Avoiding Common Healthcare Planning Mistakes (Ft. Cole Craven)

Retiring before 65 comes with a major challenge: finding the right healthcare coverage. Many early retirees underestimate healthcare costs and make common mistakes that lead to financial stress. In this episode, Josh and Austin sit down with Cole Craven of Move Health to explore the best healthcare options before Medicare, including ACA plans, COBRA, and HSAs. They break down how to avoid costly healthcare planning mistakes and why staying proactive is key. Plus, in an AI-driven world, they discuss why working with a financial advisor can help you make smarter healthcare decisions. Don't let healthcare mistakes derail your retirement!

For the full show notes, links, and transcript, visit thewealthmindsetshow.com/s2e6

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Chapters

• 1:09 Introduction of Move Health's Cole Craven
• 8:44 Pre-65 Health Insurance Options
• 12:02 COBRA Coverage & Benefits
• 15:20 The Affordable Care Act Marketplace
• 25:04 Healthcare Option at 65: Medicare
• 35:53 Why Most Retirees Underestimate Healthcare Expenses
• 38:58 Should Retirees Be Adjusting or Setting It & Forgetting It?
• 41:18 Should You Work with A Financial Advisor When Healthcare Planning?
• 45:19 A Success Story from Cole Craven

Transcript

You are listening to The Wealth Mindset Show, where Hixon Zuercher Capital Management's team of finance professionals, portfolio managers, and a life coach come together to tackle complex topics in finance and retirement planning, so you don't have to.

From investment strategies and wealth management to tax planning, retirement income, and aligning your money with your values and purpose, The Wealth Mindset Show offers the tools to thrive.

Austin Wilson:

All right. Hey, hey, hey. Welcome to The Wealth Mindset Show, where our Hixon Zuercher team will have conversations on managing wealth, navigating retirement, and making smart decisions for a secure, meaningful future. I'm Austin Wilson, Director of Investments at Hixon Zuercher Capital Management.

Josh Robb:

And I'm Josh Robb, Director of Wealth Management at Hixon Zuercher Capital Management. And today we are joined by a special guest, Cole Craven, and he is the co-founder of Move Health. And he's going to talk today about a couple topics that pertain to people as their exiting the workforce and looking at private insurance before and into Medicare. So we're going to talk about that, but really just what are some mistakes you can avoid as you're making those transitions in the later stages of your working career.

[1:09] - Introduction of Move Health's Cole Craven

Josh Robb:

Cole, can you give us a little bit about yourself and what got you into this industry?

Cole Craven:

Yeah. Yeah, yeah. I, like most people, grew up wanting to be an expert in health insurance and Medicare.

Josh Robb:

I mean, that's... Right next to fireman, I think-

Austin Wilson:

Yep, that's nice.

Josh Robb:

... that's probably one of the top things.

Cole Craven:

Fireman, police officer, health insurance expert. No. So, I stumbled into it through a mutual connection and really found a passion for helping people to improve what I call healthcare literacy. So people will understand how health insurance works, how Medicare works. I think the big piece of the puzzle is that most folks don't understand what their current health insurance looks like for them. Even if it's through an employer, you just sign the paperwork and you go, "Here's open enrollment. Put my family on this plan. We'll just deal with it."

And then when something's not covered or you don't have co-pays anymore because you're on whatever type of plan, people say, "My plan stinks."

It's like, well, the plan doesn't stink. It's a health insurance contract. You just need to know how to understand it so that you know how to use it and feel empowered in how to use it and what it will do and what it won't do and all of those things. And most of the US doesn't understand that process right now. It's confusing and I think the only thing that's constant in health insurance and/or Medicare is change, right?

Josh Robb:

That's right. And I think too on top of that, it's one of those things where you only pay attention to it at or when you need it, and at that point sometimes it's too late because you may have been able to better optimize it.

Cole Craven:

That's exactly right. I think there's a couple key things and mistakes that we will work to avoid, and also some preconceptions that we'll try to bust in the next half hour or so as we talk through what health insurance looks like. We're specifically going to dive in... I'd like to specifically dive in on the pre-65 health insurance, what I would call an early retiree. There's 40 million people between 55 and 64. And then we'll also touch on the Medicare side of the equation as well.

But we started Move Health... I've been in the health insurance and Medicare space for a long time. My two other co-founders have as well. We've got a team of 15 now that helps people navigate health insurance. Make health coverage simple and clear is our mission. But we started Move Health with a very specific person in mind. My in-laws. They were 59 years old. We had just given them their first grandchild, our now 3-year-old, who's awesome. We had just given them their first grandchild. My mother-in-law had always joked and said, "When you all have my first grandchild, I'm quitting my job."

And we called her bluff and had our first kiddo and she quit her job. We're like, "Okay."

Josh Robb:

Okay.

Austin Wilson:

"You were serious."

Josh Robb:

She was ready to go.

Cole Craven:

She retired from dental hygiene. She had been doing that for thirty-some odd years. And really enjoyed it, but she said, "I want to be a full-time grandma."

So we said, "Twist our arm. That's great."

My father-in-law, fast follow, was looking at how much fun that Nana and Porter were having together and said, "I need to retire."

Josh Robb:

You don't want to be left out from that.

Austin Wilson:

That's right.

Cole Craven:

You don't want to be left out from that. And I think that he was concerned just saying like, "I'm missing out on the life that I have wanted to create and to enjoy, which is spending more time with my family, etc."

And so he went, sat down with his financial advisor, and said, "Hey, I want to retire."

And the financial advisor said, "Okay, great."

All the things that a good financial advisor does. "Hey, kids are through college. House is paid off. You're diversified. Your glide path on your money looks good. You've got enough. You're 60 years old. You can afford to retire. You're in a good spot. Last thing that's kind of on my checklist here is what are you doing for health insurance?"

