MtoM #193: Social Worker Becomes a Millionaire and Finance 101: Health Insurance in Early Retirement

This is the White Coat Investor Podcast Milestones to Millionaire Celebrating stories of success along the journey to financial freedom.

This is Milestones to millionaire podcast number 193. Social worker becomes a Millionaire Southern Impression Homes takes owning rental property to the next level with their innovative 2.0 approach, focusing solely on new construction investment properties, single family homes, duplexes and quads in high growth markets of Florida. They handle every aspect of the process with expertise and efficiency including financing, insurance and property management. To learn more about Build to rent, visit whitecoatinvestor.com SouthernImpressionHomes or call 904-831-8058. Welcome back to the podcast. It's been a week, but it's been a lot longer than that since you've heard from me. In fact, this is the first podcast I've recorded since I fell six weeks to the day that we're recording this. By the time you hear this, it'll have been more obviously and thanks to everybody for all the kind words you've reached out to me and it's just been really nice to feel everybody's support and prayers and karma they're sending my way. I really am very grateful. I mentioned a few weeks ago when we told you there was going to be a few changes on the podcast for a while, that we're going to have an episode that talked about the fall and my rescue and kind of everything. Since that's not today, that's still coming up in a little while. It's going to be really good though. It's been really fun how many people are willing to participate and help us make that episode, but I think you're really going to enjoy it. That's not today though. Today is just a regular Milestones to Millionaire episode. Before we get into today's interview, I want to tell you a little bit about a name change. We have a partner that used to be called New Retirement. They're now called Bold in, like Bold in and you can get to their calculator, which some people call a retirement calculator. In reality it's a financial planning calculator. You can get there by going to whitecoatinvestor.com Boldin Heck, if you just put Bold, we'll have that get you there as well. Then that's all you have to remember. You can also get there by going to our recommended tab and going down there and and going down to retirement calculator or financial planning tool or whatever and you can check that out. But this, you know, there's lots of tools out there, we think this one is particularly good. We think it's very helpful. It's not particularly expensive and even has a free version that you can check out to see if you want to get the more premium version. But it gives you a chance to evaluate your savings and investments and projected earnings to really take a full picture analysis of your situation and help you to develop a reliable financial plan and establish a clear path to life. You want with those comprehensive planning tools that you just don't see with most software out there. You can Upgrade to the Planner plus is what they call their premium level. That's only 120 bucks a year. Still very inexpensive and very helpful for those of you out there who are DIY type people. I think you'll enjoy the customizable scenarios and all the actionable insights that you get from it. You can really find out if you're on track toward financial independence and get some personalized recommendations to improve your financial health. And obviously this is the sort of thing if you were paying somebody to do this for you, a non software solution, you'd be paying thousands but can get it for free to very cheap. Going to whitecoatinvestor.com Boldin all right, stick around after this interview. It's a pretty great interview. Number one. It's one of my favorite people I'm interviewing. But stick around afterward we're going to talk about health insurance and early retirement. Let's get into the interview. Cindy, welcome to the Milestones to Millionaire podcast.

Thanks. I'm happy to be here.

Tell us what you do for a living and how far you are out of school.

Well, currently I am the director of sales for the White Coat Investor. Previous to my 10 years that I've been working here, I was a social worker. I graduated with my MSW in 2011.

2011. And you are married with children.

That is true. I have four kids ranging in age from 22 down to 14.

Okay, and tell us what your husband does for a living.

My husband is a filmmaker. He graduated with his master's in fine arts in 2009.

Okay, and tell us what milestone we're going to be celebrating today.

So we're celebrating that we reached the $1 million in net worth without our home equity last year.

Awesome. A million dollars in investable assets. Congratulations.

Yeah, we're pretty excited about it.

You know, a millionaire is this term out there in the world. Right. That is often even vilified. Right. What were your thoughts on millionairehood as you approached and exceeded this milestone?

Well, you're Right. And that it's always felt like this huge thing, but then when we became millionaires, we realized that it wasn't that big of a thing. We don't feel overly wealthy, and it doesn't feel like enough money to really do anything with. But we were excited to be able to reach that milestone.

Okay, so what's your range of household income been between, you know, leaving school and now?

