How Health Insurance Can Make or Break Your Decision on When to Retire
By Scott Snider
If you are nearing retirement, it is likely that you are worried about the rising cost of health insurance. According to a survey conducted by, Dr. Renuka Tipirmeni of the University of Michigan (originally reported by Reuters), 45% of individuals in their 50s and 60s are not confident they can afford health care in retirement. This makes health care the single greatest worry to those at or nearing retirement.
To put this cost into perspective, Fidelity Investments’ annual Retiree Health Care Cost Estimate study projects a 65-year couple will, on average, spend $300,000 on health-related expenses throughout their retirement. Clearly not chump change, even for wealthy individuals.
THE CHALLENGES OF RETIRING EARLY
What if you want to retire early? It becomes even more of a challenge because you might be suffering from a serious gap in your health insurance coverage. The reality is that the average worker retires at the age of 62, which is 3 years before Americans are eligible to enroll in Medicare, when a retiree reaches age 65. If you are someone who falls into this camp, what options are there to help you bridge the gap from retirement at age 62, to Medicare at age 65?
As it turns out, there are up to 7 of them:
Employer’s Group Coverage
When evaluating which health care coverage option from above is best suited to meet your early retirement needs, determining what is right for you will depend. Therefore, it’s prudent to understand how the features, benefits, and costs align with your personal set of circumstances. With that in mind, our health care for early retirement blog series will be overviewing each of these strategies in greater detail.
For the sake of brevity, this article will highlight the key points of employer group coverage. However, we will also address health sharing ministries plans, COBRA, employer’s retiree group coverage, concierge direct primary care DPC plans, non-ACA short-term insurance plans, and ACA coverage with future articles. There are more in-depth planning techniques associated with each of these health care options that you won’t want to miss, so stay tuned to our blog!
EMPLOYER’S GROUP COVERAGE
Typically, when employment ends, that employee’s health insurance coverage ends. However, it’s important to consider if someone else in your household continues to work and he or she has group coverage. In this type of situation, the retiree may be able to obtain coverage from the plan of their spouse or partner who is still working. In fact, some company plans offer coverage for a domestic partner, roommate, or parent who is a dependent of their child.
Assuming your spouse’s company allows it, you can be added to their health insurance plan by asking your spouse to contact their human resources department for further information. It is important to get added to your spouse’s plan within 30 days of losing your job-based health insurance, as it is considered a “qualifying event” under the Affordable Care Act (ACA). If you miss this window, you will have to wait until the next Open Enrollment Period to switch to a spouse’s health insurance.
Another area you may overlook is the fact that certain employers will negotiate – and provide – continued coverage if you consult or continue to work part-time. The ACA requires employers to offer health insurance coverage to employees working 30 or more hours per week. Some companies are more generous with those limits and only require 20 hours. It pays to ask.
Generally, group health insurance coverage will be the most cost-effective option if you can get it.
A HEALTH CARE PLAN IS A KEY COG TO YOUR RETIREMENT PLAN
Do you ever wonder how early retirement is a possibility for some and not for others? The fact is that the costs associated with health care is what often causes a worker to delay their retirement. However, beneath the surface, there may be more affordable options available, as mentioned in this article – albeit under the right set of circumstances.
With that said, if you are retiring before age 65, it’s paramount that you do your homework and research the various health care options that may be applicable to your specific situation. Or, if you don’t have the time or expertise, consider hiring a professional to help you understand what all the costs are, and to make the right choice for you.
Stay tuned for our next article about health care and early retirement, where we go over COBRA coverage, including when to use it and when to not use it.
VIDEO LEARNING GUIDE
For additional guidance about the 7 health care coverage options mentioned in this article, we recommend watching the following video: Health Insurance Before Medicare. This is a self-help online course created by Paragon that is meant to help pre-retirees and retirees better understand common planning issues before the age of 65 in greater detail.
IMPORTANT DISCLOSURE INFORMATION
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