HomePopularHow To Retire Early And Get Health Insurance

How To Retire Early And Get Health Insurance

Group Retirement Health Benefits

How to Get Health Insurance When You Retire Early

The number of companies offering health care for retired employees has been declining. That said, your employer may offer an option to continue health insurance into retirement, especially if you work in the public sector.

As you’re planning your retirement, reach out to your company’s human resources department. Ask if you’ll have continued access to health insurance after you retire and, if so, how much it will cost.

If your employer doesn’t offer health insurance for retirees, ask if you have access to Consolidated Omnibus Budget Reconciliation Act benefits. If you’re retiring before you’re eligible for Medicare, compare the cost of retiree health insurance or COBRA to Marketplace insurance plans. You should also ask how the coverage changes when you’re eligible for Medicare.

Affordable Care Act :

This is what I’ve done since 2015. I’ve had insurance cost me as little as $200 a month and as much as $1,100 a month through it.

In my opinion, if you choose to go through the marketplace you need to fully understand what you’re getting and be thinking ahead. You can read more about understanding health insurance here.

Retiring Early And Paying For Health Insurance

As a financial advisor, I meet with individuals and couples who hope to retire early all the time – I mean, who doesnt. Once I sit down with them for some basic number-crunching, we work together to create a long-term financial plan that will guide many of their decisions.

This can include how much to invest, when and where to invest, and ways to increase cash flow and returns while keeping long-term costs and taxes to a minimum.

While most of my clients have similar fears about , theres one single worry that pretty much everyone I encounter shares how to pay for health insurance in the midst of wanting to retire early.

Every one of my clients will eventually qualify for Medicare at 65, but what happens until then? While the passage of the Patient Protection and Affordable Care Act, also known as Obamacare, made it so that anyone can get approved for health insurance regardless of pre-existing conditions, those major changes came with a dramatic cost.

According to a study by ehealthinsurance.com, average 2018 health insurance premiums worked out to $790 per month for individuals 55 to 64. Even individuals who fell into the 45-54 age group still paid an average of $541 per month for premiums only.

In other words, health insurance isn’t cheap.

Recommended Reading: Who Takes Health Net Insurance

Figure 2 Probability Of Retiring Over A Two

SOURCE: Lynn A. Karoly and Jeannette A. Rogowski, “The Effect of Access to Post-Retirement Health Insurance on the Decision to Retire Early,” Industrial and Labor Relations Review, Vol. 48, No. 1, October 1994, pp. 103â123.

Another factor in retirement decisions is the generosity of the retiree health benefit plan. From preliminary work that extends their study to a cohort of men surveyed in the 1992 to 1994 Health and Retirement Study, Karoly and Rogowski find that both access to post-retirement health insurance and the extent of premium cost sharing affect labor force transitions more generally, with an increase in premium cost sharing dampening the incentive to leave full-time employment. The researchers also replicate their finding that coverage through a spouse can affect labor force transitions away from full-time employment.

Thus, it appears that retiree health benefits, like pension benefits, are a financial incentive that can influence the retirement decision. Moreover, this research suggests that access to continued health insurance coverage after retirement can serve as an inducement to retire early.

Consider Holding Out On Social Security

Picking the Right Early Retirement Health Insurance ...

If you wait until age 65 to retire, youre probably pretty close to your Social Security full retirement age, which is between 66 and 67 depending on the year you were born. That means youre a stones throw away from when Social Security will pay out 100% of what youre entitled to.

If you want to stop work before your full retirement age, you might consider part-time work, or tapping your savings instead of starting your benefits before you hit your full retirement age. Consider consulting with a financial advisor to see if you might be able to retire when you want, but delay claiming Social Security until you are 70.

Social Security will increase your benefit by 8% for every year you wait to claim benefits between your full retirement age and age 70. Thats a guaranteed returnthats also inflation adjustedand you cant get that in any investment these days.

Don’t Miss: How Long Can I Get Cobra Health Insurance

Recommendation To Build Wealth

Sign up for Personal Capital, the webs #1 free wealth management tool to get a better handle on your finances. In addition to better money oversight, run your investments through their award-winning Investment Checkup tool to see exactly how much you are paying in fees. I was paying $1,700 a year in fees I had no idea I was paying.

After you link all your accounts, use their Retirement Planning calculator that pulls your real data to give you as pure an estimation of your financial future as possible using Monte Carlo simulation algorithms. Definitely run your numbers to see how youre doing.