You know, we started tracking it specifically about eight years ago. So our range of income in the last eight years has been between $160,000 and $475,000 a year.

Okay. So quite, quite a range there. Some great years and some years that were still pretty good, but not incredible.

Yeah, I think if we went back all the way to when we first graduated from school, we'd get closer, down to about 30,000 a year. So it's been a pretty wide range.

It's interesting as you get into, I call them, Dr. Like incomes, these multiple hundred thousand incomes. One of the big shocks people have, especially if they've lived on much, much lower incomes, is the tax bill. What do you think the first time you had paid the tax bill on multiple hundred thousand dollars worth of income?

Yeah, it's a hard pill to swallow for sure. And our first goal and the reason why I started coming to work for the White Coat Investor was to pay off student loans from my husband's graduate school. And we actually postponed paying off those loans for a couple of years after we could have paid them off in order to invest more money into our retirement accounts so that we could lower that tax bill. So we were all excited to pay off those student loans until we realized that it was going to be smarter for us to hold onto them a little bit longer and get our tax bill to be lower.

Tell us about your investments. What do you invest in?

Yeah, so we currently are investing. We have a pretty boring portfolio. We invest in the Total Stock Market Index Fund, the Total Bond Market Index Fund, Total International Stock Market Index Fund, and the Vanguard Real Estate Index Fund. That's it?

That's it. That's all your investments. And what accounts do you have that money invested in?

Yeah, so we looking at our net worth, we have about 7% in our HSA and 3% in a taxable account. We currently have 4% in a high Yield Savings account. And then the rest is in our 401ks and Roth IRAs.

Okay. It's almost all in retirement accounts. Okay. And what about debts? Tell us about any debts you might have.

Now, we currently Just have our mortgage on. Our home that we're living in is the only debt that we have.

And it's still worth more than the mortgage.

I hope it is still worth more than the mortgage. We have about 400,000 in home equity there. We owe about $200,000 on that house.

Okay. Do you calculate your savings rate ever? Have you ever calculated how much of your income you've saved over the last few years?

We do calculate our savings rate since we started kind of looking more closely at our money. In 2015, we started calculating that, and it's ranged between 28 to 55% of our income and kind of averages around in the mid-30s.

Mid-30s. Okay. Well, congratulations. That's an impressive savings rate. And as you've realized, you build wealth quickly when you're saving that much money.

Yeah, for sure.

What advice do you have for other people that want to be millionaires?

Well, you know, when looking back at our journey of starting out very poor coming out of graduate school, I think what we found really helpful was listening to Dave Ramsey. I used to when I before working for the White Coat Investor, I commuted into. Into the office, 45 minutes each way, and I would listen to a Dave Ramsey episode each way. So that certainly keeps you on track and keeps you fired up. While we were working on paying off our student loans, we did the envelope system. We dealt only in cash, and that's how we budgeted to make sure that we had all the extra money that we wanted to. To throw out those loans. So that certainly has been a secret to success. It's been a little more challenging now that we have more money to stick well to a budget, and we're still working through the challenges of that now that there's. There's more income to spend to make sure that we're still meeting our goals.

What do you think's the biggest money disagreement you've had over the years?

You know, currently it's our grocery bill, so it's now living at our house as a husband and two teenage boys. And we disagree a bit on how much should be spent on groceries.

Who's the one that thinks more should be spent?

Well, definitely the husband and the boys think more should be spent on groceries and better food. Then I'm much more frugal in that regard.

Interesting.

But other than that, we've been pretty much on the same page. I'm definitely the one that manages the money and that is more interested in learning how to manage the money. So he does sort of let me make some of Those decisions. But we both were pretty excited about getting out of debt and investing in a way that lowered our fees and made it simple for us especially, should he have to take it over, that it's pretty simple for him to take over.

Yeah. Now you've got two teenage boys at home. You've got two out of the house. What lessons do you feel like you're teaching your children about money?

