Health Insurance Options For Early Retirees – For most Americans, health care is one of the biggest expenses in retirement, especially for those who retire before age 65. In this article, we’re sharing three early retirement health insurance options that will help you bridge the gap until you’re eligible. Medicare.
The Covid-19 pandemic caused a wave of early retirements, especially among Baby Boomers. In fact, more than 3 million Americans retired early due to the Covid-19 crisis, St. According to research by the Louis Fed.
Health Insurance Options For Early Retirees
Unfortunately, Medicare, the federal program that provides health coverage to more than 65 million Americans, does not begin until age 65. If you’re one of the many Americans who are ready to retire before age 65, you’ll need a plan. to continue your health coverage.
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Early retirement does not necessarily mean that you cannot continue to benefit from employment insurance. For example, if your spouse continues to work, you may be able to enroll in an employer-sponsored health insurance plan.
Different companies have different rules regarding eligibility and benefits, so you want to confirm that it’s a viable option. Additionally, this option may increase your spouse’s health care premiums and/or out-of-pocket health care expenses, so be sure to factor the additional costs into your budget when planning for early retirement.
Another early retirement health insurance option is to get a part-time or full-time job that offers employee benefits. However, keep in mind that you may need to meet certain criteria to qualify, such as completing a probationary period or committing to work a minimum number of hours per week.
In fact, 21% of large companies that offer health benefits also offer retiree health plans for some employees, according to a recent survey. Some employers may even pay a portion of the monthly premiums. And in some cases, you may be able to keep your retirement benefits after you enroll in Medicare to supplement your coverage.
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If available, workplace insurance can be one of the most cost-effective health insurance options for early retirement. In addition to benefiting from the economies of scale of a group plan, you don’t have to spend time looking for coverage.
On the other hand, you may not be eligible for coverage right away, so you still need temporary coverage to bridge the gap.
If your insurance gap is less than three years, you may want to consider COBRA or short-term health insurance.
The Omnibus Budget Reconciliation Act (COBRA) requires employers to offer retirees the option of continuing health care benefits for a limited time. If your employer had at least 20 employees for more than 50 percent of the regular workdays in the previous year, COBRA may be one of your early retirement health insurance options.
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To be eligible for COBRA, you must have been enrolled in your employer’s health plan when you were an employee. Additionally, the health plan must be active for current employees.
If you’re eligible, you can usually continue your existing health coverage for 18 to 36 months after you stop working. Even if you don’t enroll yourself in COBRA, covered family members may be eligible to continue benefits.
After you stop working, you will receive a COBRA election notice if you meet the requirements. You then have 60 days from the last day of coverage or from the date you receive the notice (whichever is later) to continue or deny your health coverage.
COBRA can be a convenient option for some early retirees because it makes it easier for you to continue your existing coverage.
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However, it can also be one of the most expensive early retirement health insurance policies. On average, a person’s monthly COBRA premium is between $400 and $700 per month.
If you are not eligible for COBRA, another option may be short-term health insurance if you are within a few years of turning 65. Short-term insurance replaces a year’s worth of coverage gaps, but you may be able to. extending for three years.
Note that not all states allow short-term health insurance coverage. In California, for example, lawmakers passed a law in 2018 that bans the sale or renewal of short-term health insurance in the state. Also, eligibility depends on your income and medical history.
Short-term health insurance can be more expensive than the ACA marketplace if you need it for a shorter period of time than early retirement health insurance. However, it may not be easy to obtain and usually does not offer comprehensive coverage.
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For many early retirees, the Affordable Care Act (ACA) marketplace will be your best bet for affordable temporary coverage, especially if you have several years until age 65 and are eligible for Medicare.
The ACA marketplace offers annual open enrollment typically beginning in November and ending in January. However, the exact dates vary by state.
In addition, certain qualifying life events allow you to sign up for coverage outside of the open enrollment period. For example:
In 2023, the average cost of health insurance in the marketplace for a 60-year-old is $1,025 per month. More expensive, low-coverage plans typically start at around $500 per month.
Health Plans For Early Retirees
Thus, the ACA marketplace’s affordable early retirement health option depends on the type of plan you choose. Options range from high-deductible catastrophic plans to comprehensive coverage.
In addition, you may be able to reduce costs if you are eligible for premium tax credit. Generally, only the lowest-income Americans qualify for this credit.
If you prefer not to use the ACA marketplace, you can also purchase commercial health insurance directly from an insurance company or broker. The main advantage of a commercial policy is that you can choose any plan that suits your budget and medical coverage needs.
Finally, while not technically early retirement health insurance options, a health savings account (HSA) and/or membership organization benefits can help reduce your health care costs in retirement.
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If you have an HSA, you can use the funds to pay for medical expenses if you retire early. Qualifying expenses may include insurance deductibles, co-payments and co-insurance.
Generally, you cannot use HSA funds to pay health insurance premiums unless they fall into one of the following categories:
HSAs are beneficial because they offer triple tax savings. Contributions are pre-tax, funds can grow tax-deferred and withdrawals are tax-free if you use them for eligible expenses.
On the other hand, you need a high-deductible health plan to open an HSA. Plus, you’ll likely need one of the early retirement health insurance options above until you turn 65.
Signing Up For Aca/obamacare Health Insurance For Early Retirement
Meanwhile, some membership organizations offer exclusive benefits to members, such as affordable health insurance and other health care discounts. Examples include:
These discounts can help pay the cost of health insurance if you retire early. However, eligibility and coverage may vary by organization, membership status, and state of residence.
Planning for retirement can be overwhelming, especially if you’re going it alone. An experienced financial advisor like Satori Wealth Management can help you achieve your early retirement goals with confidence.
To see if we’re a good fit for your financial planning needs, we invite you to start your Free RetireNow™ Checkup and schedule your first 30-minute meeting. We look forward to meeting you!
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Danny G. is the founder and CEO of Michael Satori Wealth Management, Inc. He has 20 years of experience working with individuals, families and business owners in retirement planning.
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IRMAA: The Sneaky Surcharge That Makes Medicare More Expensive, Protecting Your Retirement Against a Possible Shortfall in Social Security Because “Finally” getting that Affordable Care Act (ACA)/Obamacare insurance wasn’t as easy as we thought, even though I know about the health exchanges, and our no matter how many times I’ve gone through the estimate process at the state exchange site.
But I’ll get to that. And for the big surprise we’d love to know, and you should know if you’re planning to retire early and buy an exchange plan.
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California has its own exchange, Covered California, which we used instead of Healthcare.gov, but the process is quite similar. Whether on the federal exchange or the state exchange, you can go any time and calculate what your health insurance would cost at certain income levels.
The healthcare.gov form is spread over several pages, so I can’t show it here. But the California form is just one page, and it asks for the same basic information:
I’ve been plugging the numbers into this tool for years to continually assess what we should be saving for health care in our early years of early retirement, so I knew it. And plugging in some numbers throws up information like:
Using the federal tool, I pretended we live in Mesa, Arizona, and with the same parameters, the plans there came up on Healthcare.gov:
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If you include similar income levels in different states, costs can vary dramatically for higher incomes but lower incomes.
