How Can I Get Health Insurance If I Retire At 62
If you retire at 62 youll need to make sure you can afford adequate health insurance coverage until age 65 when your Medicare benefits begin. Also, keep in mind, Medicare does not cover all health care costs, so many people purchase additional health coverage to supplement their Medicare benefits.
The Affordable Care Act
The Affordable Care Act was designed for people who do not get healthcare through their employer, a population that has grown over the years as companies have gone to more contract or freelance employees than full-time ones.
The health insurance marketplace can be complicated, and there is a tight window of one month Nov. 15 to Dec. 15 when the open enrollment period is in operation. When you sign up, your coverage usually begins Jan. 1.
There are four tiers of coverage under the ACA Bronze, Silver, Gold and Platinum. Those tiers differentiate themselves by how much insurance covers once you have exhausted your deductible.
The average cost of Bronze coverage for 2021 was $328 a month, and the average cost Gold coverage was $482. In California, the range was $323 to $444, and in Florida the average was $339 to $489.
The best way to attack the health insurance marketplace is to do your due diligence by determining just what you believe you are going to need in terms of coverage before you reach the age where you are eligible for Medicare.
Here is an easy to use marketplace cost calculator.
Help With ACA Plans
The ACA website provides chat capabilities for anyone with questions about acquiring health insurance through the federal marketplace.
There are also private agents and brokers who can help find insurance for people who do not have employer-sponsored insurance and are too young to qualify for Medicare.
Get Coverage Through The Healthcare Marketplace
For most people, the Affordable Care Act’s healthcare marketplace will be the place to turn for coverage.
“The Affordable Care Act is an excellent option,” Smedsrud said. And, it’s a bit cheaper now. “The ACA recently changed under President Biden to limit the cost of health insurance to 8.5% of your income,” Smedsrud said. This was made possible by the American Rescue Plan Act of 2021.
With subsidies to bring down the cost, it could get cheaper to get your own plan through the healthcare marketplace. To find a plan, visit the federal health insurance marketplace at Healthcare.gov. With these plans, there’s no limit on how long you can keep them, and coverage is available to almost anyone who needs a health insurance plan.
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Explore Your Medicare Options
In most cases, as long as you’ve worked at least 10 years and paid Medicare taxes during those years, you’re eligible for Medicare starting at age 65. If you’re permanently disabled or have end-stage renal disease, you can qualify for Medicare before age 65.
Medicare has the following parts:
- Part A covers inpatient hospital care, limited care in a skilled nursing facility, hospice care, and some home health care.
- Part B covers other aspects of health care, including outpatient care, doctor care, and durable medical equipment. You pay a monthly premium for Part B.
- Part D covers prescriptions, and its benefits are accessed by purchasing Part D plans through private insurance companies.
On its own, Medicare has significant gaps, so many retirees opt for additional coverage. The two primary options if you don’t have access to employer health coverage are:
If you want to purchase a Medicare supplement, it’s best to do so when you start Medicare Part B, as you have a special open enrollment period. Some retirees delay enrolling in Part B if they have access to coverage through a working spouse. After your open enrollment, you may have to answer health questions and go through medical underwriting.
If you want to purchase a Medicare Advantage plan, you can enroll or change plans in the fall of each year. You can also switch Medicare Advantage plans from January 1 to March 31 each year. You can shop for both types of plans through your state’s Health Insurance Marketplace.
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Cons
· Coverage can be very expensive Without the subsidies, you are exposed to the full brunt of the cost of healthcare. Depending on where you live and the size of the deductible you choose, costs can approach $1,000 or more per month. While you may want to maintain the deductible, you have through your employer, you may need to increase it in order to make premiums affordable.
· Changes in laws pertaining to the Affordable Care Act can make it difficult to plan The laws that govern the plans that are available on the exchanges have changed in the past, and there is reason to believe that there are more changes to come. This can make it very difficult to plan the cost for this line item in your budget going forward.
Option 2: Use COBRA coverage
Pros
· You can maintain your same coverage The Consolidated Omnibus Reconciliation Act or COBRA is a rule requiring employers to offer you access to coverage after separation of service for a certain amount of time. So rather than searching for a similar plan, you can use the same plan.
· It may still be at a lower cost than coverage through healthcare.gov The cost of coverage is essentially what you would normally pay in premiums plus what your employer pays. If you work for a large company, the total cost can still end up being cheaper than going it alone in the exchange because of the cost savings the employer may have negotiated.
