Thursday, April 24, 2014

Three Reasons I’m Not Worried About Healthcare Costs In Early Retirement

Ever heard of “golden handcuffs”?
Usually, this is a system of compensation and/or benefits that is designed to keep an employee from leaving a company. Benefits like matching retirement account contributions, insurance, and stock options are popular handcuffs that can keep an otherwise disgruntled or burned out worker from leaving for potentially greener pastures. And by greener pastures, I’m talking about early retirement.
I’ve received my fair share of feedback via email that basically insinuates that I’m off my rocker for wanting to retire so early in life due to high healthcare costs. It’s assumed that retiring by 40 years old almost ensures that I’ll be tackling expensive healthcare bills by myself, because there is a false perception out there that health insurance can only be attained by way of an employer, or that retiring early in life somehow invites expensive medical bills.
This is a bit confusing to me.
First, health insurance is extremely easy to attain without an employer’s permission or help. I discussed my foray into buying health insurance on my own around this time last year. I pay just north of $130/monthfor a high-deductible healthcare plan (HDHP). Not an expense I like having, but it doesn’t exactly break the bank either. Moreover, this whole process has been made even easier through the Affordable Care Act since there’s now a national exchange.
And whereas some people crave the security blanket of golden handcuffs, I think they can actually be more harmful than they are helpful.
I actually have the opinion that by retiring early in life I’ll be minimizing my healthcare costs over the long haul, and I’ll give you readers three good reasons why.

Low Stress

I work more than 50 hours per week in the service department of a busy luxury car dealership. The job is fast-paced and, at times, incredibly stressful. I think there are few jobs out there that don’t involve a healthy dose of stress. Maybe my job is more stressful than others, or maybe I’m just more sensitive to it, but I can feel this stress in a physical way that I can only describe as present. I know when it’s there, and I know when it’s gone. The former times are usually at work, and the latter times are usually everywhere but work.
There is a ton of research out there that shows certain lifestyles that include a lot of stress can lead to preventable diseases, and eventually death. The leading 10 causes of death according to the Centers for Disease Control and Prevention lists heart disease as the #1 killer in 2010 (most recent data). Of course, looking down the list you have chronic lower respiratory diseases, stroke, and diabetes. Even unintentional injury is the #5 leading cause of death, and nearly 1/3 of the deaths are due to car accidents.
What do I see here? A lot of preventable death, to some degree. While genetics plays a large part in many of these examples, certainly stress and lifestyle cannot be ignored. If you’re not engaging in a ridiculous commute to work you’re less likely to die of a car accident. If you’re not eating a ton of horrible food out of convenience because you’re so busy working you’ll be less likely to have the internal health issues that can lead to diabetes, heart issues, or stroke. If you’re not stressed out all of the time you’re body isn’tconstantly releasing hormones and wasting energy to fight it, thereby lessening your chances to catch anything from the common cold to cancer.
And what can be a better way to avoid stress than to spend most or all of your time doing the things you love to do? I’m aggressively chasing financial independence so that I can pursue the passions that bring me joy. I want to write, spend time with loved ones, travel, manage my investments, and eventually make the world a better place. How stressful can living your dream possibly be?

Exercise

I have a secret weapon here in exercise. While I’ve admitted that my diet right now could be improved in terms of overall health, it’s been maximized for efficiency, taste, cost, and convenience. But a major factor in convenience will no longer be as necessary once I’m financially independent. I won’t be slaving over a stove to cook big meals, but at the same time I won’t have to microwave frozen lunches because I won’t have to worry about packing a lunch anymore. But where I lack a little in my food choices, I more than make up for it in my regular fitness routine.
Furthermore, I’ve always been a fan of physical activity. I started exercising heavily when I was 11 years old to protect myself and deflect the constant teasing I faced as a stranger in a small town. A love was born, and I’ve been a big fan of working out regularly ever since.  And I know that if I can make time for the gym three times per week even while managing a full-time job, this blog, my portfolio, and life in general, I think I have an even better chance at exercising regularly once I’m no longer working at a full-time day job.
Regular exercise can make a huge difference in one’s life. It can help fight obesity, while simultaneously keeping the heart healthy. I spend $30/month on my gym membership, and I look at this cost as the cheapest form of health insurance there is. Once I’m financially independent, I plan on staying fit through regular exercise and making it a lifelong commitment.

Cheaper Healthcare Abroad

Lastly, this is something that maybe isn’t often mentioned or thought about, but is an idea I’ve factored in to any contingency plans.
One fantastic aspect about being financially independent is that you’re also geographically independent. Once I no longer need to commute to work, clock in, and physically exert myself while exchanging my limited, dwindling time here on Earth for a paycheck, I can theoretically live and play wherever I want. My plan to live off of dividend income means I can collect dividends from high-quality companies like The Coca-Cola Company (KO) and Chevron Corporation (CVX) from anywhere in the world. It matters not if I’m living in the US or Ecuador; the dividends will still roll in and I can still spend them as I see fit.
As such, if I were faced with a life-threatening and highly expensive health problem like cancer, I would have the option to seek treatment abroad where access to high-quality healthcare is available and plenty cheaper than what we have here in the US. While I wouldn’t want to do this unless absolutely necessary, knowing the option is there is a huge weight lifted off of my shoulders. Furthermore, this option would only be explored if I faced severe costs that were somehow not covered by my aforementioned health insurance.
I’ve also thought about living abroad much later in life anyhow, and if I were living in a country with much cheaper costs of living, like Thailand, for instance, I’d already be in a location where cheaper healthcare is readily available.

Conclusion

I look around me and I see a population that is overworked, overstressed, and, at times, overweight. But I have vowed to not be a part of the problem, and I’ve instead formulated my own solution. By avoiding the stress of commuting long distances, working long hours, and putting up with unreasonable demands, I know that I can limit a silent killer and keep my body psychologically and emotionally healthy. And by exercising, I’ll keep my body physically healthy, thereby lowering my risk factors for major diseases. Finally, if my genetics get the best of me and I get massively and expensively sick, I know that financial independence gives me the flexibility to get healthcare quotes from anywhere in the world and pursue options that best befit me.
In addition, I know that I’ll be able to comfortably cover my high deductible, because in order to become financially independent I’ll need to accumulate hundreds of thousands of dollars in income-producing assets. I won’t need to worry about being one of the many that have to claim bankruptcy due to mounting medical bills and deductibles because my $10k deductible isn’t going to sink my boat when I’m cruising around the ocean of life in a $500,000 battleship.
And one final point: Being financially independent means I won’t have to worry about missing work if I were to get sick. Missing work can be a problem for many Americans that get sick, especially those that are living paycheck to paycheck. If it only takes a few skipped paychecks to miss the mortgage payment which cascades into a domino effect of missed bills , then even the best health insurance in the world doesn’t mean much.
Full Disclosure: Long KO, CVX
How about you? Worried about healthcare costs in early retirement?
Thanks for reading.

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