And I think that's a step further than most financial planners or financial advisors go right now, is just asking about it. But he brought it up and then didn't have a solution to the problem. So he said, "What's it look like for you?" And the financial planner said or financial advisor said, "Hey, I'm going to plug in some numbers into my planning software." And the planning software told them to plan for $30,000 a year in health insurance costs.

And my father-in-law famously said, and I always joke that I'm going to get it tattooed somewhere on me, but he said, "Dan, I don't hate my job that much. I'll keep working." See, right?

Austin Wilson:

Yeah.

Josh Robb:

Yeah.

Cole Craven:

And so there are tons of people today that are sitting across a desk from a financial planner or a Zoom call, and the advisor's not educated on the health insurance side of the equation. The client's not educated on the health insurance side of the equation. And the financial advisor's trusting their planning software, which is giving them maybe some prohibitively expensive cost estimates, and the client's taking those at face value, trusting their advisor. And here's the tweetable moment of the podcast is like, there's a transfer of trust that's taking place between a financial advisor and their client and a planning software that's rooted in data that's wrong, and it's costing people time, right?

Josh Robb:

Yeah.

Austin Wilson:

Oh yeah.

Cole Craven:

If my father-in-law hadn't known me, that I was in health insurance, he likely would still be working today. And there are people that are in that boat right now that are saying, "I can't retire before the age of 65 when I get Medicare because health insurance, I either can't get it because I got a pre-existing condition or-"

Josh Robb:

Or, "I can't afford it."

Cole Craven:

"I can't afford it." Exactly right. And there's way too-

Josh Robb:

And I'll tell you, from an advisor standpoint, all that software is built on conservative assumptions, because the last thing an advisor wants to do is say, "Hey, you're good to go." And their assumptions were too optimistic.

Cole Craven:

Sure.

Josh Robb:

The problem is when you don't understand those assumptions to know when and if they are even close to remotely accurate. So healthcare costs, I know for a lot of retirement software says, "Here's the industry average." Well, if you walk down the street, average for health is a pretty wide range of things for here, people in the United States. And so yeah, right, sometimes I look at those numbers and say, "Is that really what the average person is spending? That's a big number. Yeah, $30,000. What are they buying?"

Cole Craven:

What's going…

Josh Robb:

Is it new leg every year? What's happening?

Cole Craven:

And who's got their thumb on the scale of weighting that average and all of those things. And I think that's something that is a gating factor in and of itself. But then you think about how we as Americans are conditioned to think about health insurance and healthcare planning and retirement. What's the standard retirement age? Sixty-five years old. Why?

Josh Robb:

Medicare.

Cole Craven:

Because you get health insurance.

Austin Wilson:

That's right. Yeah.

Cole Craven:

And so we would have our heads buried in the sand if we didn't think that individuals that are in that 55 to 64 window aren't sitting at their desk on a Friday and saying, "Man, I'd love to quit my job if I could just figure out health insurance." And there's a ton of people-

Josh Robb:

And figure it out is the thing. If you go to the marketplace to try to get some quotes and you're just the average person, it's so confusing and complex. You're going to give up before you get the answer.

Cole Craven:

Yeah. And a lot of it is because, like I talked about, 50% of the United States gets health insurance coverage through a job.

Josh Robb:

Mm-hmm.

Austin Wilson:

Right.

Cole Craven:

They sign on the dotted line. This is our health plan for the year. Okay, great. Maybe you have two or three options if you're at a bigger employer, but most of the time you've got one or two options. Here's the options, it's a high deductible plan or a co-pay plan, and here's what it looks like for you all. Go ahead and enroll.

And so when you put all of these numbers in front of people and say, "Here's a deductible. Here's a maximum out of pocket. Here's a co-pay." Does a deductible link to a maximum out of pocket? Does a co-pay go into the maximum out of pocket? Does it apply to the deductible? How does all of this work?

And so, analysis paralysis is a very real thing in health insurance, where someone could just try to DIY it and they go, "I can't figure that out." And then they go to sit down with a financial advisor or what have you. And that's what we would set out to solve at Move Health is that exact problem.

[8:44] - Pre-65 & Early Retiree Health Insurance Options

Cole Craven:

And so, maybe we can dive into the pre-65 part of the conversation. You all are talking about that with clients, and I know you guys are serving a lot of that 55 to 64 window, so maybe you all can give me, if I can turn the tables, what does that look like for you all when a client's talking to you about, "Hey, I want to retire at 59." What things are in consideration at that point?

Josh Robb:

And so for us and for a lot of people, like you said, it's that transition from, "I have this health plan and I'm comfortable or at least familiar with what it is because I've been working there for 30 years or whatever. I know what that costs me." I would say half the people we talk with don't fully understand the full cost because it's subsidized. Your employer may be covering 80% of your premium costs. So you're like, "Oh, great. You know, this thing's only cost me $100 a month or whatever to be insured. That's probably what I'll pay when I go get my next plan."

Austin Wilson:

Probably wrong.

Josh Robb:

And it's a little eye-opening sometimes when they see that. Or they'll say, "Well, I'll just stay on this because I have COBRA." Which COBRA is that carrying that insurance for a set period of time afterwards. Well, you pay the full cost or sometimes the full cost plus a little bit of administrative addition to it.

Cole Craven:

Plus 2%. Yep, 102% of the...

Josh Robb:

And that adds up. And so when they see sometimes those numbers, that's the shell shock. So for us, sometimes it's communicating with them, "Okay," like you said, "break what you've been thinking because going forward, it's going to look a little different."

And the other thing we deal with, especially that 59 to 64 range, or even before, but before 65, there's an income component to all this, because if you're on the marketplace trying to get a plan, your premium is based on your income. And too little, too much, those things affect how much and what you pay.

And so for some clients, they almost are putting themselves on a budget when they want to stick to a premium, and they have to understand that trade-off of paying lower premiums, but that means you can't do maybe the extra stuff you may wanted to do early in retirement, because it's going to kick your income to a different level.