Well, you know what? When we had all four of our kids, when we paid off our student loans, and that was a big deal, one that we talked about a lot with our kids, they understood that we were living more frugally because we wanted to pay those off. So when we did pay off that, our student loans in 2017, we celebrated with a big dinner at a hibachi restaurant here in town and then followed that up with a trip to Disneyland, which was amazing. We spent five days in Disneyland. Anything the kids wanted to buy, we bought it for them. They just, like, their eyes were huge. They couldn't imagine that we were actually buying all those Mickey Mouse pretzels and the churros and whatever they wanted, we bought it for them. And they were all old enough to remember this experience, so that was really special. And we told them it was like, we're doing all we can to get you through your undergrad without any student loan debt. And they've seen the pain that student loan debt can have when you're starting out with your family. And so I think they're learning that lesson well. And we have two kids in college now, and we talk a lot about limiting your expenses and being able to get through that without any debt. So they are learning that lesson, and they've watched us budget pretty rigorously, and we talk about money a lot in our house and making sure that we spend it on things that we value. So I'm hoping those are lessons that they're taking away.

Very cool. And I think a lot of listeners are probably taking those lessons away as well because they are valuable lessons. Anything else you'd add that you think would be useful for somebody else that wants to do what you've done? Maybe they're not a doctor. Maybe they have some other profession, maybe they're a social worker like you, but still want to be financially successful. What tips do you have for them?

Yeah, I mean, we were just. My husband and I were just discussing this the other night. His business has been a little bit slow this year and talking about where we can kind of cut back in our budget and make sure that we're being wise. And we both said, you know what? It's just easier when you have more income. So spending more time figuring out how you can increase your income is well worth it. It does make everything else easier if you can just bring in a little more income. The less income you have, the bigger difference it makes to increase that even a little bit, which makes it easier for someone like a social worker that's not making a lot of money. The other advice I would give is just to be really intentional. I mean, we could have had, had I not come to work for the White Coat Investor and we were still living off a social worker filmmaker income, we could have still had this success. It wouldn't obviously have come as early as it did, but just being intentional with how you're budgeting and making sure you're spending what money you have in a way that that brings you the most joy.

Well, thank you for coming on the podcast and sharing your story, and perhaps more importantly, thank you for spending the last 10 years with us here at the White Coat Investor. You've been an integral part of our success, and we're very grateful.

Thank you. It's been a joy. It's been fun to watch the company grow and to be able to make a difference in so many people's lives. And I'm happy to be a part of it.

