Do you want a wealthy retirement without worrying about money? Welcome to “Retire in Texas”, where you will discover how to enjoy your faith, your family, and your freedom in the State of Texas—and, now, here's your host, financial advisor, author, and all-around good Texan, Darryl Lyons.
Darryl: Hey, this is Darryl Lyons, and you're listening to Retire in Texas. I'm the CEO and co-founder of PAX Financial Group. This information is general nature only. It's not intended to provide specific tax or legal advice, or investment advice for that matter. Visit PAXFinancialGroup.com. They're the sponsor of this program.
If you need to speak to an advisor with a heart of a teacher, then text 74868 and put in the word “Texas”. That's 74868, “Texas”, and you can speak to one of our advisors. There are eight advisors right now. Each advisor can have about 200 households they can serve. [01:03.1]
We've got several of them that are at capacity. I am grooming and mentoring two advisors, so we'll have 10, and then probably hiring a few more. We're hiring advisors to the degree that we can find people with the heart of a teacher and that there's an appetite for our services. As long as those two things happen, we'll continue to grow, continue to serve. It's a calling for us. So, visit PAXFinancialGroup.com. We're revising our website as well. You can learn more about our calling there. Really doing some cool stuff, really, really excited.
By the way, to continue to brag on PAX and the team here, we're in the Inc. 5000, which is the Inc. Magazine publishes the 5,000 fastest-growing companies in the country. We were four years in a row, four years in a row, [in the] fastest-growing companies in the country. It’s pretty amazing.
Okay, so I want to talk healthcare today. Do not tune out because this is the most stressful issue of the middle class. Every morning, I listen to CNBC, drives my wife crazy because Jim Cramer comes on there. I have a love-hate relationship with Jim Cramer. He comes on there and says, “I just looked at my health insurance premium and it's $10,000 a year. When did this happen?” [02:09.3]
I couldn't help but scratch my head and go, “Jim, you've been screaming about cryptocurrency for an entire two years, but the middle class could care less about cryptocurrency. We're seeing our healthcare costs skyrocket.” I mean, there's a complete disconnect between what I see on Wall Street, like what the needs are. Cryptocurrency is not a need, NFTs, all that stuff. Middle class is getting squeezed by healthcare. It's really, really becoming difficult. So, what I'm going to do in this podcast is I'm going to do a top-5 countdown on the questions I receive the most about healthcare and this will cover pre-retirees and post retirees, so let's jump right in.
No. 5: What is the current state of healthcare in America right now? It's a problem and it's continued to be a problem. Obviously, the Affordable Care Act, also known as the Obamacare, and it's not political, it's not derogatory politically. It says on the government website, Obamacare, so it's not just something-- I mean, one person got mad at me because I said Obamacare. It's on the website. It's not a plight. I mean, I guess it is as if this thing falls apart. It's being patched a lot. The problem with it is the middle class is getting squeezed. [03:12.0]
I was with a guy who was very, very, very rich, and he's not getting health insurance. He's like, I don't need health insurance because I can cover everything. But as soon as he gets cancer, he will jump on, God forbid, he gets cancer. But as soon as he gets a major catastrophic health scare, he will jump on the government plan because there's no pre-existing condition and he'll have them, I’d say, then the United States government, pay the catastrophic claim.
That's the drawback of not having pre-existing conditions. It's called adverse selections. This is kind of a quasi-adverse selection thought behind it. But the idea is the rich, the very wealthy, will elect not to get healthcare in some circumstances and then jump on if and when they have a catastrophic event.
Then there's this group of people that, I hate to say it because the term sounds ugly, but it's a legal term, indigent, meaning, you don't have any resources. That group of people, there are people that are jumping on the healthcare plan from the federal government Obamacare, but there still is a very big group of people that just still aren't doing it, just irresponsible. [04:14.8]
You’d say they don't have resources, they don't have education. I think we're in America now, and everywhere I look, there's information on Obamacare or healthcare everywhere. There's a certain point where people just have to be responsible, so there's a huge number of people that get Obamacare free, completely subsidized, that just haven't signed up.
What I'm focused on is this group of middle class people, you know who you are, that $1,000 a month hurts. That means, when you're about to send your kids to college or you're thinking about college, you cannot find that money. Maybe you're a grandparent and you're looking at your kids, seeing them try to save for life and they're struggling with certain things. You know why they're struggling? Because they have $1,000 a month going out for healthcare. That's why they're struggling. [04:59.4]
Is it because the price of lettuce went up? Is it the price the gas went up? Is it the price of their auto premium going up? A little bit. The healthcare is what's killing them, and then you're paying $1,000 a month with very little opportunity for subsidies. I mean, they're in there. You get different plans through Obamacare and you get some subsidies. When you start making some decent income, then you can't get those subsidies anymore.