Austin Wilson:

I also feel like it's super interesting that if you retire early, a lot of times you can get a continued benefit of some subsidized healthcare for you as the employee, but your spouse probably was getting a better rate while you were working there, but as soon as you retire, their rate may be the one that goes way up. And that's a huge consideration going forward because it's not just the subsidization of your premium that's probably been happening, but it could have been your family's as well. So if you have other dependents, a spouse or whatever are going to be continuing, yours may actually still be semi-reasonable. And a lot of our clients have that as an option through some of the larger employers in the area that their premiums are not inflated, skyrocketing when they retire, but it's their spouse that usually gets... They might look for something else for them.

So Cole, let's talk about some of the options for those early retirees. What's out there, what's available, and what's that look like?

Cole Craven:

Yeah, so the pre-65 retiree, we're going to talk about their health insurance options. So no particular order here, and I'm going to double click on a couple of them as we go through.

[12:02] - COBRA Coverage & Benefits

But the first one is we've kind of danced around it is COBRA, right? This was a law that was passed in the eighties that says you can continue your benefits through your employer. In most cases, that's 18 months you can carry that forward. So if you've got someone who's retiring at 59, they can take COBRA for 18 months. The benefit of COBRA, you're familiar with the plan, you know how it works, you know the cost associated with using it, but like we talked about, you now pay the fully unsubsidized premium of that. And so you're paying 102% of what the employer paid, plus your share that you were paying through payroll and those things. And so that's a critical one to understand.

COBRA can be a good fit for someone who's retiring at the end of the year, maybe they're in the third or fourth quarter, they've already hit a deductible, they may be a maximum out of pocket, what have you. We would tell that person, "Hey, it's an increased premium, but stay where you're at because we don't want to reset a deductible for no reason."

Josh Robb:

That's where we see it used the most is that kind of tail end, the last half of the year. "Hey, if you already had some medical things and you hit those deductibles or out of pocket, keep it. And if you have anything, now's the time to do it. Schedule it. Get it in."

Cole Craven:

That's exactly right. Yeah, use it while you can and while you've got that coverage in place for COBRA. The downside is that it's expensive. It's likely the most expensive option that's available. And I think the thing is most folks will believe that COBRA is the best option moving forward because they're familiar with it. And we fear what we don't know. And so they say, "Well, I'm going to take COBRA." And then they see the sticker shock of what COBRA costs are.

And COBRA is not insurance in and of itself. It's a law. So it's just your employer plan without the employer helping in the costs. And so you look at... I think the most exorbitant COBRA premium that we have seen at Move Health was $4,700 for a family.

Josh Robb:

Oh, man.

Cole Craven:

It's a great health plan.

Austin Wilson:

I'll bet.

Cole Craven:

It was not $60,000 a year good. And so it can be expensive. And so those are the things to look at with COBRA. It's a good stop gap. It can work if you're very high income, you're not going to qualify for subsidies on the marketplace, which we'll talk about in a moment, or if you've already kind of hit your deductible maximum out of pocket for the year. So that's COBRA.

Josh Robb:

And would you say the other one is if they're transitioning between maybe two different careers. There's no health requirement... I mean, they're already in the plan, so they know it's just going to be a short stop gap between two different things. That way they don't have to pre-qualify for something else just for a couple of months before switching to a new employer plan.

Cole Craven:

Yeah, spot on. That's an option you could look at when you've got... Maybe you're switching careers or switching jobs and you've got that 90 day benefit run-out window until your new job, what have you. Those are getting more popular, the 90 day run-outs. And so, make certain that you understand what that is, and if you elect COBRA, do that.

I think one thing that's important as we transition into the Affordable Care Act marketplace conversation here for just a moment is if you are mid-year, beginning of the year, February, March, whatever, you're retiring, if you elect COBRA first, you no longer have a special enrollment period to get on the marketplace throughout the year. And so if you elect COBRA in February, you are on it through the rest of the year. And so that's an important thing to note. When you are electing COBRA, make sure you've exhausted all other options that you've looked at before you take it. Just understand what your options are.

Josh Robb:

Good to know.

[15:20] - The Affordable Care Act Marketplace

Cole Craven:

Kind of leaning into the next conversation piece is the Affordable Care Act marketplace. So the Affordable Care Act, written into law in 2010. The marketplace started in 2014. And what the Affordable Care Act said is that for carriers in insurance and covered individuals that are participating in the marketplace, it's guaranteed issue health insurance. You can't be denied because of pre-existing conditions. You can't be denied because of your height, weight, prescription drugs you take, things along those lines.

Prior to 2014, you could be. And so there was a problem where you'd have someone who'd come to us that was 61 years old and say, "Hey Cole, I want to retire and I need health insurance."

And we go, "Well, I'm really sorry. The whole reason you want to retire is because you had a heart attack last year. You had a reanalysis of what life looked like for you. That actually rules you out from health insurance underwriting. You're not going to be able to get coverage. And you can only keep COBRA for 18 months, and so it's not going to get you all the way to Medicare."

So people were forced with these really hard decisions of, "I guess I have to keep working," prior to the Affordable Care Act.

So the Affordable Care Act said, "Hey, everybody can get health insurance. It doesn't matter, height, weight, prescription drugs, what have you, pre-existing conditions, you can be undergoing current cancer treatment and get health insurance."

Now, effectively what that did is any carriers that are participating in the marketplace, it wiped out their actuarial department, said, "Hey-"

Josh Robb:

That pool changed dramatically.

Austin Wilson:

Oh, yeah.

Cole Craven:

Yeah, you can't underwrite anymore. And so guess what an actuary does? They say, "Hey guys, everything's on fire. Everyone's in the highest risk pool now." And so, premiums overnight from December 31st 2013 to January 1st 2014 went up 300%.

The Obama administration at the time, who rolled out the Affordable Care Act, knew that this would happen. And so they created these things for the marketplace specifically that if you enroll into the marketplace, you don't have coverage available to you through a job, Medicare or Medicaid, you can get these things called advanced premium tax credits. Some people refer to them as subsidies. You can think of it as a discount on your health insurance based upon your income.

