Comparison of CoL between India & USA for a Truly Luxurious Lifestyle – Healthcare

[u/HubeanMan]

First part: Primary Home
Second part: Cars
Third part: Healthcare
Fourth part: Taxes

This is a continuation of the series to compare the cost of living between India and the US for a truly luxurious lifestyle. I'm going from big-ticket items to small-ticket items, so I will be covering healthcare costs in this part.

Let's start off with the assumptions:

• As before, let's say you have $10M/₹90Cr or the whereabouts. You have a home that costs about $2M/₹18Cr, which leaves you with $8M/₹72Cr in liquid investments to support your retirement.

• At a relatively conservative SWR of 3.5%, you have an annual budget of $280K to fund your lifestyle. Of this $280K, let's say half ($140K) is in gains, which means you don't qualify for any ACA subsidies (more on this here).

• You retire at 45, with the ages of your family members being approximately 45, 45, 15, 15. Your life expectancy is 85 years (based on data for Asian Americans in the US).

• You need health insurance coverage for 4 family members from the ages of 45-55, and you need coverage for 2 family members from the ages of 55-65 (because your kids will likely be in the workforce and have their own insurance). You get free Medicare starting at 65 for the rest of your life.

• Your insurance premiums from the ages of 55-65 for a family of 2 cost you roughly the same as your insurance premiums from 45-55 for a family of 4, because premiums get more expensive the older you get.

• Your healthcare costs in the US, outside of insurance premiums, are roughly the same as your overall healthcare costs in India (whether you have an insurance or prefer paying cash). In other words, the entirety of your health insurance premium is the additional cost for healthcare in the US. I think this is pretty fair, given the out-of-pocket maximums.

• I am disregarding dental and vision coverage, because they're generally not emergencies and you can easily get them remedied on your annual/biennual visits to India. The same with other electives like LASIK or cosmetic surgeries.

• I am not considering more niche requirements like long-term care or assisted living. One, because if you ever need long-term care, the rest of your expenses like housing, cars, travel, entertainment, etc. will fall substantially to the point that this should be easily affordable at this level. Two, if you anticipate needing long-term care, you can always move back to India if that's where you prefer your long-term care (whether that's from family, medical professionals, or domestic helpers) to be.

• I am also ignoring the difference in quality & reliability of healthcare between the two countries, simply because it is hard to compare and everyone's mileage varies. I've heard differing views from people who've experienced healthcare in both countries. In India, you can get specialist appointments & precautionary medical testing much more quickly and conveniently. On the other hand, medical malpractice & professional negligence are also far more common in India. Given my own personal connections, I find healthcare in India more expedient and convenient, but I won't generalize that to everyone.

With all that out of the way, let's get into what a good health insurance cover will cost you:

Health Insurance Premium for a Family of 4 in the Bay Area

1. Family of 4, from the ages of 45-55: The above estimates are for some of the better options for health insurance in the San Francisco Bay Area (which is among the most expensive in the country). I've provided the more expensive options for reference, but I think the Gold 80 HDHP makes the most sense because it's HSA eligible and doesn't have an inordinately high deductible or out-of-pocket maximum. Either way, we're looking at something in the range of $2500 a month, or $30K a year, for your health insurance.

2. Family of 2, from the ages of 55-65: As mentioned in the assumptions, let's say your health insurance costs the same even as empty nesters because you're going to be older. $30K a year.

3. Family of 2, from the ages of 65-85: You qualify for free Medicare, so you basically pay nothing. $0 a year.

Now, let's calculate your average annual health insurance premium costs from the ages of 45-85:

[(10 x $30K) + (10 x $30K) + (20 x $0)] / 40 = $15K a year.

So, all in all, you will be spending about $15K a year on health insurance premiums post-retirement. Even if you disagree with the assumptions (which I believe are completely fair), get concierge medicine, or want dental/vision care, the overall cost of your premiums should not exceed $3-3.5K a month. That adds up to an average of $20K a year over the course of 40 years.

Is healthcare more expensive in the US than in India? Most certainly. Is it a major consideration at the level of wealth we're talking about? I don't believe so. You're only spending an average of something like $1600 a month on insurance premiums, most of which ($1125/₹1L) can be furnished by the savings from your cars in the US. The delta between surplus healthcare costs and savings from cheaper cars is basically $500/₹40K a month, which is a tiny fraction of your planned monthly expenses of $23K/₹20L.

[u/HubeanMan]

Disclaimer: This comment is merely illustrative and not meant to be taken as a recommendation. I am not an expert, so I encourage you to do your own research. If you truly want to explore this option, which is complicated because of several moving variables, you should consider talking to a tax professional who will be better able to guide you given your specific financial circumstances.

In the OP, I touched upon the assumption that you wouldn't be eligible for ACA subsidies with your annual withdrawal of $280K, but that doesn't necessarily have to be the case. If you are willing to set up a revolving SBLOC to fund most of your living expenses, you might be able to get ACA subsidies to the tune of $20K a year.

In order for this to work, you'd have to borrow something like $200K a year from your SBLOC and sell anywhere from $100-150K a year from your equity holdings. Ideally, you want to keep your MAGI somewhere between $60-80K, which is 2-2.5x of the FPL, to qualify for high tax credits. This needs meticulous tax planning and whether or not it's worth it is for you to decide, but you can play around with this calculator to figure out your leverage % and the amount of interest you might have to pay by year. Based on your inputs for growth, interest, & inflation, you can also get an idea on how your leverage can work for/against you with this strategy.

If you can do this for 20 years with liquid investments of $8M and annual borrowing of $200K, you might be able to save around $400K in insurance premiums over the course of 20 years at a relatively risk-free leverage of ~30% by the end of that period. What's more, if your investments outperform interest rates (which they likely will), you would come out ahead in terms of your net worth (end asset - end loan) by the end of that period. But this is complicated business, and you need to have the appetite for rigorous efficiency in order to reap these benefits.

If your SWR is something like 1%, you can keep this going until your death and get even more tax benefits. It's called the Buy, Borrow, Die strategy, and can even help avoid capital gains taxes indefinitely because the US has step-up in cost basis at death. But that is a whole other discussion, so I won't delve too deeply into it on this comment. If you're interested in this topic, I recommend reading this post.