Healthcare Options For Early Retirees

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What Is The Full Retirement Age According To Social Security

Health Insurance Options for “Early” Railroad Retirees

The full retirement age is 66 if you were born from 1943 to 1954. The full retirement age increases gradually if you were born from 1955 to 1960, until it reaches 67. For anyone born 1960 or later, full retirement benefits are payable at age 67. However, your Social Security benefits continue to increase after you reach full retirement age until you begin receiving Social Security payments.

Kent McDill is a veteran journalist who has specialized in personal finance topics since 2013. He is a contributor to The Penny Hoarder.

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What Is The Average Cost Of Health Insurance For Retirees

There is a federal law that states that your health insurance coverage cannot be more than 8.3% of your household income. According to AARP, that means a household with an annual income of $50,000 would pay as much as $346 a month or $4,150 annually. But all plans, whether through the ACA or from private insurers, vary depending on how much you want to pay in premiums versus how much you want to pay when you get medical service. Basically, the more you pay in premiums means the more insurance covers when you have a medical cost. The range is from Bronze, where you pay 40% and insurance pays 60% are copays, to Platinum, where you pay only 10% and insurance pays 90% after copays. The Platinum monthly premium will be much higher than the Bronze monthly premium.

What Are Healthcare Insurance Alternatives

My family may be an anomaly in the FI community for paying so much in healthcare costs a year. Most of my FI peers seem to be getting subsidized healthcare through the Affordable Exchange Act. That, or they have a spouse working who has subsidized healthcare.

For a family of 4, a household need to make less than 400% the Federal Poverty Limit, or $100,400 to be eligible for healthcare subsidies under the ACA. See the chart below for your income limits by household size to be eligible for subsidies. For most early retirees, their incomes should fall within 400% of FPL.

Unfortunately or fortunately, we currently earn about $250,000 a year in retirement income to provide for our FI lifestyle living in San Francisco or eventually Honolulu. Therefore, we do not qualify for subsidies.

Due to inflation and the arrival of our daughter in 2019, we have an ultimate goal of trying to generate $300,000 a year in retirement income before our little on goes to kindergarten in 2022. But of course, who knows how our investments will perform by then given how deep we are in the bull market.

For the majority of places in America, earning up to $100,400 in retirement income to take care of a family of four should be enough. Unfortunately, we choose to live in San Francisco because this is where weve been since 2001. Given our choice, we choose to pay a premium for healthcare.

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Health Insurance Option After Retirement Before Medicare

You have a few options for finding health insurance if you choose to retire before you can qualify for health insurance. Unless you can be insured by your spouses health insurance, you may want to consider these health insurance options:

  • COBRA
  • Individual and family health insurance

Lets take a look at each option to see what works best for you.

Budget And Plan For Retirement

Affordable Health Insurance Options for Early Retirees ...

Before you retire early, you should make a budget plan that lets you fully assess your income needs when you retire. It helps to adjust the amount for inflation to the year you retire so that you don’t under-plan your needs. You should use a rate of 2% per year for the inflation rate when doing your math. This is because the Federal Reserve tries to keep the average rate of inflation at this level.

Your budget should include future health care costs with their expected growth rate. For example, the Centers for Medicare & Medicaid Services estimates health care costs in the U.S. will rise at an average yearly rate of 5.5% from 2018 to 2027 and will total almost $6 trillion in 2027.

If you’re unsure how to proceed, you may want to consult a financial planner and an accountant. These professionals can help you set aside the right amount of money for health expenses. They can also help you structure your investments in a manner that reduces your tax burden when you need to use them for income.

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Short Term Health Insurance

Another option that you have is to buy short term health insurance.

Short-term health insurance is an option you have in most states. Its a cheaper alternative to purchasing your own individual or family health insurance policy that can help bridge the gap between retirement and Medicare enrollment.

Short term health insurance is cheap, but these plans offer much less comprehensive coverage compared to a market health insurance plan.

Its also important to keep in mind that you may be denied short-term health insurance or charged more depending on your pre-existing conditions.

While this option offers less comprehensive coverage, it can help you avoid high, worst-case health care bills before you qualify for Medicare.

eHealth is here to help you find short term health insurance available in your area. Our team of experienced agents can find the perfect plan for your situation and can even help you transition from short term health insurance to health insurance once you are eligible!