And so, the way that these advanced premium tax credits work is a factor of your modified adjusted gross income, which acts a lot like AGI or adjusted gross income, so if you hear us say MAGI or AGI, it's what we're referencing. The important thing to note is that it operates like a spectrum. The higher that your modified adjusted gross income goes and the higher your income goes, the lower that that tax credit becomes and the more of that premium on the marketplace you are responsible for. Vice versa, if you can drive your modified adjusted gross income down, you have some wiggle room with where dollars are coming from distribution-wise, if you have a cash bubble, whatever, you can use that to make your forward-looking estimate for income lower. And you take a bunch of those advanced premium tax credits.

And these are federally earmarked dollars. It's not just for low income individuals. I think in 2025, a couple in Ohio, for example, can make upwards of $220,000 a year and still leverage an advanced premium tax credit on the marketplace. It's small, right? It might be 30 or 40 bucks a month, but as you drive MAGI down, you get someone who's maybe $85,000 in MAGI or $75,000, 60,000, you get to a point where these advanced premium tax credits are worth upwards of $20,000 a year in reduction in premium costs.

And so the federal government earmarked these dollars because they said, "Hey, everybody can get health insurance now. We need to figure out how to make it affordable." And so the Affordable Care Act, that was a big piece of that puzzle. And so, there's an income management piece, Josh, Austin, that you all know about, and so maybe you can speak to that, and that'll be helpful.

Josh Robb:

And correct me if I'm wrong, but because Medicaid exists, there's a low end that you do need to show some income, right? Or else they're going to say, "You need to go to a different platform."

So you're right, there is kind of this threshold of I need to show some income, but the more I show, the less credits I'm going to get. So you kind of play this game of do I pull money out of IRAs? Do I pull money out of taxable brokerage accounts with capital gains or losses? Do I use losses to reduce my income? All that fun stuff. But yeah, you're right, it becomes a kind of threshold where you kind of say, "I know I'm going to pay X amount on premiums. I'm comfortable with that. I can then show up to X amount of income to keep those premiums where they're at."

Cole Craven:

Yeah. I think that's right. So just to speak to your first point there, we have multimillionaires, business owners, et cetera, that come to us and they say, "My financial advisor says I can show $0 in income."

It's like, well, we actually have to get ourselves above a certain threshold as well because we don't... Medicaid state-based lower income health insurance is an option for some people, but for someone who has a couple million bucks in the bank, it's not.

Josh Robb:

Yeah, because they're good.

Cole Craven:

When you get to that point, they're going to look at assets and things along those lines. But for the marketplace, they're only looking at what your MAGI is for that year. They're not looking at what your assets are or anything along those lines. And so my in-laws, for example, they leverage this a little bit differently. They took a large cash distribution in the year my father-in-law was still working. They used that to supplement income over the next five years till they get to Medicare. And that keeps their MAGI really low. And so they went from their... Full circle moment here, right? Call back. They went from their estimate of $30,000 in their financial advisor's office, I think they spend $112 a month in premiums right now.

Austin Wilson:

It's a big difference.

Cole Craven:

For coverage in the marketplace.

Austin Wilson:

Yeah, that's awesome.

Cole Craven:

They're leveraging the advanced premium tax credit. They worked with a financial to help keep their MAGI low, and it makes a huge difference in cashflow planning, et cetera.

It also goes back to what we've talked about to this point. Somebody comes in mid-year to the Hixon Zuercher office and says, "Hey, I want to buy a boat. I need some money out of retirement accounts." Okay? If you take $50,000 out and it's taxable money, it's going to... It might not right away, but at the end of the year when those tax credits reconcile, you're going to have some liability because you overshot the estimated income that you put in your application.

So there's certainly a very unique intersection between health and wealth when it comes to health insurance when we're talking about the marketplace.

Josh Robb:

Yeah. Because you're right, they're all tax credits. You're getting an advance on a tax credit monthly for your premium. And so you're right, at the end of the year they write that up, they reconcile, make sure that it was the right amount that was given to you. So yeah, we've had those situations where clients says, "Well, what's the big deal? I already told them my income."

I said, "Well, if you told them the wrong number, they'll make it right on your tax return at the end of the year."

Cole Craven:

Uncle Sam will always get his, right?

Josh Robb:

Yes.

Cole Craven:

So they reconcile via a form called a 1095-A on the marketplace, is that tax form. And so some people, depending on the time of year, might be getting those right now and looking at them and filing those.

I think the important thing to note about early retirement, early retirees before 65, in the marketplace specifically, is you can have a pre-existing condition and get health insurance coverage.

Josh Robb:

Yes.

Cole Craven:

Many folks do not understand that. The Affordable Care Act is over 10 years old at this point, but many folks don't understand, "Hey, you can have a pre-existing condition. You can take those prescription medications, et cetera. You can get health insurance." It doesn't have to be a gating factor to retirement.

So that's the big change for the Affordable Care Act and what it did for early retirees. There are other options that are what we would consider off marketplace for the early retirees as well, and I'll touch on these really quickly.

There's some that are growing in popularity, which is like a healthcare sharing ministry. Alternative to insurance, not insurance. It's essentially members of a group that are pooling dollars. Typically, these are faith-based organizations. My only encouragement if someone is vetting those is to understand how old is the faith-based sharing ministry? What's the stability? What does it look like? What are reviews on it? Make certain you fully understand it. Very, very niche product. Not a fit for everybody.

And then there's off marketplace, which there are still traditionally underwritten health insurance plans that are available. And these would be a fit for people that are high income earners that are also healthy. So you have healthy people that are high income earners. They're not going to get much if any of the advanced premium tax credit on the marketplace. So they'd say, "I can pass underwriting." And because you can underwrite with those plans, they can reduce the rates because they control the risk in that.

