Covering the Retirement Health Insurance Gap

You may retire before you are eligible for Medicare and your healthcare benefits are subject to change, so you have to make plans for covering your medical expenses.



How would you answer the following question: What is the most important job of a law enforcement officer? There’s a good chance that most answers would include the word: “protection,” as in “to serve and protect.”

Indeed, much of a police officer’s training is focused on protecting self and others. But here is another question to consider: How much thought have you given to protecting yourself from major medical expenses after you retire?

If you are like most law enforcement professionals, the answer to that question is clear: You don’t think about it. Or if you have thought about it, you don’t know what to do to protect yourself.

For all of our focus on protection, why do so many men and women in the law enforcement profession make this oversight? For many officers, especially those in the early or middle part of their careers, retirement may seem quite distant and so it is overlooked. Many others wrongly assume that Medicare will foot all of our medical bills, but it won’t. So failing to prepare for medical expenses during retirement can be a critical mistake. One that you may regret.

Here’s why:

1. Medical expenses and health insurance premiums will be among your largest expenses once you retire. It is estimated that about 15% of the average retiree’s annual expenses will be healthcare related, including Medicare premiums and out-of-pocket expenses. This can be doubled if you have a spouse
and/or children who will still be under the age of 26 when you are retired.

2. Many law enforcement officers are unprepared for the medical expenses they may incur after retirement and before they become eligible for Medicare. The average law enforcement officer retires at the age of 55, but Medicare does not activate until age 65. This creates a 10-year cost gap. Further, many assume Medicare will cover all healthcare costs in retirement, but it doesn’t. In 2016, the average annual out-of-pocket expense for Medicare was more than $5,400.

3. You may think your city or county employer will cover all of your retirement medical expenses. That may not be the case. City and county budgets are strained. As a result, many in the law enforcement community are falling victim to reduced city and county post-retirement health benefits. As time passes, it is becoming less likely that your employer will pay for retiree health insurance for you and your spouse.

“Ok,” you may be saying, “I see the need to protect myself from medical expenses post retirement. But how do I do it? What’s the best way forward?”
Here are some tips to steer you in the right direction:

1. Find a good Retiree Medical Trust (RMT). These plans have been created to help you prepare for medical expenses during retirement. Basically, contributions are made each month on your behalf while you are working—either by you, your employer, or both—to pay for medical expenses after you retire. The funds can then be used to reimburse you for costs such as medical, dental, vision, prescription drugs, and long-term care insurance as well as all other IRS eligible expenses.

2. Not all RMTs are created equal. They may be rare, but some RMTs—such as the Peace Officers Research Association of California (PORAC) Retiree Medical Trust—are completely tax-free. That means they do not tax your contribution, do not tax your earnings, and do not tax your reimbursement benefits. This means more money for you upon retirement. It can make a considerable difference. (NOTE: Officers do not have to be in California to benefit from participation in the the PORAC Retiree Medical Trust.)

3. Not planning doesn’t make the problem go away. Officers are always observing, strategizing, and making a game plan during law enforcement operations. Determining how to cover your retirement medical expenses also requires you to look at all the angles so that you have contingency strategies and a flexible game plan. The more economical, sensible path to travel is to plan ahead. Invest the money on a tax-free basis so that it can be returned to you in the same manner. Anything less can end up being more expensive in the long run.

Protecting your retirement begins way before you get to the back side of your career. It’s tempting to simply ignore the issue while you are young and energetic. A lot like that peeling paint on the house. It doesn’t change a thing on the inside. But one day down the road, you have to address the paint issue. A lack of prior attention leads to a more costly repair in the end. You simply will have to dig deeper into the pocket for the money.

It’s the same with the retirement health insurance issue. If you take the time to plan now, then later on you will be in a better monetary position—better prepared. And that is where RMTs can help.

Terry A. Moore is president of PORAC Retiree Medical Trust. Officers can go to: or call (833) 335-0593.

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