This time of the year is generally when the Retiree Medical Trust celebrates another birthday. We first came into existence in 2008. Ironically, we put things together just ahead of the failure of the subprime mortgage industry and what some call the Great Recession.
Fortunately, we dodged a big ol’ bullet. It wasn’t like we had an epiphany or anything similar. It was more like run-of-the-mill, good old-fashioned luck.
Our goal was to put together a trust plan to help pay for medical expenses in retirement. And now, 18 years later, we think our vision was a decent one. We have spread into three West Coast states. Our active participant numbers are creeping closer to 10,000. We have roughly 4,500 retirees with accounts. The association count is 75 and growing.
As I look back, I now realize something. In the beginning, I didn’t know what I didn’t know. By that, I mean my personal perception of the future was quite skewed. In my mind, the government plan for health care would take care of me just fine. There is, after all, Medicare. I guess my thought was that it might cost something, but not really that much. Yeah, I was wrong.
Sometimes it’s just best to admit it. Then share that information with others in the hope that they can learn from the poor experience I might have had.
Many employers no longer offer any form of paid medical benefits for retirees. Every year, more and more employers are either reducing or eliminating that benefit entirely. What that really means is that they are simply transferring that financial debt from their pocket to yours. You will still need to purchase health insurance.
So, let’s just examine a couple of quick scenarios.
Scenario 1: You retire from law enforcement in your 50s. You live in Washington and you need to purchase health insurance. If you are LEOFF II, depending upon the plan you choose, you might end up paying either $1,463 or $2,296 per month. The cheap plan runs about $17,000 a year. If you want the Cadillac plan, you will need to add another $10K to that number.
Scenario 2: Same situation, but you are located in the Bay Area. It’s even worse there. A two-person plan will run $2,395 per month, or almost $29,000 per year. Got a family? Add another $8K.
But you are a long way off from Medicare, which currently kicks in at age 65 (that might change as folks begin to live longer). It gets better at this point, but you are still on the hook for a premium. With Medicare, there are different options and configurations. Part of it depends upon where you live and whether or not doctors in your locale are accepting Medicare as coverage for treating you. Here is just one example, and it happens to be mine. I am married and 73 years of age. My wife and I both have sufficient quarters in the Social Security system to qualify for Medicare.
- Medicare Part A (hospital): Paid for since we have vested in the Social Security system
- Medicare Part B (medical): 80% coverage for $202.90 each x 2 = $405.80
- Medicare Part C (sometimes called Medigap coverage): 20% coverage for $609 total
- Medicare Part D (prescription meds): Varies year to year, but currently about $50 per month total
So, in retirement and participating in Medicare, we are paying about $13,600 per year for all of our Medicare coverage. What I didn’t know then, but I certainly do now, is that my government-sponsored medical plan was going to cost that much money.
You have two gaps that you will need to address in retirement. The first gap is after retirement and before Medicare. The second gap will be the additional money you will need to come up with as your share of the cost to fund your Medicare benefits.
None of it is cheap. But help is available. I strongly urge you to consider the benefits offered by the Retiree Medical Trust. Either way, you will need insurance and certainly you will buy it. Going without it would be to risk everything you have worked for. With the RMT, you just end up with more money in your pocket.
We would love to share with you and your association exactly how this works. Give us a call and we can chat.