What Should I Look For

  • Options. You want a choice of plans at prices that work for you.
  • Quality care. You need access to personalized treatment from doctors and hospitals, no matter where you are.
  • Discounted rates. You’ll want a range of in-network doctors and hospitals to choose from, so you can take advantage of discounted rates.
  • Annual check-ups and preventive care, at no additional cost to you.* Preventive care, such as your annual exam and screenings, help you stay healthy. These should be covered under your plan benefits.
  • Easy-to-use tools. Online tools can help you pick plans and find doctors, and predict your costs.
  • 24/7 service. When you have questions, you’ll want access to claim and health care experts who can answer them.

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Healthcare In Fire Is Affordable

Healthcare costs in America is truly a great burden for early retirees and regular retirees. But theres nothing we can do except to eat better, exercise more, save more, and invest more to help those who cannot.

After all, helping others is the American way. Ive honestly been considering relocating to Canada to reduce our healthcare cost burden. However, until we find ourselves in difficult financial times, we will hold off on this option.

High healthcare costs is one of the main reasons why the large majority of people pursing FIRE or writing about FIREe live in the heartland of America. But the reality is, half the American population lives on the more expensive coasts due to their jobs, family, desire for more diversity, or personal preferences. Not everybody feels comfortable relocating Kansas City to save on costs.

So long as your household earns below 400% of the Federal Poverty Limit, you will be able to get healthcare subsidies. However, the typical plan is usually a Bronze or a Silver plan with a high deductible. Were talking $10,000 $15,000 deductibles.

You must plan ahead for this expensive but necessary cost. Once you do, you will enjoy your early retirement lifestyle much more!

On Demand Health Care

Health Insurance Options in Early Retirement

This might be a good option if you are young and relatively healthy. On demand health care clinics offer an affordable option for everyday health problems. For example, each visit at ZoomCare costs $99, which may be a good short-term solution if you dont have a chronic illness. But this is not a good option for older folks because long-term illnesses will inevitably show up.

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Aarp Health Insurance Plans For People 50 To 64 Years

The AARP no longer has a program of new health insurance plans for people aged 50 to 64, but makes other products available in the medical field that are beneficial for this age group and beyond.

This includes dental, vision and acute care policies.

AARP Dental Insurance

The AARP dental insurance plan is administered by Delta Dental, a national network of insurers under the umbrella of the non-profit Delta Dental Plan Association. Plans are available in all 50 states as well as the District of Columbia, Puerto Rico, and the Virgin Islands.

Plans that can be used by any dentist have an annual deductible as low as $40 and pay up to $1,500 per year.

A DeltaCare plan requires the use of a network dentist and uses a copayment instead of a deductible.

Carefully add up the costs and benefits of each plan before you buy. Unlike health insurance, dental insurance in general often does not cover the bulk of any procedure, risking little benefit to the client.

A Consumer Reports review of AARPs Plan B dental insurance, for example, found it cost at least $482 per year with a deductible of $100 and a maximum annual payment of $1,000. And you pay part of the cost of all services and procedures, says CR. So you would spend at least $582 before you reap a benefit.

AARPs Preferred Provider Organization plans can be expensive, but they meet the needs of seniors. Plan A pays for three cleanings and exams per year as well as part of the cost of implants and dentures.

Use Obamacare For Early Retirement

Whether you love the program or hate it, for a few years, Obamacare did make early retirement health insurance costs much more affordable.

One of the ideas behind Obamacare was that everyone could get insurance preexisting conditions were not a factor. This was especially useful for people in their 50s and 60s most of whom have had or are facing some kind of health issue.

While you can still get coverage if you have a preexisting condition, Obamacare insurance has gotten a lot more expensive and the future of the program is in flux.

Many insurers have significantly raised premiums, in part because the Trump administration decided to stop payments to insurers that cover the discounts they are required to give to some low-income customers to cover out-of-pocket costs.

Nonetheless, if you are retiring early, it is still worth it to explore your Obamacare health coverage options on healthcare.gov.

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Health Insurance After Retirement At 62

Your social interaction experiences. When you stop operating, there are co-workers that you throw away. You must have developed a certain degree of connections with your co-worker. Eventually, you will begin losing contact with these relationships as they continue to operate while you interact with in other passions.

You lose your identification. If you are among those people who affiliate their details with certain companies or projects, going beginning may be a little bit challenging. This may lead to low self-esteem and low self-confidence.

Our Health Insurance By Year

Early Retirement Healthcare Options

The table below shows the health care plans we had since my early retirement began in late 2019. We used a mix of COBRA, Short Term, ACA, and Small Business options. The table also shows the monthly premums we paid. Any additional doctor expenses were on top of these premiums.