The government has a formula where they want you to pay about, here's the number and let me actually, I’ve got it here, it's about 10%. They want you to pay about 9.83% of your income in health insurance costs. Forget the deductible. Forget the ancillary stuff that isn't covered through the system. They want you to spend about 10% of your income on healthcare, on health insurance. Okay?
This is a real problem. I mean, I’ve been doing this long enough now that I’ve seen thousands of stories about healthcare destroying and really inflicting the middle class, and the deductibles are high, too, so if you have a $10,000, $14,000, $15,000 deductible, to a lot of middle class, that's a stretch. [06:06.3]
Now, some people can. They've set up the emergency fund. They've done their Dave Ramsey. They've got three to six months, and that's why you want that money. That's why you set. That's why you save for those things. But there's plenty of people that really hurt, and so then they have this debt, and it just becomes a vicious cycle because sometimes they'll borrow it from a friend or sometimes they'll put it on Visa or MasterCard, but sometimes they just don't pay it, and guess who takes that bill? The hospital.
The hospital then has to put that into their expense item, and then it becomes part of their profit and loss statement, and hospitals, by the way, have less than a 3% profit margin. Believe it or not, I don't know if I'd ever run a hospital. I've looked at them before in terms of business opportunities and I don't know if I would run one. There are so many people that come in there that don't pay, and so we've got this vicious cycle that we're dealing with and it's really falling on the shoulders of, generally, the middle class. It really is, and so we need some relief there. We need to find a way to resolve it. [07:08.1]
So, what's the state of health insurance in America today? It's on the shoulders of the middle class, and you know who you are. You're carrying that burden. It's not the indigent. It's not the very rich. It's that middle class. $1,000, $1,500 a month, that's just for the premiums. That doesn't account for your deductible or the ancillary stuff that's not covered. It's killing America, so there you go. I'm being dramatic, but it's a pain point that I see all the time. Okay, that's No. 5.
No. 4 question. When do I get Medicare? If you're pre-retirement, this doesn't affect you, if you're in your thirties or forties. It does affect your parents and it does affect those that are looking out. Just know, Medicare and Medicaid are different. Medicaid is, again, I talked about being indigent, that means you have less than $2,000 in the bank, no income or very little income. You get Medicaid. It's completely government-subsidized healthcare, restricted in its scope in terms of who you can see and who takes Medicaid and who doesn't. [08:00.8]
Medicare is for when you turn 65. Medicare is when you turn 65, and so in Medicare, you get a seven-month window three months before you turn 65, the month of and three months after to enroll in health coverage. That's government health coverage.
I’ve got to tell you, though, Medicare has been very good. You're trying to grasp here, where am I coming from from a political perspective. I'm not really coming from a political perspective. I'm giving it to you how I see it. Medicare has been very good to our clients. I mean, I hardly get any complaints about Medicare.
Doctors, on the other hand, it drives him nuts, because the reimbursements are so refined, so you have this comprehensive surgery and you're like, This is what I can get paid for that and then I’ve got to process it through. I've got to hire all these people to process it. Doctors have a different opinion of Medicare and rightfully so. It's really burdensome from them, and so some of them just elect not to take Medicare and just go cash, which becomes or that could be an issue for the system, in general, and then in turn, only the wealthy get the best physicians, but the majority of the physicians are still taking Medicare. [09:08.6]
Medicare has got to be very careful that they still pay physicians well and efficiently, and don't burden them. As long as they do that, what I'm finding is those that are getting Medicare are very happy with it. By the way, we have an episode, I don't know off the top of my head, completely on Medicare. You can look in our show notes. Justin Elliot is our Medicare specialist in the office. Not very many financial advisory firms have a Medicare specialist in the office. We only do it for our clients.
We can't do it for the general population, but for our clients, we help them transition in Medicare and figure out all the supplements and all that. Part A is hospital, Part B is medical. You can go to Medicare.gov there. It's a pretty good website to get information on that, and once you get social security, and the timing could be off, so you could get social security later, but when you do get social security, they just take Medicare, the premiums, out of your social security checks. That's kind of easy. If you're running your social security analysis, then your net—so you get your gross check. Then they'll take out the Medicare premiums. Then your net check—that’s what'll hit your bank account each month. [10:14.2]
One of the things I want to make sure you do, you may be stuck in a dead-end job and the only reason you're in that job is because you're waiting for Medicare. Here's the strategy. You've got to listen to me on this. Let's say you're 62. Let's say you're 60, and you're like, I hate my job. I hate everything about it. It's killing me. My blood pressure is up. My heart, everything about my body is dying. I don't even like the people I work with. I can't leave until I get Medicare.
