For many, early retirement represents a well-earned reward for years of disciplined saving and smart financial planning. However, limited health care options can strain your retirement budget or even discourage you from retiring early.
The full retirement age is 66 if you were born between 1943 and 1954, and it increases gradually until it reaches 67 for those born from 1955 to 1960. However, retirees aren’t eligible for Medicare until they reach 65. This gap between workplace insurance and Medicare coverage often leaves early retirees searching for affordable health insurance.
If you plan to retire between the ages of 55 and 64, learning about affordable health care options can help you develop a realistic budget. Luckily, recent health care changes have the potential to help many people make their early retirement dreams a reality. Let’s explore these options for filling the early retirement health care gap to see which one is right for you.
COBRA
The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows employees to temporarily keep their employer-provided health insurance while looking for new options. It’s designed to help individuals avoid a gap in insurance after a job loss.
Typically, choosing COBRA means your coverage will be the same as the coverage you had when you were employed. However, COBRA isn’t a long-term option.
Important factors to consider before enrolling in COBRA:
- You have 60 days to enroll in COBRA after employer-sponsored benefits end.
- The coverage period for COBRA only lasts 18 – 36 months.
- Your spouse and other dependents are also eligible for COBRA even if you don’t choose coverage for yourself.
- You may be required to pay the entire premium out of pocket plus a 2% administrative fee.
Health Insurance Marketplace
The Health Insurance Marketplace, established by the Affordable Care Act (ACA) helps people of all ages who don’t have access to employer-sponsored plans enroll in health insurance. Costs for insurance plans in the Marketplace vary widely, based on coverage and eligibility for tax cuts. Depending on your household income, you may be eligible for a subsidy that can make deductibles and copays less expensive.
Losing employer-sponsored health insurance provides you with a qualifying period to enroll in ACA health care plans. You can purchase a policy up to 60 days before or after you lose qualifying coverage. You can get an idea of how much your health insurance will cost by using the Health Insurance Marketplace calculator.
Medicaid
Medicaid is a federally funded, state-run public health insurance program that provides health insurance coverage for low-income adults, children, pregnant women, elderly adults, and people with disabilities. Early retirement means your household income is likely to drop significantly, making you more likely to be eligible for coverage.
Since the program is state-run, eligibility requirements vary from state to state. You can learn more about your state’s program and find out if you qualify at Medicaid.gov. You can also apply for Medicaid at the Health Insurance Marketplace. It’s important to note that while Medicaid provides full coverage for most conditions, not all doctors accept patients with Medicaid. This means you might have to switch doctors.
Also, if you are eligible for both Medicare and Medicaid (dually eligible), you can have both. The programs will work together to provide you with health coverage and lower your costs.
Spouse’s Employer-Sponsored Plan
If you’re married, you may have an option to be added to your spouse’s insurance plan. Losing your income when you leave your job is often considered a qualifying life event which would allow you to take advantage of a special enrollment period to join your spouse’s or domestic partner’s plan.
When joining your spouse’s plan, it’s essential to consider eligibility requirements and coverage options. Getting coverage through a spouse’s plan may cost more than going through the Health Insurance Marketplace or qualifying for Medicaid. However, it’s often less expensive than enrolling in private insurance without assistance.
Private Insurance
You don’t have to be employed or be part of a group or specialized program to purchase health insurance. You don’t have to meet any income or special eligibility requirements to get a private health insurance plan. However, since tax credits don’t apply, this health care option is typically one of the most expensive. Choosing private health insurance is often the best option if you aren’t eligible for other programs or if you have specific coverage needs.
There are various ways you can seek a private insurance plan that matches your needs and budget. HealthCare.gov provides an online finder tool to help you locate private health plans outside of the marketplace. Other options for finding coverage include seeking out a health insurance company, broker, agent, or online health insurance provider.
Retiree Benefits
This entry in our list of health care options isn’t always available, but it’s always worth looking into. Although the majority of employees lose health insurance coverage when they leave their jobs, some companies offer retiree health insurance benefits to cover the gap until Medicare kicks in. Your retiree plan may have slightly different benefits than plans for active employees, but it should be similar to the group plan you’re accustomed to.
Unfortunately, this option is more likely to be the exception than the norm and isn’t offered by many companies. Before finalizing your retirement, consult with your HR department to inquire about retiree health insurance and your eligibility.
Finding Health Care Options That Meet Your Retirement Needs
If you’re interested in retiring earlier than the traditional retirement age, finding the right type of health insurance is an important part of developing an accurate budget. While you may be tempted to do without health insurance until you’re eligible for Medicare, an unexpected event could leave you with thousands of dollars of medical debt.
No matter how healthy you are, an unexpected injury or illness could disrupt your retirement plans. Fortunately, there are plenty of affordable health care options available for those under 65. Many popular retirement destinations, including 55+ communities, offer access to quality health care alongside amenities designed to support your lifestyle, making them a great choice for planning your next chapter. With the right health care plan and the right community, you can enjoy peace of mind and focus on making the most of your retirement years!
