be able to save by re-rating or by getting a new policy. Always have the new one in hand before cancelling the old!

Let us know in the comments section if I missed some savings opportunities.

* – TANSTAAFL – “There ain’t no such thing as a free lunch.”  It shows up in No Surprises Retirement fairly often.
* – WIIFY – “What’s in it for you?’

Actions you can take include:

Bills to consider negotiating:
-TV/Cable
-Internet (Cable or DSL)
-Trash
-Homeowners insurance
-Auto insurance (is there a lizard in your future?)
-Landline phone
-Cell phone.

Look for the next update on Friday, September 8 at 12:30 PM.

Questions, comments, or suggestions for retirement surprise areas you want to know more about?
-Leave a comment
-Use ‘Contact’, above, to send an email.

Medical expenses – a good defense is a viable offense (to avoid or minimize retirement financial surprises!).

WIIFY

A primer on post-retirement health insurance and medical expenses.  Transfer your health risks to an insurer for a known premium and avoid an uncertain and potentially retirement income busting drain on your nest egg.

tl;dr – Have a health insurance strategy.  Know what the pre-65 strategies are and what direction seems to fit best for you..

FYI – if you see text in blue, it’s a hyper-link to a resource!

TANSTAAFL

A quick mnemonic – There ain’t no such thing as a free lunch (TANSTAAFL).  Nowhere is this more true than medical insurance and expenses. Medicare is an example, Part A (hospitals) has no premium and Part B (essentially ‘doctors’) does, but you’ve paid Medicare tax forever, therfore TANSTAAFL

Two main kinds of ‘retirement’ medical insurance

One way or the other, you will need a retirement medical expense strategy.  There are two kinds of medical insurance for retirees, pre-65 (before Medicare) and Medicare (65 and on).  We’ll cover Medicare in a later post, so this post is for if either you or your spouse (or both) is going to be under 65 when you retire.  Basically a must read unless both of you are over 65 right now.

When you retire you’ll need medical insurance unless you:
a) have no assets and low income and will depend on Medicaid
b) you have assets and are willing to assume the risk of spending them all on medical care, then going to a), above.

Pre-65 health insurance strategies

1. Keep working – Stay at your current job and don’t retire until you have your health insurance strategy or qualify for Medicare. Or, find a part time job that offers health insurance. I just checked and if you work 20 hours/week, Starbucks has health plans.  I have no idea on the costs for the Starbucks plan.

2. COBRA – Not the snake, but the acronym for the Consolidated Omnibus Budget Reconciliation Act of 1985. COBRA lets you continue employer health insurance for 18 months at 101% of the employer’s negotiated premium.

Advantages: it’s guaranteed, the premiums, deductibles, and coverages are known.  You have up to 18 months of COBRA coverage when leaving employment.

Disadvantages: the premiums can seem very high and there is no ACA subsidy. You only have 18 months of coverage.  Since you only have 18 months, if either of you are younger than 63.5, you’re going to need more than one strategy, because COBRA will stop before you are on Medicare.

3. Individual health insurance through an ACA exchange or a broker – This is really up in the air right now, but when I last checked, incomes up to the $60k range received significant premium subsidies. Depending on your age, this may be the best option, but until the ACA direction is firmer, you may want to hold off on retirement if individual health insurance is your strategy.

Up next – Look for the next update on Friday, August 4 at 12:30 PM.

Actions you can take:

-Call your HR Department and ask what the current COBRA premiums are.
-Take a retirement knowledge quiz.  It’s a tough one, but explains the answers at the end.

Questions, comments, or suggestions for retirement surprise areas you want to know more about?
-Leave a comment
-Use ‘Contact’, above, to send an email.