That is not true. We've done it multiple times where we do a financial analysis. What we do is we say, okay, let's say you've been a good saver. Let's carve out money from your investments, your IRAs, your 401(k)s. Let's take that money and let's buy an individual health insurance policy in the open marketplace and we'll shop it for you and see, running the math, and see if it impacts your financial life down the road. [11:09.5]
As an example, let's say an individual policy. I'm making stuff up, don't hold me to this. An individual policy for you and your spouse is $10,000 a year and you're 60, and you can't wait for 65 because your job is killing you, so that would be 50,000 we would have to take out for the next five years to pay for individual coverage on the marketplace. All right?
What we could do is look at your financial plan and say, What if we took 50,000 out of an IRA or savings? Will it impact your down-the-road self? Will you run out of money? We take it out, we stress test it, and we say, “No, you won't run out of money. You're still going to be okay. “That could be a life changer for you, which we've done multiple times.
Then, here's the cool thing about it. If we do it the right way, then we lower your income and get to qualify for some subsidies, and then it reduces the cost of health insurance. There's some great strategies and that's part of being a financial advisor that's a lot of fun and fulfilling, which is that we can have somebody actually retire sooner, because there's thousands of people out there, millions probably, that are just not retiring because they're waiting for Medicare. Don't do that. You can retire sooner. You just have to do some planning with it. [12:19.2]
Okay, No. 3, the third question.
The fifth question that I get is, what's the current health state of America right now, the health insurance state?
No. 4: When do I get Medicare?
No. 3: Should I get a high deductible plan or an HSA? Just so you know, a high deductible plan is defined as a deductible of at least $1,400 for an individual, $2,800 for a family. The total yearly out-of-pocket expenses can't be more than 7,000 or 14,000 for families, so the deductible is the main thing you need to think about. That's $1,400 for an individual, $2,800 for a family.
The reason that's helpful is if you have a higher deductible, your premium is lower. I mean, that's just logical insurance. I guess it's logical to me. I mean, maybe it's not to everyone, but if you're taking on more of the risk for your healthcare costs, the premium's going to be lower, so you lower your premium. [13:16.8]
Then what you do is you find a health savings account. Again, it's kind of one of those things that we do for our clients or, at least, guide them, but you can find a ton of health savings accounts online. HSA Banks, one we use a lot. You can invest your health savings account. You can invest in it. They usually give you different funds to choose from.
Should you invest your money? It's okay. I mean, first of all, it's not a lot of money, generally speaking, unless you're starting at 20 and you're just building this thing up, so maybe it has a long term, but it's really designed to be an emergency fund. An emergency fund acts like insurance. It costs you money. It doesn't make you money. You may put in a fund that has low volatility versus the emerging markets or a stock-based fund, so that's something to consider. [14:10.1]
But I definitely want you to get an HSA. An HSA is a great above-the-line tax deduction. We won't get into that now, but a great incredible tax deduction is an HAS. So, I really want to encourage you, if you do get traditional health insurance, try to get a high deductible, reduce your premium, and then fund in HSA.
All right, so, No 5: What's the health insurance state right now in America?
No. 4: When do I get Medicare?
No. 3: Should I get a high deductible plan with an HSA?
No. 2: What are these Christian sharing solutions I'm hearing about? Very important. Really, it's been around 20 years. Samaritan Ministries is the one I use. Medi-Share is a really popular one. Christian Healthcare Ministries, one Dave Ramsey promotes. There's actually one called Zion that came out. That one is different because you don't have to make an affirmation of your faith or that you go to church, so that one is interesting, and there's more secular ones coming out, but it's incredible. I've been on it for over 10 years now. I've had well over $100,000 of claims. We had some medical issues in our family and they were all paid. It's an incredible tool. It's just completely different. [15:13.8]
Here's how it works. You don't pay a premium, but they don't use that language because then they would be in the insurance world, and so let's use Samaritan Ministries, because that's the one I know better. Every month, my check goes to, I'm going to make up a name, Joe Smith in Mississippi, and when I'm writing my check to Joe Smith in Mississippi, it's the same amount each month. Let's say, it's $500. I'm writing to Joe Smith and then Joe Smith is actually cashing that check and I'm paying for, I'm helping fund Joe Smith's cancer treatment.
So, it's crazy, I'm actually writing a check to another individual across the country, literally, and that's my premium. Joe Smith then gets 20 checks from people around the country that account for all of the needs that he requested to cover the cancer treatment, and it works and it's been working for 30-plus years exceptionally well. Exceptionally well. [16:10.2]
Why? Because when Joe Smith—that's the name I used, right? I can't remember, but, yeah—when he goes to the hospital for cancer treatment and he says, “I'm a cash pay, not an insurance pay,” that treatment went from, and I'm making this up again, but you get the point, that treatment went from $300,000 a year to $60,000 a year because of the difference between insurance pay and cash pay, and I’ve seen it so many times.
