How To Retire Early Without Losing Your Health Coverage

Getting health insurance when you retire early is no longer the impossible task it used to be (Photo by RawPixel)

Almost every day, we talk to people who are at least considering retiring before their 65th birthday.

65 is, of course, the age at which you become eligible for Medicare.

For many early retirees, their biggest concern is how to hang on to their health insurance until age 65 when they can sign up for Medicare.

Here’s some often surprising news. Retiring early – and staying fully insured – is now easier than ever.

Many pre-retirees aren’t aware of major changes in insurance laws that now make health insurance very accessible, even if your personal health history has had more than a few rough patches.

Thanks to the ACA, or Affordable Care Act, obtaining health insurance after leaving a job, but before becoming eligible for Medicare, has gone from “mission impossible” to “definitely possible.”

If you’re faced with early retirement, you’ll have a few choices. But the important thing is that retiring early before you’re eligible for Medicare is now no longer the big deal it used to be.

Choice #1. If you work for a larger company, you may be offered COBRA when you leave your job. Under COBRA, you can pay the full monthly premium for your medical insurance and keep it in force for 18 months.

If you’re 63 ½ or older when you leave your job, you’re in luck. You can pay for COBRA coverage until the coverage runs out at age 65, and then sign up for Medicare. Perfect timing!

One downside: COBRA coverage isn’t cheap. You need to pay for the employee’s share of the premium plus the part the employer used to pay. That adds up to a lot, easily topping $1,000 per month for individual coverage. Plus, COBRA coverage is only offered to workers at larger companies. If you work for a smaller firm, like many Americans, you’re out of luck.

Choice #2. You can buy your own policy through your state’s health exchange. This is a good move for people whose income is low enough to qualify for a government subsidy. If your income is below certain limits (about $49,960 for a individual, or $67,640 for a couple, or $103,000 for a family of 4), tax subsidies will cover much of the health insurance cost.

Under the ACA, insurers can’t deny you coverage or charge you more based on any pre-existing conditions. That’s a huge improvement over the previous situation, where pre-existing conditions in your 50s or 60s could bar you forever from obtaining affordable coverage. To see what’s available, both in terms of policies and premium costs, visit www.healthcare.gov/get-coverage or a site like www.healthsherpa.com.

Choice #3. Buy your own policy through an insurance agent. This is a good option if you don’t qualify for a subsidy on the government exchanges. You’ll pay the full cost of the policy, but the plan may offer more features and benefits, or perhaps a better network, than those available on the state-run exchanges. The cost will depend on what kind of policy you buy, your age, and where you live. You can find an agent and shop for policies by visiting www.nahu.org or an insurance site like ehealthinsurance.com.

The Takeaway: Whatever you do, don’t be tempted to go bare and forego coverage all together. Health coverage can protect you from the devastating cost of a medical emergency, so explore your options to find a policy that keeps you healthy, active and financially sound.

About Mari Adam

Mari Adam, Certified Financial Planner™ and President of Adam Financial Associates Inc, has been helping individuals and families chart their financial futures for over twenty-five years. Have a question about your financial situation? Ask Mari!

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