Cons
Option 3: Private Health Plans
Pros
Cons
Start planning now
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Strategy #: Delaying Social Security
How much you get in Social Security depends on a sliding scale set by the Social Security Administration based on your age, how many years you worked, how much you contributed to Social Security and when you claim. Although you can claim starting at age 62, the payments rise for every month you delay claiming until age 70, when your benefit hits its maximum.
Social Security income is counted as part of your income for calculating insurance premiums on the marketplace. Therefore, claiming Social Security later will lower your income and enable you to get higher subsidies in the intermediate years between when you retire and age 65, when Medicare kicks in.
Delaying claiming Social Security is therefore beneficial to your entire retirement strategy, because it results in higher ongoing income when you could really need it in middle or late retirement. Married couples especially can take advantage of Social Security claims strategies to minimize health care costs. For example, the lower-earning partner could claim early while the higher-earner can wait to claim this minimizes income for the couple that counts toward the current health insurance subsidies.
Refinancing In Your Golden Years
Dear Liz: I just wanted to comment on a recent question about refinancing a mortgage in retirement. The writer wrote: “… at 67 and 72 years old, its unlikely that both of us will survive for another 15 years to pay off this loan. This seems an old way of thinking about age. The obituaries in my paper are full of people who have lived into their 90s and even past 100 years old!
Answer: Good point. People often misjudge life expectancies, which over time have lengthened considerably. At 67, a typical female could expect to live nearly 19 more years, according to Social Securitys life expectancy tables, while a male at 72 has a 13-year life expectancy. People with higher incomes, good health and good habits could add many years to those estimates.
Liz Weston, Certified Financial Planner, is a personal finance columnist for NerdWallet. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the Contact form at asklizweston.com.
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Your Spouses Health Plan
If your spouse is still working and has access to a health insurance plan that offers spousal coverage, youll be able to enroll in that plan when your own coverage terminates. Your loss of coverage will trigger a special enrollment period for your spouses plan, just as it does for a marketplace plan.
Even if both you and your spouse were covered under your plan, youll both be able to transition to your spouses employers planassuming coverage is availablewhen your existing plan terminates.
Note that if youre eligible to enroll in your spouses plan, youre likely not eligible for a premium subsidy for a marketplace plan. As long as your spouses coverage is considered affordable for just the employee, the cost to add a spouse is not taken into consideration.
Although the American Rescue Plan made marketplace premium subsidies larger and more widely available, it did not fix this family glitch.
State Health Insurance Marketplace
As a result of the Affordable Care Act, every state has a health insurance marketplace/exchange where private individual/family health plans can be purchased. These plans are all guaranteed-issue. This means you can enroll regardless of medical history.
Enrollment is limited to an annual open enrollment period or a special enrollment period triggered by a qualifying event. The loss of your employer-sponsored health plan is a qualifying event, so youll be able to switch to a plan in the marketplace when you leave your job and your health plan ends.
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Early Retirement Health Insurance Are You Eligible For Cobra
In certain circumstances, if you lose your job, you can still be eligible to benefit from your companys group health plan for a limited period of time. Using the Consolidated Omnibus Budget Reconciliation Act , you can expect to be paying about 2% more than the full cost of health insurance on your old companys plan, says founder and CEO of Northwoods Financial Planning, Corey Purkat.
It is going to be more expensive than if you were still employed at a company, but it will still be less expensive than paying for your health insurance on your own, He says. The only way someone wouldnt be eligible for COBRA would be in situations where there was a very good reason a person was let go, such as a criminal investigation.
Continuation coverage under COBRA is typically available for a relatively short period of time, typically 18 to 30 months.
Retired Under Age 65 Directly From Active Employment
You become eligible for health insurance on the first of the month following your 65th birthday. You must elect health insurance before the first day of the month following your 65th birthday. If your 65th birthday falls on the first day of a month, the effective date will be the first day of the following month. Evidence of insurability is not required.
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How To Find Health Insurance If Youre Retiring Early
Medicare, the government healthcare program for retirees, doesnt kick in until youre 65. But what if you want to retire a little earlier, or have been forced into an early retirement?
Stephanie Faris
Key Takeaways
- Retiring early is possible, but Medicare doesnt kick in until youre 65.
- Government marketplaces can be a great option for medical insurance if you arent covered by an employer.
- A part-time job or spouses employer-provided insurance will likely provide the best benefits.
Medicare, the government healthcare program for retirees, doesnt kick in until youre 65. But what if you want to retire a little earlier, or have been forced into an early retirement?