So there are options out there for pre-65 retirees. I think if someone is sitting at their desk or on their way to work listening to this and they're saying, "I'd love to quit my job but I don't know what to do for health insurance." There are a lot of ways to figure that process out and it should not... There are a lot of really good reasons to not retire. Health insurance is not one of them. There's way too many ways to figure that specific portion out pre-65.

Austin Wilson:

Yeah, that makes a lot of sense.

Josh Robb:

Have you ever thought about how your financial choices reflect what truly matters to you? At Hixon Zuercher Capital Management, we believe that integrating your values and dreams with your financial future is key to achieving peace of mind and confidence. When you engage in deep conversations with us, you'll start to see how your money can support the things that matter most in your life. Your financial plan is more than just numbers. It's a personalized blueprint that evolves with you. You'll have a dedicated team of professionals tailoring to your unique needs, all focused on crafting an investment portfolio designed to help you achieve your specific goals.

Plus our on-staff retirement life coach offers guidance to empower you towards a fulfilling retirement that goes beyond just financial security. Ready to transform your relationship with money? Join us at hzcapital.com and let's embark on this journey together. Now back to the show.

[25:04] - Healthcare Option at 65: Medicare

Austin Wilson:

All right, Cole, so we made it through to 64, but we turn 65 and then what happens? We get other options.

Cole Craven:

Yeah, you get other options at 65.

Josh Robb:

You get one option.

Austin Wilson:

Yeah, you get one option.

Cole Craven:

There's options within the option.

Austin Wilson:

Yeah, yeah, yeah.

Cole Craven:

But yes, you get one option. It's Medicare. It's important to know that Medicare is what happens when you turn 65. And we've talked about Medicaid. Those can sometimes work together, but Medicaid and Medicare are two very separate things. Medicaid is state-based, low-income typically health insurance. Medicare is for those that are over the age of 65, the more seasoned individuals in our midst as well as those that may have a disability. So 65, you get Medicare. Remember we talked about you base retirement off of when you get health insurance, and that's 65 and Medicare.

And so when you get to Medicare, you have a couple important decisions to make. And I think it's important as we think about healthcare mistakes to avoid. This is one of them. You want to make certain that you're making an informed decision when you hit Medicare eligibility.

A couple of things. Do you need to enroll into Medicare when you turn 65? Do you need to? Well, are you still working? Do you have an employer plan that is considered creditable coverage according to Medicare? There are specific rules and regulations around that of how many employees does the plan have on it beyond just that of is it considered creditable coverage per Medicare? And if it's not, you can start accruing penalties if you don't enroll into Medicare at the right time.

Are you drawing social security before 65? If you do that, guess what? You get Medicare automatically. You don't get a choice. You get on it at 65. And so, if you're deferring Medicare, make certain you understand and talk with someone who can help you to understand, do you need to take Medicare Part A? Do you need to take Part B? I mean, we could do a whole week-long session on Medicare alone. But at 65, there are decisions to be made whether you are continuing to work or not.

The other one that we see often is, "Hey, I'm 65, or I'm turning 65. I want to retire, but my spouse is 62. Can we bridge that gap? What does that look like for my younger spouse who's 62? What about for me?"

So when you hit the Medicare eligibility phase, don't be nervous about it. I think the other big kicker is whatever you receive through the mail that says, "Hey, enroll into this plan," just throw it away. Go talk to someone who's an expert in the space that's going to give you good objective feedback. Because we see all the quarterbacks online that are like literal quarterbacks that are telling you to enroll.

Josh Robb:

Why are they always a spokesperson? I don't know.

Cole Craven:

Yeah, I don't know. But I can tell you what, those quarterbacks are not on the plans that they are suggesting.

And so, there are two real options when you hit Medicare that you need to look at. And it's really... The way that Medicare works, you have original Medicare Parts A and B. Parts A... Part A, excuse me, typically free. $0 usually. This is the hospital portion. It's going to cover the-

Josh Robb:

We say free. You paid in it your whole working career.

Cole Craven:

Correct. It's free for you now.

Josh Robb:

There's no premiums. Yeah, no premiums going forward.

Cole Craven:

You've paid into that, and there there's parts of Part A that you are still responsible for, the Part A deductible, et cetera, and there's unique rules and things around those. But there's Part A. It's typically no cost once you turn 65.

Josh Robb:

And that's hospital coverage, those type of things.

Cole Craven:

That's correct, yeah. So I think the way that I've heard it explained before by some of our team members is it's the hospital bed that you're laying in. It's the jello that you're eating and it's the nurse that brought it to you.

Josh Robb:

There you go.

Cole Craven:

And so that's Part A. Part B is the medical portion, so this is going to be doctor's office visits, et cetera. Part B is also the part that you pay for. In 2025, the standard Part B premium is $185. So you pay that monthly when you become Medicare eligible and elect Part B. Depending on, like we talked about, your job-based coverage, et cetera, most people have to elect Part B at 65. So that's that piece.

Part D, Part D is drugs. And then Part C is Medicare Advantage.

Josh Robb:

Which is the only one that lines up and is easy to remember.

Cole Craven:

Exactly right. Part D for drugs is the only one that makes sense. But the original Medicare conversation, Part A and Part B, leaves a gap. So in the Part B side of things, that's 80-20 insurance, meaning they cover 80%, you're responsible for 20%. Furthermore, that 20% is uncapped. So that 20% could be referred to as a gap. And so there are plans that are out there called Medigap plans or Medicare Supplements. And so you have a choice. When you hit Medicare eligibility, you can say, "I'm going to take a Medicare Supplement and prescription drug coverage and Part D, a standalone Part D plan and a Medicare Supplement." Most times the most comprehensive right now is a Medicare Supplement Plan G. I won't get into the specifics of it, but you have that choice.

