Early Retirement, Part 2: Health Care - Adviser Investments

Early Retirement, Part 2: Health Care

Updated: February 28, 2022
Despite being ineligible for Medicare if under age 65, this active and adventurous couple would be able to take advantage of one of our other 5 solutions for healthcare coverage in early retirement.

Continuing your health coverage can be a snap if you retire from full-time work after you hit age 65—simply switch from your employer-based plan to Medicare. (For details, check out our podcast on Medicare planning.) But how do you handle health insurance if you want to retire earlier?

Here are five options to consider:

  1. COBRA. The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows you and your dependents to maintain health coverage under your employer’s plan for up to 18 months after you retire. The pitfall is that employers generally pay a large portion of the premium while you’re working; under COBRA, the entire expense will fall on your shoulders. And prices can be steep, especially if you have underlying conditions. Find out in advance what your employer pays so you can budget for the expense.
  2. Health Care Exchange. If the 18-month COBRA window doesn’t bridge the gap to Medicare, securing coverage through the insurance exchange at healthcare.gov is another option. When COBRA expires, you are granted a 60-day enrollment period when you cannot be denied coverage on the insurance exchange based on preexisting conditions. Some states, such as Massachusetts, offer their own exchange for health care plans. But both paths are expensive. If you expect to use the health care exchange, check healthcare.gov preemptively to shop for a suitable plan.
  3. Spousal Coverage. If you plan to retire sooner than your spouse, find out if you’re eligible to be included as part of a family plan through their employer. This can be a handy and cost-effective way to maintain health coverage before your Medicare eligibility without purchasing an individual plan on the insurance exchange.
  4. Part-Time Work. Many retirees decide to take up part-time work after leaving their full-time careers. If you think this is a possibility for you, check what health benefits may come through your part-time employer.
  5. Employer’s Retirement Package. While this avenue is far less common today than in the past, it is possible you may be eligible for health benefits in retirement through a past employer or union. (Teachers, civil servants and veterans sometimes receive benefits depending on the circumstances of their employment.) If this is something you may qualify for, make inquiries with your current and past employers.

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