The good news is, early retirement health insurance isnt as elusive as it seems. There are plenty of options available, from state marketplaces to employer insurance. Youll likely also be eligible for COBRA to cover you in the months immediately following your employment termination. This guide will help you get started on early retirement planning.
Affordable Care Act Exchanges
Before the ACA went into effect, early retirees often faced breathtaking health insurance premiums, if they could get coverage at all. Insurers were allowed to deny people with even minor preexisting conditions and charge much higher rates for older people. Insurers also routinely capped payouts, so that people with serious illness or injury were potentially exposed to catastrophically high bills.
Those practices ended with the ACA, which also provides most people with subsidies to help make health insurance more affordable. You can start your search for a policy at HealthCare.gov, which will point you to your states insurance exchange or to the federal one if your state doesnt offer an insurance marketplace.
Most people have to wait for open enrollment in November to get a policy, but losing coverage because of retirement is considered a qualifying life event that allows you to take advantage of a special enrollment period.
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Do I Need Health Insurance If I Have Medicare
While Medicare is an excellent option for retirees, you wont qualify for it until you turn 65. If you retire before that date, youre responsible for getting your own coverage.
However, even eligible Medicare beneficiaries may need additional insurance.
Medicare covers a large portion of your health expenses, but it doesnt pay for all of your necessary medical services. Original Medicarewhich is made up of Medicare Part A and Medicare Part B doesnt cover:
- Dental care
- Prescription drugs
- Routine foot care
If you want insurance that covers the above services, youll need additional coverage, such as a Medicare Advantage Plan.
Subsidized Plans From The Affordable Care Act
When I mentioned my premiums earlier through the Affordable Care Act, how many paused when they saw $200?!
Yep, I qualified for a subsidized plan my first year being self-employed and it was glorious.
Keep in mind: That premium was 5 years ago. Health care costs increase faster than standard inflation. Today I think I would’ve paid more. Subsidized plans vary from state to state and based on your income level within the qualifying range.
With FIRE and health coverage income becomes the key phrase as Pete Adeney, a.k.a., Mr. Money Mustache, has pointed out: If you are truly retired with, say, a $1 million portfolio and choosing to live off $25,000 of annual dividends, that is your only taxable income, and you would qualify for very low health insurance premiums.
With that said, it does bring up an ethical and moral dilemma: you can technically afford more, so should you be leaving those plans for the people who actually need them rather than driving up the costs by opting into them?
Lastly, I wouldn’t count on subsidized plans forever. If you accidentally make too much, you won’t qualify come tax time and will have to settle up a hefty outstanding bill. Plus, our political climate is unstable and we really don’t know the future of ACA. These plans could change at any time.
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Strategy #: Minimize Withdrawals From Retirement Accounts
Along with Social Security, withdrawals from 401s, IRAs and similar accounts are counted toward the income that determines the level of health care subsidy you get. Therefore, if you want to retire early, its important to avoid withdrawing large sums from tax-deferred retirement accounts that could impact your potential subsidies.
Because you arent required to take distributions until you turn 72, careful planning can help you avoid the kinds of excessive withdrawals that might negatively impact your health insurance costs. Consider boosting your withdrawals from the IRA in the year or years before you retire and putting that money aside in a liquid savings account, which you can then tap in early retirement to pay your expenses between when you retire and age 65.
If you have some wiggle room in tax planning right now, you should also think about converting your IRA into a Roth IRA to reduce the taxes youll have to pay once youre retired and taking distributions. Should you already have a Roth IRA, you are also able to make early withdrawals in this manner, if necessary, since Roth withdrawals arent counted toward income under the ACA.
Strategy #: Build A Cash Cushion
In the years immediately before retirement, theres a lot you can do to limit your exposure to any unexpected health care costs. Before youre retired, you should generally be directing any additional savings toward the liquid savings account mentioned above. At least a year before you want to retire, consider if you have any capital gains from taxable investment accounts and putting them there as well. Do the same with any sudden windfall you get: a bonus from your job, an inheritance or gift.
The idea is to build up this liquid savings account so it will cover all or most of your expenses in the year or years between your retirement and age 65, when you can access Medicare. To be clear, this cash cushion isnt merely designed to pay your health care expenses, its bigger purpose is to ensure that youre living the retirement lifestyle you imagined before retirement.
In these years many retirees take on part-time work to provide extra income that will cover the gap between your expenses on the one hand and your savings and Social Security income on the other, a strategy well worth considering in the intermediate years.
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