All right. That was a fun interview, wasn't it? You know, we've occasionally done something like this with somebody near and dear to our hearts. Cindy obviously is. She was the first WCI employee. And yes, her background was social work. And obviously that's not what she's doing right now. She doesn't work quite full time for us. Never has, actually. But it's been pretty wild to see what people can do, no matter what their profession, no matter what their background or training, when they actually pay attention to their finances and stick with it for the long term. And they've been very successful. We're very proud of them and hope that lesson can be used by doctors and non doctors like to provide a little bit of inspiration that you too can be a millionaire. You too can be financially successful. You too can increase your income, increase your savings rate and really make a difference in your financial life and that of your children, if any. All right. I promised you at the beginning we were going to talk about health insurance and early retirement. And you know, the first question I have anytime we talk about this is, what's so freaking special about health insurance? Nothing. Right? There's all this stuff you got to Buy in early retirement. You got to have a place to live, you got to have food to eat. You may want to do some traveling. I ask you what's so special about health insurance? But everybody gets all out of whack about health insurance because they're like, oh, I can't retire, I won't have any health insurance. Well, that might be true. You might not have enough money to retire unless somebody gives you health insurance. But the truth is it's just like any other expense, right? You go figure out how much it costs and you determine if you have enough money to retire, including paying for that expense, or you don't, in which case you got to keep working. I'm sorry, that's the way it works. So it's really not that different from your groceries and your housing and your gasoline and your cell phone bill. Yes, it's expensive. Don't get me wrong. This is part of the issue is people get sticker shock when they find out what health insurance actually costs. And part of the issue is we screwed up. I think this actually started in around World War II, but I think it may have been an additional effect in the 60s or 70s. 70s. Most likely what happened in World War II is they put wage controls on employers so they couldn't pay people more than a certain amount. And of course, employers wanted to attract the best talent they can get, so they started offering lots of cool benefits, including health insurance. And since that time in the United States, health insurance has been kind of married to your employer. And there's all kinds of bad effects from this happening. It's really kind of a historical tragedy actually. But the main one that we're talking about today is that you just don't know what health insurance costs because your employer's been paying 80% or 90% or 100% of the premiums for you for the last 10 or 20 or 30 years. And we do that here at the White Coat Investor for our employees as well. Right. I think our deal is we pay 80% of the premiums. And so people may not quite realize what it costs. But health insurance is expensive, folks. If you have to buy it, it costs a lot of money. Now I've been buying health insurance on the open market for the last 14 or 15 years. I've been self employed in that time period. And guess what? You can just buy this like anything else, like any other kind of insurance. You can just go to a health insurance broker in your area and buy health insurance. That's all you have to Google. Google your Hometown health insurance broker, and there's probably a half dozen people ready to help you tomorrow with your health insurance. Our broker happens to be a neighbor, somebody we've been working with for many years. And we were just buying individual policies for a while. And then when the white coat investors started to have employees, we went to the same health insurance broker and they helped us buy a group policy for us and all of our employers, all of our employees. And it's not that complicated for us and our four kids, Katie and I and our four kids, our health insurance is like $1,200, $1,300 a month, something like that. Now we're actually in a pretty cheap state, though. Utah, for whatever reason, has pretty low health insurance rates. I've talked to lots of couples in their 50s that buy health insurance on the open market in their state, and it's like $2,500. But my point is, if you're a high earner and you're not going to get any Affordable Care act subsidies or anything, you don't have to go to your Affordable Care act exchange to buy health insurance. You could just go to a health insurance broker and buy it on the open market. And it's not complicated. It's pretty easy. You can compare everything out there and choose how much you want to spend on it and what kind of premiums you want to pay versus how high your deductible and max out of pocket is. It's just not that complicated. You can go buy it. Okay, so that's the first main point I want to make with this. Bear in mind that right now it's illegal to exclude preexisting conditions when you buy health insurance. So this wasn't the case a few years ago. It used to be a few years ago. It was really hard to do that. And this is one of the best things that came out of the Affordable Care Act. I mean, even if you had something simple, you had one urinary tract infection years ago, you might not be able to get health insurance. Well, now that's kind of gone away, and that's one of the really great things that came out of the patient protection Affordable Care Act. So kudos to the Obama administration for that particular move, if nothing else. You may not like anything else about the Affordable Care act, but that was a good change. And it's pretty hard to argue it was not. Okay, here's the deal. A lot of people are like, well, I just need something to get me to Medicare age. Well, you can get Medicare when you turn 65. Okay. And make sure you apply for it when you're 65. That can be a mistake to not do that. But bear in mind, Medicare isn't free. A lot of people think it's free. It's not. Okay? So keep this in mind. Not only have you been paying taxes for