Can You Afford to Retire Early Because of Obamacare?

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Studying the long-term effects of the Affordable Care Act, the Congressional Budget Office recently projected a drop in hours worked equivalent to having 2 million fewer full-time workers in the workplace in 2017. Several factors play into this forecast, but one major driver is the flexibility offered by available affordable health insurance. So how will the new law affect your ability to retire early?

You may be eligible for deeply discounted health insurance
Insurance premiums for older men and women are expected to drop by 19% and 32%, respectively, under the Affordable Care Act, according to a recent study. This will decrease the amount of out-of-pocket premium dollars this population will need to spend on health insurance, meaning they will need less money to cover health expenditures.

Furthermore, health insurance companies are no longer allowed to refuse coverage or increase premiums based on pre-existing conditions or the age of the enrollee. Before the ACA, many Americans needed the insurance benefits offered through their work -- and therefore stuck with a full-time job. But if health insurance is available at a lower cost, older Americans could choose to retire and purchase coverage through the exchanges.

Premium costs are expected to drop thanks to tax credits -- essentially discounts on monthly premiums. Enrollees can qualify for tax credits based on their family size and income, and this may allow them to work less or not at all. The ability to purchase affordable health insurance is not the only reason people may consider working less: Premium costs decrease as income decreases, so there is an incentive to work less and therefore to earn less. The regulations for the 48 contiguous states are:

  • $11,490 to $45,960 for individuals
  • $15,510 to $62,040 for a family of 2
  • $19,530 to $78,120 for a family of 3
  • $23,550 to $94,200 for a family of 4
  • $27,570 to $110,280 for a family of 5
  • $31,590 to $126,360 for a family of 6
  • $35,610 to $142,440 for a family of 7
  • $39,630 to $158,520 for a family of 8

Community rating restrictions require health insurance providers to offer policies to their costliest beneficiaries at no more than three times what they charge to their least-costly ones -- regardless of health status. As a result, older Americans will, on average, see a 13% drop in their premiums -- as opposed to a 75% spike in costs for the youngest group of insured Americans.

This drop in cost for older Americans may mean less of a need for employer-based insurance, less money needed in their 401(k) accounts, and, therefore, less time spent in the workforce.

For example, using the Covered California shop-and-compare tool, a couple in San Francisco, both age 55 and with a household income of $60,000, could find bronze coverage for $2 per month after premium tax credits. While not all prices are so low, this exemplifies just how affordable some plans can be.

Medicaid expansion may be your ticket
Medicaid is expanding in some states, and this expansion will cover a group of newly eligible individuals: people between 19 and 65 who have an income below 138% of the federal poverty level ($15,856 this year for a single person), meet citizenship requirements, are not incarcerated, and do not qualify for Medicare.

The expansion of Medicaid benefits is made possible through federal funding mandated by the ACA, and will result in a having higher number of Americans qualify for additional health-care benefits -- making early retirement possible for some. Beware, though, that Medicaid expansion has not been approved in all states. You can find information about your state here.

Some important care is now free
Marketplace insurance plans cover a set of free preventive health benefits that are not subject to a copayment or deductible. Certain tests and screenings have specific criteria based on health and age, and some may be more applicable than others, so don't worry about getting every screening just because it's free. There are some screenings that everyone should consider getting, and women have an additional set of benefits to take advantage of. While these free benefits are an exciting part of the Affordable Care Act, know that they are free only when performed by an in-network provider.


Read/Post Comments (27) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 16, 2014, at 9:53 AM, Rifleman3006 wrote:

    I'm certain there are more reasons than that. Our President is an imbecile.

  • Report this Comment On March 16, 2014, at 10:01 AM, sandyp23 wrote:

    I didn't even bother reading this article because the answer to the question posed in your title is a resounding, "NO!" I checked the plans offered though the Marketplace for my State, and the plans are absolute crap. Unaffordable with either high co-pays, deductibles & co-insurance, or a very high premium for the "best" plan with less crappy co-pays, deductibles & co-insurance. And I don't care about the government subsidies because the plans are terrible no matter what.

    If I retire early, I'm lucky enough that I can retain my insurance through my employer. It's still expensive but in the long run a far better plan that my doctors will actually accept.

  • Report this Comment On March 16, 2014, at 10:26 AM, jmgconsultants wrote:

    More spin from the fool who was bought off by Obama and his regime. Obamacare is killing jobs so that is why you are retired not on your own accord. Obamacare is the worst law ever passed in this countries history.

  • Report this Comment On March 16, 2014, at 10:42 AM, jkj wrote:

    Yes, and I do. It sure helped.

  • Report this Comment On March 16, 2014, at 12:27 PM, JohanStrauss wrote:

    Since the VA has $0 premiums and $0 deductible, Obamacare is the least of my concerns.