You also have the option of taking Medicare Advantage. So this is different than a Medicare Supplement. And with Medicare Supplements, you keep Part A, Part B, you have your own standalone Part D coverage, and Medicare is an open network. So if the doctor accepts Medicare, you can go see them. You want to go to Cleveland Clinic, you can go there. You want to go to Mayo Clinic, you want to go to Cancer Centers of America, they take Medicare, you can go, your Medicare Supplement is going to pick it up, et cetera.

Medicare Advantage is the other side of the house, where there's typically no premium for a Medicare Advantage plan, whereas a Medicare Supplement, you pay a monthly premium for. With Medicare Advantage, you still have to pay your Part B premium, but there's typically no premium for the plan itself. This might be a variety of different carriers, and these are usually the ones that you see TV commercials for, because they'll say, "Hey, you can use a flex card that we give you for enrolling into this plan for your utilities, or you can use it for groceries or you can use it for travel or you can use it for what have you." It might include dental and vision benefits within it, all wrapped into one. And so it's this really cool package that they put all together for you.

What you give away when that happens, you're no longer administrating your own Medicare. And so that's an important thing to note is that when you take a Medicare Advantage plan, the carrier that you chose to enroll with now administrates your Medicare. So you still have original Medicare, but the carrier that you choose is the one that's telling you, "Hey, you can go see that doctor. You can't see that one. You can get that service. You can't get that one. Before you can get that service, you need to do steps one, two, and three before we will pay for that service."

And so Medicare Advantage you can always go to, you can always get a Medicare Advantage plan. Medicare Supplement, what we've talked about, which open network, limits out-of-pocket exposure, all those things. You have a finite window when you enroll into Medicare to get a Medicare Supplement without medical underwriting. It's called your initial enrollment period. So you can get a Medicare Supplement for the first six months of Medicare eligibility. You can get it with no underwriting. So they have to take you. After that, you have to go and undergo medical underwriting.

And so what we always like to say is that start down the path of Medicare Supplement because you can always get a Medicare Advantage plan. You can always go that route. You can't always get a Medicare Supplement. And so yes, there is a premium for a Medicare Supplement, but oftentimes that makes a lot more sense to go that route first. We can't say right or wrong, but when you look at the quarterbacks that are talking about Medicare Advantage plans, they're on a Medicare Supplement.

Josh Robb:

And check your area, because for instance, our area being a smaller rural area, Medicare Advantage, the plans that are around here, you got to drive a long ways to get to their coverage. So just because you see this great advertisement, and usually it looks cheaper because, like you said, there is no supplemental cost to it. Understand what you're trading off. And that's always the big piece that we encourage our clients is it sounds really good, but check what doctors are available. Is your doctor part of that group? If not, you're switching doctors and finding one that fits, and it may be 40 minutes from where you're currently at.

Cole Craven:

Yeah. I'm a car guy, and so I've likened it to two different types of cars and one of them being a... Maybe Medicare Advantage is like a very showy fast car. It looks really cool, but you can only drive it when it's not raining. It needs to be perfect conditions. It requires new tires every 4,000 miles and an oil change is 8,000 bucks. So there's that option. It's like, wow, that's really cool for the little bit of time that I get to use it and all the things and shiny and flashy.

Whereas a Medicare Supplement is kind of like your workhorse, like a Toyota Camry. It gets you from point A to point B, does exactly what it says it's going to do, limits your exposure, it's safe, all of those things. And so if you think about it that way, that's a good thing to note. And you can always go get the flashy car. You can always do that. You can't always go buy your old Toyota Camry again. And so, that's the analogy that I like to use often is make certain that you're-

Josh Robb:

That's a good one.

Cole Craven:

... you're choosing the option from the jump that's going to benefit you in the long run, and that you understand all the hidden costs. I'm not anti-Advantage plan. There is a unique time and place for an Advantage plan to be a good fit for people. But when you're making the initial transition to Medicare at 65, make certain that you're talking with someone who can help guide you through that decision and make an informed one.

Josh Robb:

And speaking of the open enrollment, every year you get the opportunity to reevaluate that at the end of the year. Is that correct?

Cole Craven:

Correct. Yes, so the annual enrollment period for Medicare runs October 15th through December the 7th every year. And that's your time of year to review your prescription drug coverage. And if you're on a Medicare Advantage plan, that's also the time to review that. But your Medicare Supplement, when we help someone to enroll in a Medicare Supplement at Move Health, we tell them, "We hope that this is a lifelong relationship for you. We want you to keep this Medicare Supplement long-term. Not because it benefits us for that, but because you're not going to be able to go get another Medicare Supplement." So when you-

Josh Robb:

Yeah. The underwriting and all that.

Cole Craven:

Correct, usually with underwriting in most locations, you can't get a Medicare Supplement again. And so we say, "Here's the carrier. This is a long-term relationship."

And so, during open enrollment period is when you could explore going to an Advantage plan. If you wanted to test out an Advantage plan after you've been on a supplement, you have a thing called a trial right where you can go to Medicare Advantage for a year, and if you don't like it, you can go back to your Medicare Supplement. But always... Not always. But many times, we like to suggest that people start with the Medicare Supplement. The open enrollment period is an important time of year to always review drug coverage on those things.

Josh Robb:

That was the main one. Yeah, because the drug coverage is the one that is adjustable without underwriting or anything like that.

Cole Craven:

That's right.

[35:53] - Why Most Retirees Underestimate Healthcare Expenses

Austin Wilson:

Okay. All right. Let's transition a little bit. Take a step back. So let's think high level. What are some reasons that people, especially as they get into and close to retirement, underestimate healthcare expenses in general? You guys both have some thoughts on that?

Josh Robb:

Yeah. Cole, do you have thoughts? I know sometimes they overestimate too, based on your situation with your in-laws. But I would say for me at least while you get a chance to think about your answer, the underestimating to me for the healthcare cost is up to this point, they may have been using an HSA, health savings account, and they may not actually understand out of pocket, what they're actually spending out of pocket. And that sometimes is a shock to them. Once they've depleted that health savings account, oh wait, that comes out of somewhere else. It's not a bucket of money that I just pull from automatically.