Ive been using Personal Capital since 2012. I have seen my net worth skyrocket during this time thanks to better money management. With proper wealth management, early retirees can rest easy knowing everything will be OK.

Can The Eligibility Requirements For Continuing Health Benefits Coverage Be Waived

Yes. OPM has the authority to waive the 5-year participation requirement when it’s against equity and good conscience not to allow an individual to participate in the health care insurance program as a retiree. However, the law says that a person’s failure to meet the 5-year requirement must be due to exceptional circumstances. When someone is retiring voluntarily, a waiver may not be appropriate because he or she can continue working until the requirement is met. When circumstances under these conditions otherwise warrant a waiver, we will notify the individual’s employer.

You May Like: Does Health Insurance Cover Breast Pumps

How To Plan For Healthcare Needs Before Retirement

When I was working towards financial independence, I always baked in the cost of healthcare and inputted a 5% annual healthcare cost growth rate. Healthcare costs, childcare costs, and tuition costs are three of the fastest growing costs in America. For early retirees, being able to generate enough passive income to pay for these expenses is the bare minimum.

To determine my healthcare cost in retirement, I asked my employer what the full non-subsidized healthcare cost they paid per month for me was, then I built my healthcare cost model.

Even though we budgeted to pay $1,400+/month in healthcare costs after both of us left our full-time jobs with subsidized healthcare, it still was a big shock. We had to first get over the fact that we both were no longer getting steady paychecks twice a week. Then we had to get used to paying a large new monthly expense.

One good solution I have for everyone is to start doing some enjoyable freelance work on the side to help cover your costs. As an early retiree, you still have valuable skills to leverage. You also suddenly have plenty more time in the day to do things you enjoy.

If you become a sole proprietor or create a company, you may be able to write off some or all of your healthcare costs as a business expense. If your business effective tax rate is 25%, you could save 25% on healthcare costs. However, check with a tax professional first.

Get Coverage Through Your State Or Medicaid

How to Retire Early AND Have Health Insurance!

If you’re retiring earlier than age 65, you may qualify for Medicaid. There are strict income limits, however, so make sure you qualify based on your state.

States calculate who’s eligible based on a percentage of the federal poverty level, and you can find your state’s percentage here.

While it’s not the right fit for everyone, it’s worth checking out if you know your income in retirement will be small.

Recommended Reading: How To Find Health Insurance For Self Employed

If You Retire Before Age 65 Without Health Coverage

If you retire before youre 65 and lose your job-based health plan when you do, you can use the Health Insurance Marketplace® to buy a plan.

Losing health coverage qualifies you for a Special Enrollment Period. This means you can enroll in a health plan even if its outside the annual Open Enrollment Period.

If you want to enroll because you lost your job-based coverage, see our Special Enrollment Period page for more information.

When you fill out a Marketplace application, you’ll find out if you qualify for a private plan with premium tax credits and lower out-of-pocket costs. This will depend on your income and household size.

Youll also find out if you qualify for free or low-cost coverage through the Medicaid program in your state.

Insure But Also Take Good Care Of Your Health

The biggest thing to remember about early retirement, though, is to stay active and healthy, Purkat shares.

The worst thing you can do in retirement is sit around the house all day, He says. Be sure to exercise, stay involved in your community or even work a part-time job. These acts will all contribute to your overall health and wellbeing and can help keep your health care costs lower.

Studies have shown that staying physically active can also help fight off the onset of Alzheimers, the most common neurodegenerative disorder. This underscores the danger of a sedentary lifestyle.

Also Check: Can Health Insurance Deny Pre Existing Conditions

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.

Budget For Medicare Costs

Pin on Retirement

Youre eligible for Medicare once you turn 65, but Medicare is not free.

In 2021, enrollees paid a minimum monthly premium of nearly $150 for Medicare Part B, and in 2022, this will rise to just over $170. Households with higher income can be charged even more. There are also other premiums, copays and coinsurance youll also need to cover.

And if you plan to keep working past 65, be careful with how workplace health insurance will handle your claims. If your employer has fewer than 20 workers, you still need to enroll in Medicare when you turn 65 otherwise you could be hit with a late-enrollment penalty when you do enroll.

More importantly, many insurers of small employers will presume Medicare is your primary payer once you are eligible for Medicare. You dont want to learn about that when a claim you make to your workplace plan is turned down after youre 65, and youve yet to enroll in Medicare.

Recommended Reading: Which Health Insurance Covers Ivf

Qualifying For Health Insurance Premium Tax Credits: A Case Study

Its not difficult to see an enormous difference in premiums if youre able to reduce your modified adjusted gross income below 400% of the FPL, but heres an example that shows how much a retired couple could save.

