Early Retirement and Health Insurance: What You Need to Know

If you’re nearing the end of your career and considering early retirement, here’s what you need to know about insurance options.

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Planning for retirement is an important action to take at every stage of life. If you’re nearing the end of your career and considering early retirement, here’s what you need to know about insurance options.

Retirement and health insurance

One of the biggest challenges facing those who can retire early is the high cost of healthcare and insurance coverage. The standard age of retirement is 67. By this age, you are already eligible to enroll on a Medicare plan, a federally sponsored health plan for retirees and other qualified beneficiaries. However, if you retire early (before the Medicare-eligible age of 65), you likely won’t qualify, so you will have to cover your healthcare costs on your own.

Budget for insurance

The good news is you don’t have to let the cost of insurance stop you from achieving your goal of early retirement. Instead, you need to create a budget that accounts for the costs associated with early retirement.

If you’re using an online budgeting tool, it may not include insurance as it could assume that you’ll qualify for Medicare after retirement. As you create your financial plan, be sure to include what you expect to pay for insurance.

Related: 7 Easy Steps to Start a Budget

Consider other coverage options

Health insurance isn’t only available through an employer. You can qualify for a plan on your own. The private health insurance market is available to just about anyone who doesn’t qualify for employer coverage, so start comparing plans to see what works for you.

In addition to shopping for your own plan, you may want to consider these alternative coverage options:

  • Check your spouse’s or partner’s coverage: If you’re married, you may be able to get coverage through your spouse’s or partner’s employer-sponsored health plan. Many employers extend coverage to their employees’ families, and employer plans tend to be the most cost-effective. If this option is available, have your spouse or partner check with their Human Resources department to find out what events qualify you to be added to the plan outside of the standard open enrollment period.
  • Look into COBRA: COBRA coverage is offered under the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 and allows former employees to remain on previous employer health plans for a period of time. The law stipulates that all employers with 20 or more employees must continue to offer group health insurance coverage to employees after termination or retirement. Coverage can last for up to 18 or 36 months. Since the employer no longer covers a portion of the bill as part of your employee benefits package, the cost will be higher, but you may remain on the same health plan you were on before retiring.

Get the right coverage

Something to consider as you shop for coverage is that your healthcare costs will likely go up as you age. The average healthcare expenditure for someone who is 65 years old is $11,300 per year. This is nearly three times the average annual cost for someone in their 20s and 30s.

If you’re in the habit of choosing a plan with a high deductible and low premium because you’re relatively healthy, you may want to adjust your coverage as you get older. The vast majority of your lifetime healthcare costs will come after the age of 45.

Early retirement can be a great option if you have achieved the financial status you need to comfortably retire before the standard age. Make sure you’re prepared and informed, so you know what to expect as you embark on the next stage of your life.

Related: 4 Ways You Can Prepare for Retirement Now

Looking to find out more about SelectHealth coverage? Visit https://selecthealth.org/plans/individual-and-family.


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