So to me, sometimes that's the piece where they underestimate is, "I get premiums, 180 bucks for Medicare. I got it." And then all of a sudden that 20% copay or whatever they're doing, that starts adding up. Where's this money coming from? That for me is the one I see a lot.

Cole Craven:

Yeah, I think with anything within health insurance, if it's pre-65 or if it's Medicare, you can arrive fairly quickly at what your annualized exposure is. So you've got your best case scenario where it's, "Hey, I just pay my premium." You've got your worst case scenario, which is, "I pay my premium and I've met my maximum out of pocket." So you can arrive at that.

I think the healthcare literacy point that I touched on at the beginning of the conversation is exactly that. I think you see people underestimate or not understand their health insurance, and so they go, "Whoa, this is expensive." And the reality of it is maybe they are on an HSA style plan, which nothing is covered before the deductible. And so they go to the doctor's office and they go to urgent care, what have you, and they get a bill for $193 and they're like, "What is this? When I had my employer coverage, it was a $15... I just paid it at the desk. Now I'm getting $193." And when in reality all you're doing is you're just stacking up your dollars into that deductible.

But I think it's a healthcare literacy thing. I think that people can understand what their exposure is pretty quickly if they understand how to do it and are given good guidance on it. So I think you can see people underestimate exactly what you went through or talked about there, Josh, of what their costs actually are.

And I think the other thing is, like anything, just plan for the costs. So a good financial planner is going to help you to walk through and say, "Hey, here's what health insurance costs look like outside of a job." We just need to be prepared for them. And be okay with it when you see yourself paying six, seven, eight hundred dollars a month for your health insurance, know what you're getting in turn for a trade off of that, which is more freedom and more time you retire.

Josh Robb:

And then the other one is, again, if you're in some employer plans, I may be able to go to the chiropractor and that's part of the cost. And now that I'm on my own, oh boy, I'm paying for myself. Understanding which things are covered and which aren't. Or like the dentist. I used to have dental, now I don't. Now I'm just paying the full cost. Really tracking which things are covered under my plan versus what are things I'm responsible for.

Cole Craven:

Spot on.

[38:58] - Should Retirees Be Adjusting or Setting It & Forgetting It?

Austin Wilson:

And healthcare needs change over time. So can you guys talk a little bit about during what phases you need to be nimble and be able to make changes to your plan or to what coverage or what services you need access to, or times where you can just set it and forget it?

Cole Craven:

Yeah. So let's talk about the Medicare side of the house first. So like we talked about, set it and forget it is a Medicare Supplement. Typically, that's going to be something. Unless the premium, that is... Death and taxes plus your Medicare Supplement premium increasing, that's going to happen. So your Medicare Supplement premium is going to go up, but that's really a set it and forget it. If you have it to the point where it's really breaking a cash flow bank where you can't swing the Medicare Supplement premium any longer, you could then reevaluate to look at Advantage plans. But Medicare Supplements, set it and forget it.

Part B, not set it and forget it. Review that every year. I think we had one person this year that hadn't reviewed their Part D coverage in like 12 years and it was like, "Yeah, your drugs are expensive because you haven't reviewed it and half of them are on the-"

Josh Robb:

"None of them are on your list."

Cole Craven:

Exactly. So there are more that are not set it and forget it. Medicare Supplements set it and forget it. On the pre-65, you want to review that every single year. You want to make certain that if you're buying your own health insurance coverage, that you review it. There's an open enrollment period for health insurance as well. Just like you have through an employer, there's also one for the marketplace. Just make certain that you're taking those things into account.

Anytime that you have a life change or a qualifying life event, you've added someone to your household, someone has passed away, you have moved, all of those things are good times to reevaluate health insurance coverage to make certain that you can go see the doctors and things that you need to still.

Josh Robb:

The other one is if you are in a health savings account eligible plan, so a high deductible plan, setting up an automatic contribution into the health savings account is a great thing to do. Just set it up, make it automatic. We talked about savings in general. A lot of times on our podcast, the best way to create a long-term savings plan is to make it automatic. And health savings accounts are great. You get a deduction on the contribution, grows tax-free, and if you use it for healthcare, you don't pay tax on withdrawal. So it's a great thing to have. And you're not restricted. After age 65, you can't put money in if you're on Medicare, but you can still use it. And so again, what we encourage people, it's a great account when you have the ability to add money in and let that grow.

Cole Craven:

That's exactly right. Spot on.

[41:18] - Should You Work with A Financial Advisor When Healthcare Planning?

Austin Wilson:

So you guys both kind of hit a little bit on the importance of working with someone to get some help here, because this is not something that's self-explanatory, and honestly it's just not something that is intuitive in any way, shape or form. So can you guys just delve in a little bit more? Cole, specifically into the technological side, you can talk about on how you guys can utilize that. And Josh maybe on what the value of an advisor is. Just as another level of eyes, just to lay out all the options.

Cole Craven:

Yeah. So like we talked about, my in-laws almost didn't retire because of financial planning software. And that sounds crazy when you zoom out and you say, "What? The financial planning software?" But I think the big thing is make certain that the numbers that you are looking at are rooted in reality for your unique situation. I think that you might have... There's so much personal bias built into health insurance and people's experiences with it. So what's the right fit for your cousin who retired a couple of months before you, likely not the right fit for you. Sometimes it is, but most times it is not.

And so when someone tells you, "Well, I'm only spending $200 a month on my health insurance," and you're looking at an $1,100 bill, you're like, what give? Why did they get access to that plan? It comes back to income is something that plays into it. How many people are in their tax household plays into it. Where they live plays into it. Age plays into it. You're a tobacco user. All of those things play into health insurance costs.