In fact, one time, we were at the hospital once. My wife had an issue when she had the baby. Was it Lucy or Noel? I think it was Lucy, she'll correct me. But her spine was pricked when she had her epidural and she said it was worse than the labor. When we called the doctor, the doctor said, “Oh, just meet me in the emergency room,” so we met in the emergency room. Then he stopped me and he goes, “Wait, I remember you're cash pay. We need to go up to another room.”
Okay, so I stopped there, stopped there to think for a second. Just because he knew we were cash pay, he helped the whole system, because we were going from, whatever, a $10,000 room to $1,000 room, to $1,500. But if we were insurance, he would've sent us to the emergency room, and that's the difference between these health sharing programs. [17:20.8]
When it's cash, you're starting to ask different questions. The hospitals ask different questions. The doctors do. It's not perfect. Many of them ask for an affirmation that you're not abusing alcohol, you're not having sex outside of marriage, you're not [engaged in] tobacco use, maybe a cigar every now and again, and then are you going to church. What they're trying to do, they're generally trying to get a pool of candidates within their system that have good habits and then it makes the whole system work. But like I said, it's worked for years.
Let me give you an example of the premium difference. A premium, and this is just an example, they're all across the board, a family might pay in the insurance world, $18,000 a year for a $5,000 deductible. In the Christian sharing world, they might pay $6,000 a year for a $400 deductible. I mean, it's crazy ridiculous. [18:12.4]
So, you’ve just got to look at it. The whole health insurance world is messed up, and so there’s alternative's out there, and there's secular ones there that are out there. There's plenty of them, so check them out. That’s a great alternative.
Finally, oh man, I didn't know I'd go 20 minutes, but here I go, the last one. No. 1: What are the options for chronic care? Chronic care is different from acute care. Acute care is when you break your arm or something, or have a cold. Chronic care is debilitating. That's the inability to eat, bathe, dress, toilet, transferring, bowel movement, cognitive movement or cognitive issues, any of those. They call those activities of daily living, and so if you're unable to do two of the five or six activities daily living, then you typically need some type of full-time care. A lot of times the spouse is there for somebody, but when the spouse isn't there or is not able to, we have to consider assisted living or long-term care. [19:05.2]
What I used to do for our clients years ago is we used to sell long-term care insurance, and it was kind of a frustrating product for all of us because the underwriting was challenging, but we knew that there was a tsunami wave of care needed, so we would get the policies and it worked. I had a claim early in my life, in my financial career, where one of my clients bought it a month later. His wife was diagnosed with dementia and they paid the claim because it wasn't preexisting. They did all their due diligence. Sure enough, they paid that claim. He was very, very thankful.
So, the long-term care insurance policies, they absolutely, a hundred percent work. I've seen it. The problem is they’re totally messed up as an industry on anticipating the claims that they're going to pay, and so what they've been doing every single year is raising rates, not just a little bit, but a lot. So, getting a long-term care policy, if you're 65, is a lot of times just going to be not cost-effective. If you're under 65, you may want to look at it. [20:00.7]
In Texas, they have something called a Partnership Program. You want to make sure, if you get a long-term care policy, you get the Partnership Program. It's beyond the scope of this conversation. Maybe we'll do another show on that.
But chronic care is something you absolutely have to plan for. Either you plan for buying insurance or you plan on using your investments, or you plan on spinning everything down and going on Medicaid. Whatever it is, the probabilities are there where aging is very expensive when somebody needs chronic care, so when you're putting together your financial plan, you've got to anticipate an account for chronic care.
That's it. I know that's a lot of content to throw at you. Please email me with any questions, darryl@paxfg.com. If you want to go deeper on any of these subjects, let me know. In the book 18 to 80 that I wrote, I do cover some of these a little bit more, but let's do the countdown one more time.
No 5: What's the current state of the health insurance market right now in America?
No. 4: When do I get Medicare?
No. 3: Should I get a high-deductible HSA plan?
No. 2: What are the Christian sharing solutions?
No. 1: What are my options for chronic care?
Hey, thanks for listening. I know this was a meaty show, but I hope it helped. [21:09.8]
I want to remind everyone to text 74868, put in there “Texas”, and you can speak to a financial advisor with a heart of a teacher and give you more direction, maybe specifically on this kind of stuff, healthcare, specifically.
Then, finally, I want to remind everyone, you think different when you think long term. Have a great day.
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