Retiring early doesn’t mean losing affordable health insurance

Dear Liz: I am 55 and have health issues that I don’t talk about at work. I want to retire soon. I know that getting health insurance is going to be hard. I am just at a loss as to how I am going to keep working when I don’t feel well. What are my options?

Answer: In the past, getting health insurance could be difficult or prohibitively expensive if you had even relatively minor health conditions. That changed with the Affordable Care Act, which requires insurers to extend coverage without jacking up the premiums for preexisting conditions. In addition, most people qualify for tax subsidies that reduce the premiums, and those subsidies were expanded this spring when President Biden signed the American Rescue Plan into law. You can start your search for coverage at HealthCare.gov.

Before you quit, however, consider whether your employer could make accommodations that would allow you to continue working. Many people at 55 don’t have enough saved for a comfortable retirement that could last decades. Shifting to part-time work, if your employer allows it, could help you continue to save or at least reduce the amount you need to withdraw from your savings.

Refinance or use IRA funds on mortgage?

Dear Liz: I owe $360,000 on my mortgage. I have sufficient funds in my IRA to pay this amount off without depleting income distribution for the next 20 years. I am currently paying $1,100 monthly on an interest-only loan, but I have to start making much larger principal payments in November 2022. Would you advise withdrawing IRA investment monies (and taking a tax hit) to pay off the full loan amount, or simply getting a conventional mortgage and live with a higher payment ($1,500) each month? I am 77 and retired now for four years.

Answer: Making that large a withdrawal will almost certainly hurl you into a much higher tax bracket and increase your Medicare premiums. Refinancing the mortgage while rates are low likely makes the most sense, but consult a tax pro or a fee-only financial advisor before making any big moves with retirement funds.

Two federal laws specify that people shouldn’t be charged for coronavirus tests. But there’s a loophole for out-of-network labs.

Pensions and Social Security benefits

Dear Liz: My situation is similar to the former teacher who wrote about a pension impacting Social Security benefits. I started Social Security at 62. My wife’s government pension is from a job that didn’t pay into Social Security. I’ll receive her pension if she should die before I do. If this occurs, how will my Social Security be impacted?

Answer: It won’t, because your situation is actually the reverse of the former teacher’s.

You paid a portion of each paycheck, currently 6.2%, into the Social Security system. The teacher (and your wife) did not, so their benefits are affected by rules designed to prevent people who didn’t pay into Social Security from getting more than those who did.

Investing a windfall

Dear Liz: My husband and I are retired and recently inherited a large sum of money. We already have money of our own invested and have a good income. Would a whole-life insurance policy based on an index account be a good place to put this money?

Answer: The insurance agent trying to sell you that policy certainly thinks so, because it’s an expensive product that would generate a substantial commission. You’d be smart to get a second opinion from a fee-only financial planner that doesn’t profit from the investments they recommend.

Most people would be smart to have their homes paid off by the time they retire. But refinancing into a long-term mortgage is a good option for some.

Refinancing in your golden years

Dear Liz: I just wanted to comment on a recent question about refinancing a mortgage in retirement. The writer wrote: “… at 67 and 72 years old, it’s unlikely that both of us will survive for another 15 years to pay off this loan.” This seems an old way of thinking about age. The obituaries in my paper are full of people who have lived into their 90s and even past 100 years old!

Answer: Good point. People often misjudge life expectancies, which over time have lengthened considerably. At 67, a typical female could expect to live nearly 19 more years, according to Social Security’s life expectancy tables, while a male at 72 has a 13-year life expectancy. People with higher incomes, good health and good habits (nonsmokers, for example) could add many years to those estimates.

Liz Weston, certified financial planner, is a personal finance columnist for NerdWallet. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.