  • Report this Comment On March 16, 2014, at 12:42 PM, mewp12 wrote:

    I keep hearing this argument. You get subsides for your health care but without a job who is going to pay your rent? Buy your groceries? Put gas in you car? Pay your utilities?

  • Report this Comment On March 16, 2014, at 1:24 PM, HChuck65 wrote:

    What a joke this is. You're not getting deeply discounted health insurance. You're getting deeply SUBSIDIZED health insurance, which means someone else (aka the taxpayers of the United States, or the Fed, who is printing money hand over fist to fund the behemoth known as the federal government) is footing the bill.

    You're working less so that you can go on the dole, like every other welfare queen. This law is creating a huge disincentive to work.

  • Report this Comment On March 16, 2014, at 3:01 PM, thecarnivore123 wrote:

    What a dumb article. The Motley Fool used to be respected. Now it has been bought off by Obama as another mouthpiece.

  • Report this Comment On March 16, 2014, at 3:18 PM, greenergrass wrote:

    Thirteen years ago, as severance, I was able to resign from my employer but continue to carry their sponsored insurance plan. Having health insurance not tied to my job has afforded me a sense of freedom, and enabled a fantastic second career. Now everyone can enjoy this benefit as a result of the ACA. Now I am afforded the security that if my old company ever drops me, I can still get a policy even with my preexisting conditions.

    -thanks ObamaCare

  • Report this Comment On March 16, 2014, at 3:27 PM, blackfoot1979 wrote:

    Medicaid expansion is great if you live pay check to pay check and plan to leave nothing for your children and loved ones. Medicaid has estate recovery and has the power to claw back payments paid for you. Unfortunately, since this is also an adverse fact not included in the disclosure. Most saps who fall for it will never know their government and their President stole all they worked for and their parents worked for(assuming they inherited from prudent parents before they die). Why isn't the media talking about this...

  • Report this Comment On March 16, 2014, at 3:30 PM, blackfoot1979 wrote:

    The only person happy with Aca are paid media consultants or the sickest of us. How many average Americans have used the $5,000 deductible. If you haven't ACA hasn't done anything for you.

  • Report this Comment On March 16, 2014, at 3:56 PM, Paulas777 wrote:

    People are getting their hours of work cut in half, and now have an ADDITIONAL monthly bill to pay with less income. Is anyone taking that into consideration? How can you enjoy life with no money (to persue your dreams as they say) or pay your bills with an ADDITIONAL monthly payment to make with LESS money coming in? Sure, you have more time to spend with your family, but you can't afford to go anywhere. Why didn't Obama just concentrate on helping ONLY the ones who DIDN'T have health insurance and leave everybody else alone?

  • Report this Comment On March 16, 2014, at 4:23 PM, roger142 wrote:

    Too bad I live in Georgia, our politicians have always catered to the insurance and medical industry lobbyist, and right now they are about to vote on a law that will allow insurance companies to ignore the Affordable Care Act.

    I realize the ACA does nothing directly to address why health care cost have out paced inflation since 1970. But to ignore the fact that the cost of health care has gone up less annually over the past 3 years, than the previous 40 years is not helping consumers.

    The irony for me is I have a preexisiting condition that has been completely cured, but could not get insurance until January of this year. But now my state legislators are about to give the insurance companies the right to either drop me, or charge me more than I can afford.

  • Report this Comment On March 16, 2014, at 4:31 PM, TIGERVETTE wrote:

    We retired at age 59 and receive $30k per year in investment income to supplement our spending from our savings account. In the meantime the IRAs remain untouched. The $30k in income qualifies us for a subsidized plan of $69 per month with a $500 deductible. Before you poo-poo our subsidized plan, it's the exact same Blue Cross plan our company offered us for retirement for $1300 per month. We'll stick with this until Medicare kicks in. If you are 55+, research your options.

  • Report this Comment On March 16, 2014, at 5:14 PM, greenergrass wrote:

    Blackfoot, I am hard-pressed to understand why the government shouldn't recoup past Medicaid benefits from the estate. The inheritance should not benefit from Medicaid.

  • Report this Comment On March 16, 2014, at 5:33 PM, greenergrass wrote:

    Roger, it looks like Georgia is going against federal law to allow the insurance companies to reinstitute pre-existing conditions - I hope the overturn fails. Our health should not be governed by the profit motive of insurance companies.

  • Report this Comment On March 16, 2014, at 6:56 PM, ralf914 wrote:

    YES! AMA has nearly destroyed my retirement plans. Higher deductibles than my old work plan, but I cannot get an HSA with it. It is also three time more expensive. Leave it to government to really screw up a good idea.