years and years and years to get Medicare, so it's not free in that respect. And people will continue paying taxes for. For you to have Medicare going forward, but it's not free. Okay. What you're thinking about what you get at 65 that you qualify for is Medicare Part A. That just covers the cost of hospitalization. It doesn't cover doctor visits, it doesn't cover medications. Right. Almost surely the health insurance you had up until this point and the health insurance you want does cover doctor visits and does cover medications. So what do Medicare people do about this? Well, they buy Medicare Part B, which covers physician services and outpatient hospital services, and by Medicare Part D. Okay, so last time I looked at the premiums and they go a little up a little bit each year, but the premiums for Part b varied from 145 bucks to 492 bucks, double that if you're married. That's monthly, right? What does that sound like? That sounds like health insurance. Right. Medicare Part B is not free. You got to pay for it. If you want to see doctors and not just be hospitalized, you got to have Part B. And Part D is quite a bit cheaper. Last time I looked this up and it's been a few years, the average monthly Premium was like 33 bucks. Range is probably going to be anywhere this year. 15 to 100 bucks or so is what you pay for Medicare Part D. There are also monthly CO pays, the amount that varies by prescription or coinsurance. So keep that in mind. Right. And then there's Medicare Part C or Medicare Advantage as well you may want. Right. My point is Medicare is not free. So you're buying health insurance between early retirement and when you get to Medicare. And even once you get on Medicare, you're going to be paying something for your health insurance, so better get used to it, is my point. Health insurance is expensive stuff. A lot of people think it should be like their cell phone bill. In reality, it's more like at least your grocery bill, if not your mortgage. Right. It's expensive, expensive stuff. Okay, so what are your options between when you retire at 58 or whatever and when you actually qualify to go on Medicare at 65? Well, the first one's to go bare, you know, I don't recommend this. I don't think this is a very good option. I mean, I'm somebody who's used a heck of a lot of medical services this year. You know, after I fell in the Tetons, I think I hit my max out of pocket before I even got to the hospital, right? And those of you who work in the hospital taking care of trauma patients, you know that about the first 10 minutes after arrival, spend about 20 grand between labs and CT scans and so forth. So if I hadn't hit it before I got to the hospital, I certainly hit my max out of pocket in the emergency department. And of course, I've had at least one surgery since then. Might be two by the time you hear this. I'm not sure when it's going to run. And I've spent four days in an icu. It's not cheap. I just got my bill this week from the ICU. Remember, I wasn't intubated. I think the only IV medication I was getting was morphine. Right. My ICU bill was $113,000. I think insurance knocked it down to $51,000, which is one great thing about insurance, right? If nothing else, they've negotiated better prices for you. But that's not the sort of thing most of us have money sitting around our back pocket to pay. So don't go bare buy health insurance of some kind. Okay? So that's option two. And the option my family's chosen is to just go out and buy health insurance. You can go buy it from a health insurance broker. It works great. It's not cheap, but once you get over the sticker shock, it's really not that complicated. Go do this. There's another option. You can cobra, your employer's health insurance. And COBRA is cool. COBRA is very nice, especially for short time periods, bridging gaps. Because the really cool thing about COBRA is that you can enact it somewhat retroactively, right? You don't have to buy it until you need it, at least for these really short time gaps. If you're just out of health insurance for two or three months, you can kind of sit there and go, do I actually have any healthcare expenses? And if you don't, you don't pay for cobra. If you do well, you do pay for cobra. So what is cobra? COBRA is paying what your employer was paying for your health insurance. So instead of you paying 20% of the premium, you're now paying 100% of the premium. So when you tell people, I'm on cobra, the first thing you say is, oh, I hear that's really expensive. Well, it's not really expensive. It's just the price of health insurance. That's what it is. So that's one option. And you can drag that out for a long, long time. You can cobra you retire at 62, you could cobra your employer's health insurance for three years if you wanted to. So that is one option. Chances are pretty good you can get a better deal if you go to a health insurance broker, especially if you qualify for ACA subsidies. So let's talk about this right? Here's another option is getting the taxpayer to pay for you or to pay for part of your health insurance. And the truth is the vast majority of early retirees are going to qualify to have the government at least help them, right? There's lots of government programs out there that can assist you with your health insurance needs. Most of them are based primarily on taxable income. They don't ask why your taxable income is low. They don't care if it's low because you're disabled or because you're lazy or because you're caring for an ill family member or because you're living off capital gains and Roth IRA withdrawals. They don't care. So early retiree millionaires usually qualify for these programs like Medicaid. You can even qualify for Medicaid. You might be surprised, the rules change by state and oftentimes a lot of your assets might not be assets as far as Medicaid is concerned. Especially if you do some fancy Medicaid planning. That's probably not going to work for most white coat investor early retirees. But many of them will qualify for a Affordable Care act or Obamacare subsidy and should look into that. Now if you want that, you got to buy your health insurance through the exchange and that can be quite a bit more of a pain than it is just going through a health insurance broker. But you might be surprised by how big of