If healthcare in America were not so exorbitantly priced, more individuals could retire earlier and enjoy more fulfilling, joyous lives. We are among the few nations where affordable healthcare is linked to employment, making it significantly more challenging to attain financial independence.
Considering the steep expense of coverage, before opting for an early retirement by choice, attempt to negotiate a severance package and utilize your last year at work to get into peak physical condition. View it as a way to invest in your future health returns. The fitter and healthier you are, the less you’ll need to depend on expensive medical services. Furthermore, you can prolong your financial freedom longer.
The typical expense for a family health insurance plan is currently approximately $27,000.
## My Choice to Voluntarily Retire Early While Accounting for Healthcare Costs
When I chose to retire in 2012, one of my primary worries was how to manage healthcare expenses. For 13 years, my employers had covered a portion of my premiums via a group plan. Instead of spending $850 monthly for coverage, I was only contributing about $375 as I neared the end.
Thus, when I left my job, after my six months of fully subsidized healthcare ended as part of my severance package, I encountered an $850 monthly bill as a healthy 34-year-old who seldom used the system. It seemed exorbitant, and I needed a strategy.
At that moment, I asked my 31-year-old wife not to hastily abandon her career alongside me. Rather, I motivated her to embrace equal responsibility and continue working for another three years to ensure that my seemingly impulsive choice wouldn’t endanger our financial stability. Thankfully, she concurred.
Throughout that period, she kept her employer-sponsored healthcare plan, which also included me. Many of her coworkers already had family coverage, so joining her plan was entirely standard.
## Our Healthcare Costs Are High
In 2015, at age 34, we finally began the process of orchestrating her own layoff as a high performer to obtain a severance package. We understood that we would lose our healthcare subsidy and have to pay approximately **$1,680 a month**, but this was a deliberate decision we made in exchange for freedom. It felt inappropriate to adjust our income just to qualify for government healthcare subsidies when we were capable of paying full price.
Today, for our family of four, we expend **$2,633.59 a month** on unsubsidized premiums for a Silver plan, not even reaching Gold or Platinum tier. $2,633.59 does not strike me as affordable, despite the government’s designation of it as the “Affordable Care Act.” The system operates such that individuals earning more than 400% of the Federal Poverty Level subsidize those who do not.
Essentially, we maintain a high deductible health insurance plan. I’m hopeful that my new investment in value stock UnitedHealthcare will assist us in covering our premiums in the future.
## Many Millionaire Early Retirees Receive Subsidies
The truth is, many early retirees benefit from healthcare subsidies—even those who are millionaires or multi-millionaires. Some even boast about it online. That has always bothered me, as I question whether the government’s aim was to subsidize the top 10% of wealth holders. Or perhaps it was.
For instance, consider you possess a $2 million portfolio generating $80,000 annually in income. As dual unemployed parents with two kids, your household income is about 250% of the Federal Poverty Level (FPL), qualifying you for healthcare subsidies. Remember, subsidies can extend all the way up to 400% of the FPL.
This implies that a household with a $5 million growth-stock-heavy portfolio earning only a 1.3% dividend yield—around $65,000 annually—would be at about 210% of the FPL and qualify for a **50%+ discount** on healthcare premiums. Quite remarkable!
## The Congressional Debate on Extending Healthcare Subsidies
Congress is presently deliberating whether to **extend the enhanced healthcare subsidies** for households earning above 400% of the Federal Poverty Level. Democrats aim to make the temporary expansion permanent, while Republicans prefer reverting to the initial regulations.
The American Rescue Plan Act of 2021, under Democratic leadership, temporarily boosted the value of the premium tax credits and broadened eligibility beyond 400% of the FPL. These “enhanced” subsidies capped a household’s premium costs at 8.5% of their income.
Subsequently, in 2022, the Inflation Reduction Act, also under Democrats, prolonged those enhanced subsidies through 2025. They are now scheduled to end at the conclusion of 2025 under the Trump administration.
According to the Congressional Budget Office, continuing these enhanced subsidies would incur a cost of around $350 billion over ten years, or $35 billion annually. Not ideal considering the size of the existing budget.