A Complicated Benefit Of Working In Your 60's

This is shaping up to be an insane weekend coming after Friday's fallout, the chatter being driven by the release of more (all the remaining?) Epstein files and Bitcoin is cascading lower flirting with Strategy's (MSTR) break even price as I write this on Saturday afternoon. I'll give all of that another day to "breathe" so that we can look at some HSA/Medicare/Social Security retirement stuff.

Barron's kicked it off with Healthcare Inflation Can Be A Runaway Train In Retirement. They pegged CPI running at 2.8% and that official numbers for healthcare expenses are inflating at 3.5%. To Barron's credit they called BS on 3.5% in the next sentence. I have no idea what the inflation rate is for actual medical services but there are countless anecdotes and news stories about people being forced to pay much more for health insurance. 

A few weeks ago we looked at a scenario where Healthcare.gov subsidies stopped at $84,000 of family income being the difference between paying almost nothing and jumping up to twenty something thousand/yr. Maybe there are enough alternatives out there, I don't know but where is a family making $90,000-$100,000 supposed to get $20,000 for health insurance this year after paying nothing last year? 

The criticism that a well structured healthcare system shouldn't need subsidies like the ones that just expired (is it too late to reinstate them for 2026?). That's true but the answer isn't just ending them, leaving people stuck.

A little further down in the article, they cited 5.8% as being the average annual increase of healthcare costs throughout retirement according to a report coming soon. I'm not sure I believe the 5.8% number either. Actually, I am sure. I don't believe that number. 

The Barron's article then drifted into income levels where IRMAA kicks in which as we looked at last week is $109,000 for single filers and $218,000 for married filing jointly. Up to $274,000 IRMAA is an additional $81 per person per month for Medicare Part B. Up to $342,000 of income and Part B is a total of $405 per person per month. 

Of course health savings account entered the discussion. Starting quite a few years ago, having an HSA eligible plan rarely has made sense for us being self employed. Our insurance guy said something about certain things have to be covered that insurance companies don't want to cover so they make the plans more expensive. Awful if accurate but either way we've only had an HSA eligible plan in the 2020's. We were very diligent putting money in every year when they did make sense for us without needing to take any out.

I asked Copilot what the median HSA balance is for families making at least $150,000. I got an absurdly low number so I pushed back a little bit and it came up with $19,000 plus or minus a couple of thousand. If that number is correct, then it wouldn't be enough to pay for something expensive that insurance won't cover but there are expenses where it could cover including paying for Medicare. 

It's a little tricky. Part B premiums are deducted from our Social Security payment. But it is valid to reimburse yourself that expense out of your HSA. The reimbursement can go to your bank account to be spent however you like including Part G Medicare. Technically, you can't use HSA money to pay for Part G but once the reimbursement hits your account you can spend it as you wish. This was per Copilot and corroborated by Grok.

The table from Copilot shows what it believes are averages for Part G per person.

Copilot thinks Part G is inflating by as much as 8-15% per year.

We'll all have Part B to contend with. How likely are you to be subject to IRMAA? Copilot estimates that 7% of people on Medicare pay the IRMAA surcharge. Depending on how long I work, there's a chance we'll have to pay it. I don't know the odds but between various streams of income, it seems plausible. We are all entitled to our own opinions but an extra $160/mo will not be at the top of my list of things to be worried about. 

Somewhat more concerning is the visibility for Medicare to eat up an ever bigger piece of Social Security checks.

That leads us to another article from Barron's (used a gift link for this one) that was not easy to understand, I may not understand it but it got into the minutia of how Social Security is calculated and what seems like a reward for working beyond 60 at your maximum income level. 

Starting at age 60, the calculation stops adjusting wages for inflation which apparently can be a positive. The key is that you're making the most you've ever made in your 60's. The example Copilot gave was someone making $150,000/yr in their 60's would benefit if their $50,000 income at age 30 was only adjusted for inflation up to $120,000. In this simplified example, $150,000 at age 62 would replace inflation adjusted $120,000 from age 30. 

Our Social Security payments are based on our highest 35 years of earnings so however many years you work in your 60's at your highest income level are replacing your lowest earnings years from when you were a kid. 

When I first read the article, I thought it was saying that your whole year by year scale moves up but Copilot said not exactly but that your "primary insurance amount" PIA is moving up. I'm not entirely sure what the difference is. If you log in to your SS online account you can see your year by year earnings record adjusted for inflation. For example, I worked at Charles Schwab for a year before going to college, I made $11,000 or $12,000 from July to July but when I last looked a few years ago, that $11 or $12 had been inflation adjusted up into the high $20,000's combined if I recall correctly. At this point, whatever the correct inflation adjusted number was from 1984/85 has since been replaced in my calculation.

If I continue to work as I plan on doing then I would be able to replace most of the years from ages 23-33 which were my lowest post-college earnings years. 

A logical question is what if SS gets cut in 7-9 years? If you're going to get $4000/mo but that gets cut to $3000/mo, then working through your 60's as described above can be thought of reducing your $1000 haircut by a few hundred dollars. If that's not worth it to you then by all means, don't do it. 

A couple of final administrative points to make. Copilot couldn't read a gift link, I had to past the text in to get help with it which surprised me. I couldn't work it in easily above but I'll include my standard lift weights/cut carbs recommendation as a way to keep healthcare costs down. 

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