If you’re considering early retirement, you may be wondering what you’ll do for health insurance coverage in the years before you qualify for Medicare. You don’t want to be worried about how to cover medical costs when you leave your job - and you don’t want to get hit with a penalty for not being enrolled in healthcare, either. So, what do you do?
COBRA allows you to use the same healthcare coverage that you had at your previous employer for up to 18 months after leaving your job. Keep in mind that, while this can be convenient to maintain your level of coverage, you lose any employer subsidy you had before - meaning you’re responsible for 100% of your premium. This can get pretty expensive for those who haven’t prepared for the additional cost of coverage one way or another.
Retiree Health Insurance
Although this is rare, some employers offer health insurance programs specifically for retirees who don’t qualify for Medicare yet. If this benefit is available to you, double check to make sure you’re eligible, and check to see that the coverage offered through this program is comparable to what you were receiving while you were employed full-time. It may only cover your health insurance, not your spouse’s or other dependent’s - so make sure you read through the benefits carefully!
Spouse’s Health Insurance
If you and your spouse are retiring at different times, and they still have health insurance options through their employer, this is probably your best bet. Most employer-sponsored health plans are lower cost than anything you’ll find through private insurance or on the healthcare marketplace. Retiring, or quitting your previous job, qualifies as a life event that gives you eligibility to enroll your spouse’s plan. Note: you only have 30-60 days (depending on your health insurance provider) to enroll in your spouse’s health insurance after a qualifying life event. Don’t miss your window!
Affordable Care Act Marketplace Health Coverage
If you don’t qualify for Medicare, aren’t able to join a spouse’s insurance plan, and still need to find an alternate solution - The ACA Marketplace might be an option to explore. Depending on your income, you may even qualify for subsidies that reduce the total cost of your coverage.
Like most health care plans, the ACA categorizes their coverage into three levels: Gold, Silver, and Bronze. Remember that this isn’t always the same coverage as the insurance you held as a full-time employee, so make sure that the coverage level you select is right for you! When you’re researching ACA health care options, a few things to look for are:
Understanding what’s covered - and what’s not - can help you make an ideal decision for you and your family.
Do Your Research
Many times, when someone is looking to retire early, they panic about health care coverage. This sense of urgency pushes them to make a decision about insurance enrollment during the years before they qualify for Medicare - and they often don’t check all of the boxes when researching what the best option available is. COBRA, your spouse’s health insurance, retiree health care coverage, or the ACA marketplace are all valid options - but there are other, less well-known options available.
Health insurance is still technically mandatory by law for 2018. While this might change in the future, it’s still unwise to go an extended length of time without any form of health insurance. This decision has the potential to be fairly expensive, and you want to work to minimize your insurance costs while maximizing your coverage as you could face rising medical costs as you age throughout your retirement. One option is to speak with a financial planner about your health insurance needs. They can help you determine what coverage plan makes the most sense for your unique financial situation, and how to leverage your coverage over the course of your years as a retiree. Want to learn more? Contact Tony at Wisely Advised today!
Tony Velasquez is the Founder and Managing Director of Wisely Advised an Illinois Registered Investment Advisor. Wisely Advised provides comprehensive financial planning and investment advisory services to both individual and business clients. You can learn more about Tony and his firm here.
Tony Velasquez runs Wisely Advised, LLC a full-service Registered Investment Advisory Firm offering comprehensive financial planning and investment advisory services to individuals, families, and businesses.
Whether it's traveling, being at the beach, or at his family's ranch in Texas, Tony loves enjoying time with his family and friends.