Imagine youre two married early retirees living in Hamilton County, Indiana. Youve done well for yourselves, and you have the retirement nest egg thats large enough you can comfortably live on $70,000 per year.

Unfortunately, thats more than 400% of the FPL, so youll face the full weight of health insurance premiums in Indiana at this income. According to this calculator from the Kaiser Family Foundation , the average cost for a Silver plan in your county and state works out to $1,470 per month.

Plus, with Silver plans through Healthcare.gov, you still pay 30% of healthcare costs and your plan pays 70% until your deductible and annual out-of-pocket maximum is reached. No matter how you cut it, that can be really expensive!

But imagine for a moment you were able to reconfigure the amount of money you live on by reducing your modified adjusted gross income. In that case, your entire healthcare scenario can be turned upside down.

Health Insurance For Early Retirees

How do you get insurance when you are retired?

Sweet freedom! Youre no longer tied to a schedule. Youve retired early, and the years ahead are yours to enjoy. But theres the question of health insurance. If youve been getting your health insurance through your job and youre not yet 65 years old, you may be asking, what now? Shopping for a health insurance plan to meet your coverage needs during early retirement can feel overwhelming, but it doesn’t have to be. Let’s look at the basics of a quality health insurance plan.

Don’t Miss: Does Health Insurance Cover Tooth Extraction

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.

Responses To 6 Strategies For The Early Retirement Health Insurance Dilemma

How to Get Health Care if You Retire Early
  • says:

    Kevin, thanks for highlighting this very real Early Retirement killer. Ive written about the topic, and we have a plan. Were budgeting $24k/yr, and will retire next year at Age 55. I fear the $24k is too low, but at least we have a realistic estimate in our retirement cash flow forecast.

    I agree too many folks overlook the seriousness of this issue. Well do private pay for 10 years, and its the thing I worry about most in our early retirement plan.

  • Hi Fritz Youre one of the few realists on the early retirement front. Most who cover it do their best to pretend that this issue doesnt exist, or that somehow everyone will get a magic pass. $24k is a realistic number, but my fear is that it wont be in five years. Its not just that health insurance is prohibitively expensive, but equally that there seems to be no ceiling on premiums in sight. Were either going to fix this crisis on a national level, or its going to take the whole ship down, and a lot of personal fortunes with it.

  • says:

    Good article! I work part-time and carry the health insurance for our family. My husband is a small business owner and the premiums would be more expensive through him. More options for the years before age 65 would be nice and would free people up to design a work year on their own terms.

  • Read Also: Does Cigna Health Insurance Cover Eye Exams

    Finding The Right Plan For You

    Whenshopping for health insurance its important to consider your currenthealthcare needs and any needs you anticipate in the future. Its alsoimportant to consider your budget and what you can afford.

    Need help figuring out what coverage is right for you? eHealth is here to help. eHeath is the first and largest online health insurance brokerage, so you can be sure that you will find the best plan for you and your needs with us.

    Our online tools are here to not only help save you money but help you keep your doctors when making the switch. eHealths comparison tool allows you to easily compare a large range of health insurance options, so that you can find a plan that fits your budget and coverage needs.

    Start shopping for individual and family health insurance now!

    And when you turn 65 and are ready for Medicare, let eHealth help you with that transition as well.

    Retire Early With Your Employer Health Plan

    Believe it or not, some companies still offer retiree health benefits even if employees leave the office before they reach traditional retirement age. According to a recent study by the Kaiser Foundation, about 25% of companies with at least 200 employees offer these perks.

    So your company can still cover your premium in some cases even after youve left the working life. You may also be able to sign up as a dependent on your spouses employer-sponsored plan.

    And if your firm doesnt offer retiree health benefits, you can likely keep your current plan for a limited time.

    Recommended Reading: What’s The Cheapest Health Insurance I Can Get

    Compare Health Insurance Plans For Retirees

    If youre looking for health insurance coverage as a retiree, its good to take advantage of any government programs you qualify for and shop around to ensure that you have the coverage you need. For example, even if you qualify for Medicare, you may need to purchase supplemental plans for services that are not covered, like dental work.

    When evaluating different plans, there are a few different factors that you should consider. You should make sure that the insurance company has in-network providers in your area, and that they offer a plan that meets your specific health needs. You should also compare policy premiums and deductibles, waiting periods, and customer satisfaction.

    Popular Articles

    explore more