Planning for health care in early retirement is a crucial component of your overall retirement strategy. If you retire before the age of 65, you won’t be eligible for Medicare, and health care coverage can add considerably to your expenses. Through exploring COBRA, the Health Insurance Marketplace, HSAs, and spousal coverage, we help clients make informed decisions to ensure their health needs are adequately addressed. We start by assessing your personal circumstances, including financial considerations and health care requirements, to navigate the complexities of various health care plans. As a significant part of your financial picture as an early retiree, a well-thought-out health care strategy will provide peace of mind.
COBRA Continuation Coverage:
If you retire before you are eligible for Medicare and your previous employer had 20 or more employees, you may be eligible for COBRA continuation coverage. COBRA allows you to maintain your employer-sponsored health insurance for a limited period, typically 18 months after retirement. Being on COBRA coverage will not extend the Medicare enrollment period. The age 65 initial enrollment period shifts payment to Medicare first at 80% and COBRA coverage second at 20%. Those over 65 must be enrolled in Medicare in order for their COBRA benefits to be paid. If COBRA is not an option for an early retiree’s health care coverage or is cost prohibitive, then the next step is checking out policies available through the marketplace.
Health Insurance Marketplace:
The Health Insurance Marketplace, established under the Affordable Care Act, offers a range of health insurance options for individuals and families, including those retiring early. You can explore various plans with different coverage levels and premiums. Depending on your income level, you may also be eligible for subsidies to offset the costs.
Health Savings Accounts (HSAs):
If you retire early and opt for a high-deductible health plan, you can take advantage of a Health Savings Account (HSA). HSAs allow you to contribute pre-tax funds, which can be used to pay for qualified medical expenses. Contributions to HSAs are tax-deductible, and any interest or investment gains accumulate tax-free. HSAs offer flexibility and can be a valuable tool to cover medical costs in retirement while providing potential tax benefits.
Consider a Spouse’s Coverage:
If you have a working spouse who plans to continue working beyond your retirement, explore the possibility of being covered under their employer-provided health insurance. This can be a cost-effective solution, especially if the coverage is comprehensive and the associated premiums are affordable. Assess the eligibility requirements and ensure the offered coverage meets your health care needs.
We help clients weigh the trade-offs between various policy options based on their individual health status, expected healthcare expenses, and capacity for absorbing unexpected expenses.