And so there's technologies out there that you can utilize. We have built one specifically for financial planners to make certain that a financial adviser has access to good data for their clients that are rooted in reality. So they can say, "Hey, as a part of the financial plan, we're going to factor in health insurance costs, and we're going to talk about the advanced premium tax credit on the marketplace and if it makes sense for you. If it doesn't, we'll plug in the numbers that are at the high end and we'll just plan for them." And so I think that's where technology can come into it.

And I think that you gave me a chance there, Austin, to kind of beat back the personal bias thing as well. If your cousin or the person that lives down the street or what have you has had good, bad, ugly experiences with health insurance, that could just be their personal experience. Doesn't mean it's across the board.

Josh Robb:

And I would say from an adviser standpoint, the more tools that we have, the easier it is to know that we're giving a good recommendation. Because if I'm, again, just looking at averages, the person sitting across from me, how do I know that's going to be their situation? And so yeah, the more access, the more tools we have, the better. And this is what we talk a lot about with our clients is this is something that we will be adjusting along the way. When we actually get known data, we will make those adjustments. So at 55, planning for retirement at 60, well that's five years away. We may not know exactly what things are going to look like. We'll put assumptions in, but we're going to adjust it along the way. And just to be flexible and open to making those adjustments gives you the best chance of success along the way.

Cole Craven:

That's right. I think you think about healthcare planning, in the early retirement space before 65, leveraging tax credits, what have you, all of these things that can work in favor of reducing income. If you look at that over a five-year span, my in-laws for example, at 60 years old, they retired, their savings of $20,000 a year, it's $100,000 in cash that's not leaving their accounts. That's a huge cash flow win if you can make that advanced premium tax credit work for you.

And so I think understanding, being flexible is important. Also. If you've got a year where it's like, "Hey, we've inherited something, or we need to take a distribution from here," be flexible and be understanding that your modified adjusted gross income can have an impact on what your premiums are. And so just plan for it. That's really what it comes down to.

Josh Robb:

And it's not permanent. Every year readdress.

Cole Craven:

That's exactly right. It's exactly right.

Josh Robb:

Perfect.

[45:19] - A Success Story from Cole Craven

Austin Wilson:

So Cole, you gave that great example of your in-laws. I think that's a perfect example of why it's important to look at real numbers versus assumptions. But any other just success stories of examples where someone came to you and said, "Oh my goodness, this is an insane quote and I just don't know if I can make this work." Any other cool stories like that?

Cole Craven:

Yeah, there's several. I mean, we do this all day, day in and day out with advisors and their clients. And so we get to hear all kinds of cool stories. I'll tell you one of them that's pretty impactful. It was an advisor out of Holland, Michigan, beautiful area. He had a client that was in Florida. Funny enough, this client was an Imagineer at Disney.

Josh Robb:

There you go.

Cole Craven:

So like, the coolest job in the world, right? But he was ready to retire, and he wanted to retire and said... He had talked about some changes that had taken place, wasn't loving everything that he was doing any longer and some of the new responsibilities, all of that to be said, his advisor said... He started working with us at Move Health and said, "What's your plan around... We've talked about 63 and a half as the number of when you're going to retire. Why are you so dead set on this?"

And this is an engineer type. We all know some engineers, right? They're great people, but they're very analytical. And he said, "Well, I'm getting to 63 and a half. I will retire. I will take COBRA for 18 months until I get to Medicare." And he was 61 at this point.

He said, "It's two and a half years. Are you sure that you want to want to go two and a half more years of work?"

He goes, "Well, that's what I'd like to do."

And so the financial advisor pulled up the Move Health estimator, started talking through it, and said, "Hey, listen, we've got some flexibility here. Your health insurance can actually be X."

And the client then, and I kid you not, the client put in his two weeks notice the next week. And said, "Hey guys, I'm done. I just found out health insurance can be a lot less expensive than what I thought it was going to be."

And so an advisor can really unlock that for a client, and health insurance doesn't have to be scary. And so that client, as an example, now he's like a chair within the Roller Coaster Club of America, which I didn't know was a thing.

Austin Wilson:

I want to join.

Cole Craven:

But I guess as an Imagineer, it's a whole... Whatever. So he's traveling the country now, riding roller coasters and writing blogs and all this stuff. And healthcare planning really helped to give him two and a half years of life-

Austin Wilson:

There you go. That's awesome.

Cole Craven:

... before he thought he was going to be able to retire. So we see wins like that all the time. That's just one that sticks out to me because this person said it was the thing that was the sticking point. And so, for many people it is.

Josh Robb:

Perfect. Well, thank you again for joining us, and again with Move Health, it's a great tool for helping you better understand. Because you're right, it doesn't have to be scary. And so, thank you for joining us again.

For those that... If you found this valuable and you have some more questions, you can reach out to us at thewealthmindsetshow.com. There's resources there. You can subscribe to our newsletter so you get all the updates. And as always, make sure you stay connected with all of our social media to know our next podcast when it drops. Cole, thank you again for joining us.

Austin Wilson:

Yeah, thanks Cole.

Josh Robb:

We appreciate your passion for healthcare ever since a little boy, jumping into that. So we look forward to seeing where this continues to go. Well, thank you again for joining.

Cole Craven:

Of course. Thanks for having me, everybody.

Austin Wilson:

Thanks.

Josh Robb:

All right. Have a good rest of the day.

Austin Wilson:

Bye.

Cole Craven:

Bye.

Thank you for joining us at The Wealth Mindset Show, where we tackle the complexities of finance and life planning to help you align your wealth with your values. We hope today's conversation provided value and clarity as you navigate your financial journey.

Your hosts work for Hixon Zuercher Capital Management, and all opinions expressed by them or any podcast guest are solely their own and do not reflect the opinions of Hixon Zuercher Capital Management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Hixon Zuercher Capital Management may maintain positions in the securities discussed in this podcast. There is no guarantee that statements, opinions, or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. And any investor attempting to mimic index performance would incur fees and expenses that could reduce returns. Securities investing involves risks including the potential loss of principal, and there is no assurance that any investment plan or strategy will be successful.