a subsidy you qualify for. Just looking at when I wrote an article about this a few years ago, it's four times the federal poverty level, right? You get something until you're four times the federal poverty level. And the year I wrote this post, that was $135,000 in taxable income for a family of six. Even for a family of one, it was like $49,000. So remember, that's not everything you can spend because you can spend basis from your taxable account. You can spend Roth IRA withdrawals, right? They don't count toward that, and so there's a lot of money that you can spend that doesn't count toward that taxable income and still get a pretty substantial Obamacare subsidy. Okay. Another approach you can take is to get a job, right. Maybe this isn't retirement anymore. Right. The retirement police are going to stop by and tell you you're no longer retired, but you can get a job that provides health insurance. Right. Sometimes people leave a high, you know, stress job that's killing them. Maybe they're a doctor, maybe they're a lawyer, whatever, and they get kind of a encore job. You know, maybe you're a rafting guide now or something, I don't know. It doesn't pay you much, but it does provide health insurance. Well, there you go. There's your health insurance covered. Okay. Another option is a health sharing organization or a health sharing ministry. These are often Christian and may require you to agree in some way with the Christian faith. But often that's pretty minimal. You might be surprised how little of that there is with most of these. These ministries have some similarities to health insurance, but there's also substantial differences. But many early retirees have found them to be an acceptable and even a great deal compared to what they were doing before. Now the premiums are often called something else, like shares, but they're often half as much as what your health insurance premiums would be. So there's a huge savings, there's. And then basically what you do is you go out and you're paying cash for your health insurance and then you turn these expenses into the health sharing ministry to be shared with other people in the ministry. And so what you have to keep in mind with these though is they're not health insurance. And there are some healthcare costs that you might think are pretty routine that are not covered by these health sharing ministries. So you have to read the fine print of what's covered and what's not covered and be okay with what's not covered. Okay. It's a really important aspect. The other thing that happens is these ministries tend to self select a healthier population. Because what happens if you actually develop something expensive, you come down with Ms. Or something that's going to need expensive drugs, is you tend to, at least by the end of the year, go to the Affordable Care act exchange and get on an Obamacare policy with or without a subsidy. Right. Because they can't exclude you now for pre existing conditions. And so this works while you're healthy. It may not work while you're not so healthy. You know, the Trump administration passed a regulation that allowed you to buy a bare bones health insurance plan for up to one year. Those plans often excluded medications and maternity and some mental health expenses and had high deductibles but did have low premiums. So you can talk to your health insurance broker about whether anything like that is available. By the time you hear this, we're almost to the election. If it's not available right now, it might be soon if President Trump wins the reelection. So it generally only works for a short period of time, but might help you bridge the gap to Medicare. Another option, at least for fairly elective stuff, is that you can go to a foreign country and just pay cash. You might be surprised how much cheaper it is to go to Mexico and get some of your care done or go to Thailand and get some of your care done. But it is an option that some people have taken at least to help supplement some of the things that they were dealing with in this country with their healthcare expenses. And maybe you'll even want to move. Maybe you'll go live in Costa Rica or something for retirement or less expensively, Guatemala and realize that boy, just paying full price at the hospital is very cheap there and it might not be the exact same healthcare you're getting here, but the price is going to be right, I'll tell you that. But anyway, my point is that if you have enough assets that you can retire, you have enough to retire. You shouldn't feel like you can't because you need health insurance. You might need to work one more year until you have enough money that you can pay for health insurance out of that nest egg you've saved up. But this shouldn't be something that keeps you from retiring. If you're 58 and want to retire but feel like you can't because you don't have health insurance, you need to look into all your options because there's a lot of options out there that likely one of them is going to work just fine for you and help you to have some sort of health insurance coverage between now and when you get onto the Medicare roles. Hope that's helpful to you. All right, our sponsor, Southern Impression Homes takes owning rental properties to the next level with their innovative 2.0 approach focusing solely on new construction investment properties. They do single family homes, duplexes and quadruple in high growth markets of Florida. They handle every aspect of the process their turnkey with expertise and efficiency including financing, insurance and property management. To learn more about build to rent, visit whitecoatinvestor.com SouthernImpression Homes or call 904-831-8058. Hope you've enjoyed this episode. You can come on these episodes. We'd love to have you on these episodes. And you can sign up whitecoatinvestor.com milestones to apply and we what we want to do is we want to celebrate what you've accomplished and use your accomplishment to inspire others to do the same. We're out of time. Thanks for what you do. Keep your head up, shoulders back. You've got this and we're here to help. We'll see you next time on the Milestones to Millionaire podcast.

The hosts of the White Coat Investor are not licensed accountants, attorneys, or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.