  • Report this Comment On March 16, 2014, at 7:24 PM, Mentallect wrote:

    90% of those who hate ObamaCare know only 5% about it, and 4% of that came from Fox News...not a reliable source of information.

  • Report this Comment On March 16, 2014, at 8:31 PM, TerryFlowers wrote:

    HR 676 = Healthcare Equality

    The Affordable Care Ace (ACA) or Obamacare is not the solution to our nation's healthcare challenges. Neither the Republicans nor the Democrats seem to have any real answers. Healthcare costs have been spiraling out of control for over three decades and something has to be done before it gets to the point that very few of us will be able to afford medical care. ACA may have slowed the rise in healthcare costs but it continues to rise faster than the rest of the economy.

    The only real solution for our nation is to remove the profit from the bottom line. All too often it is the patient that suffers as profit becomes the priority.

    HR 676 is a single-payer, true universal healthcare plan. It would leave the medical providers as the owners and operators of their practices in the private sector as not-for-profit entities. It would eliminate the need for the for-profit healthcare insurance industry. The program would be paid for by increasing the Mediare tax to 4.5% (would be less than what most of us pay in insurance premiums now). Businesses would see their taxes rise as well (again would be less than what they pay out in employee healhtcare benefits currently).

    HR 676 wouild provide comprehensive medical care at no cost to the patient and would include medical, dental and vision. No co-pays, no deductibles, no out-of-pocket medical expenses. This would eliminate the bankruptcies and foreclosures that are the result of medical bills.

    HR 676, sometimes referred to as Improved and Expanded Medicare for All, would usher in true healthcare freedom, equality and justice. Research it for yourself. There are a number of excellent web sites that have a wealth of information. and and are some of my favorites.

  • Report this Comment On March 16, 2014, at 9:01 PM, emal2me wrote:

    I love ACA. Without it I'd have to keep working to have health insurance because my wife has a pre existing condition (cancer).

    God bless Obama.

  • Report this Comment On March 16, 2014, at 9:28 PM, jojo13 wrote:

    Obamacare is a field day of profits for insurance companies. I cost the end user a bundle with little or no expense to the insurance company. A retired couple under 65 without a subsidy could easily pay over $25000 without any assistance other than basic check ups.... Great profits!!!! It should be half the costs charged and much lower deductables. Affordable does not mean if you make $63000 in retirement funds you should give $25000 back that is not AFFORDABLE! Retire at 62 and they rob you of $75000 before you get medicare.... BIG BUCKS for insurance companies...

  • Report this Comment On March 16, 2014, at 9:45 PM, nothingbuttheat wrote:

    @Tigervette, I am glad you could find an insurance plan for $69 with subsidies. In my state for a 60 year old with 30k income was a bronze plan with $5250 deductible, and $6250 out of pocket expanse for $90 with subsidies. This plan is not affordable for me because it does not include vision and dental and the 40% co-pay is out of my price range. So no ACA will not let me retire with plans like these out there.

  • Report this Comment On March 16, 2014, at 10:12 PM, EdHamox wrote:

    If people don't have to work to provide the needs of their daily lives, some will drop out and become permanent charges on the pubic purse, deadbeats.

    The father of modern liberalism, FDR, never disputed this. As he warned in 1935, welfare is "a narcotic, a subtle destroyer of the human spirit."

  • Report this Comment On March 16, 2014, at 11:40 PM, novo71 wrote:

    This whole article is based on the idea that somebody is willing to accept a subsidy for healthcare, what is know to working men and women as WELFARE.

    No person with a shred of dignity would ever steal from the working taxpayers of this country in order to get subsidized healthcare. That is a program reserved for leeching thieves.

  • Report this Comment On March 17, 2014, at 10:29 AM, greenergrass wrote:

    Two thumbs up for TerryFlowers proposal for universal healthcare. Today's news indicates that as many as one third of the uninsured Americans say they are still planning to take their chances and remain without coverage. We need to take care of these people since they shirk their responsibility to take care of themselves. It would be interesting to know what the priorities are of those that "can't afford" health insurance. My bet is their cell phone and cable TV plans add up to more than their health insurance bill.

  • Report this Comment On March 17, 2014, at 10:43 AM, sabebrush6 wrote:

    Weasel wording. Because of the high costs of Obamacare, may people that had a few extra bucks & were paying down their mortgages and other bills so they could retire comfortably -- -- -- now cannot.

    Obamacare costs are outrageous. but then, that was the object of it. Charge you a lot to support the bums & those who make too many bad choices in life.

    Like your Obamacare - it sure likes your wallet.

  • Report this Comment On March 17, 2014, at 11:55 AM, greenergrass wrote:

    Sabebrush, you don't like universal healthcare or ObamaCare. What is your solution to skyrocketing medical costs and the tens of millions that have insufficient plans for the continued health of themselves or their family?

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