Bryan Knoebel, CFP®, Author at Personal Capital

Thinking about early retirement? Then you need to consider your health insurance options and the added expenses healthcare will pose. Retiring before the age of 65 means you’re not eligible for Medicare, so you will need to consider alternatives that work best for you and your healthcare needs until you hit the qualifying age. Early retirees should start with these health insurance options: Former Employer’s Insurance Plan State HealthcareExchanges COBRA Spouse’s Plan Medicaid Health-Share Plans Former Employer’s Insurance Plan (Or Group Retiree Coverage) Many people do not fully realize how much of their medical costs are subsidized by their employers. Check with your company’s human resources department to see if retiree health insurance is an option. This means you remain grouped with the actively employed population as a retiree. If you are eligible to receive insurance through your employer after retiring, it will likely only be available until Medicare coverage begins. State Healthcare Exchanges In 2010, the Affordable Care Act created healthcare exchanges for each state. These marketplaces are where people without health insurance can find information about their health insurance options and purchase healthcare policies. Depending on income, retirees may qualify for tax subsidies to help offset the cost of their health insurance acquired from an exchange. A retiree can sign up for coverage through designated enrollees or their state’s healthcare exchange website 60 days prior to, or 60 days after, the effective date of retirement. COBRA COBRA (Consolidated Omnibus Budget Reconciliation Act) mandates that employers offer coverage identical to the plans in which a terminated or retired employee was enrolled prior to the separation of service. COBRA benefits can typically last up to 18 months, giving early retirees some time to seek alternative coverage options. It is important to note, that the retiree is responsible for the full cost of the coverage, including the portion that their former employer subsidized. Before electing this option, it usually makes sense to see if there is an alternative on the open market that is priced better or suits your needs more closely. Spouse's Plan If your spouse is still working and receives health coverage through their employer, you might be able to enroll in their plan. Typically, employees may only make changes to health insurance during the open enrollment period, which normally takes place one month out of the year. Your spouse would need to verify their employer’s deadline with their Human Resources Department. You may want to retire around this time so you don’t go without health insurance. Additionally, if you have dependent children, they can stay on your spouse’s plan until they turn 26. Medicaid To receive Medicaid, you’ll need to meet a number of requirements, including an income that is considered to be low or very low. you can apply for Medicaid any time of year —it does not have Open Enrollment Periods. If you do qualify, this may be your most affordable health insurance option. However, Medicaid doesn’t offer as many choices to their recipients in terms of providers compared to other health insurance options. Health-Share Plan Also known as “health sharing ministries,” these plans are based on the idea of sharing bills with individuals who share similar values. This health insurance option is typically organized under ministries or other religious organizations, where healthcare sharing programs operate outside of traditional health insurance. In some cases, it may be more restrictive but has the benefit of costing less than traditional health insurance. Another thing to consider is health-share plan cooperatives make their own rules on what they will and will not cover. So you could potentially pay out-of-pocket for certain medical needs. Takeaways When you consider the additional health insurance expenses, you might be convinced to work longer, which is a very reasonable solution. Working longer can extend your subsidized medical care coverage from your employer and give you more time to save for retirement. If you’re ready for early retirement then we suggest using Personal Capital’s retirement planner to see exactly where you stand and how healthcare costs might affect your retirement goals. Or talk to a Personal Capital financial advisor to create a personalized retirement plan. Suggested Next Steps For You If you are thinking about early retirement, sign up for Personal Capital's FREE financial tools and access the Retirement Planner. The Retirement Planner will allow you to run several different scenarios against your portfolio, and see what percent chance of success you have of your money lasting throughout your retirement years. Consider talking to a fiduciary financial advisor about your early retirement plans. A good financial advisor can help you with several aspects of the planning process around early retirement, including your options for health insurance.

Bryan Knoebel, CFP®

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