When Dragon Gal retired in 2017, I just put her on my workplace insurance, which we had together through November 2019.

Year
$348* $1,048

*Originally we were going to pay $550 for Dragon Gals insurance in 2022. But we decided to move her from a PPO plan to a more restrictive HMO plan to save $200 per month. She has a smaller network but since she doesnt visit the doctor much, she was comfortable with the change to save money.

My last day on the job was November 1, 2019. Because I worked one day in November, I was eligible for company sponsored insurance through the month of November. Thus, we werent responsible for buying our own health insurance until December 2019. Not all companies have this rule where insurance coverage is for the entire month, so it is best to check with HR on the company policy. Before I quit, I read the health insurance manual and did confirm that I would be covered for the entire month.

In 2021 and 2022 we are on a Small Business insurance plan. Even though Dragon Gal doesnt need all the coverage I have, we both have to have plans to be eligible for small business insurance. .

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Best For Supplementing Medicare: Humana

Humana

Humana offers excellent Medigap coverage with a user-friendly website and multiple plan options to choose from. It is our choice as the best Medigap provider for its customizable coverage options and the ability to keep the healthcare providers you trust.

  • Multiple plans to choose from

  • You can choose any healthcare provider.

  • Majority of your Medicare costs covered

  • Monthly premiums can be high.

If youre 65 or older, you may not think you need additional coverage since you qualify for Medicare. However, a 65-year-old couple that retired in 2021 can expect to pay $300,000 in healthcare and medical expenses during their retirement.

A Medigap policy can help cover your health costs, such as your Medicare deductibles, coinsurance, or copayments.

Medigap policies dont include prescription drug coverage, and your monthly premium may be expensive. Humana is licensed to offer Medigap policies in most states, but check to see if plans are available where you live.

Humana is one of the top Medigap providers, offering a user-friendly website that allows you to search through the companys Medigap plans easily. With a Humana Medigap policy, you can see any healthcare provider that accepts Medicare. Depending on which plan you choose, the majority of your Medicare costs may be covered. Humana has an A- rating from AM Best.

Finding The Right Plan For You

Whenshopping for health insurance its important to consider your currenthealthcare needs and any needs you anticipate in the future. Its alsoimportant to consider your budget and what you can afford.

Need help figuring out what coverage is right for you? eHealth is here to help. eHeath is the first and largest online health insurance brokerage, so you can be sure that you will find the best plan for you and your needs with us.

Our online tools are here to not only help save you money but help you keep your doctors when making the switch. eHealths comparison tool allows you to easily compare a large range of health insurance options, so that you can find a plan that fits your budget and coverage needs.

Start shopping for individual and family health insurance now!

And when you turn 65 and are ready for Medicare, let eHealth help you with that transition as well.

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Ways To Plan For Healthcare In Early Retirement

Early retirement has become a growing movement in the past few years, particularly with the nine-year bull market in stocks. But one critical aspect of early retirementthats commonly ignoredis how to pay for healthcare in early retirement. Its not a minor consideration either. In many households, the cost of health insurance will be the second biggest expense, after housing. Its not an exaggeration to say that if your early retirement plan doesnt make a workable provision for healthcare you probably wont be able to retire at all.

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Take Advantage Of Open Enrollment

Healthcare For Early Retirees

If you choose to purchase health insurance coverage through the marketplace, you may have to wait to do so until the open enrollment period. Open enrollment usually begins in November and lasts through the middle of December each year. You may be able to sign up for a plan outside of the open enrollment period if you experience a significant life event, such as moving to a different state, losing previous health insurance coverage, getting married, or having a child.

Read Also: Cost Of Medical Insurance In Retirement

Health Insurance Options For Early Retirees

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People who retire early before age 65, when Medicare eligibility begins need to find a health insurance option that can cover them in the meantime. Even if you don’t retire too early for Medicare, a younger spouse might need coverage to bridge the gap until he or she can qualify, too.

Tightened Income Eligibility Guidelines For Premium Tax Credits

Under Obamacare regulations, if exchange plan enrollees have earned income up to 400 percent of the federal poverty limit, they are eligible to receive premium tax credits from the federal government to help cover their cost of insurance. The eligibility guidelines help ensure that your exchange premium expenses are capped at just under 10 percent of your income, regardless of your age. However, starting in 2020 under the Senate plan, the income eligibility criteria narrows, only allowing those earning up to 350 percent of the federal poverty limit to qualify. Many exchange enrollees with modest incomes, such as early retirees on a limited budget, will find themselves no longer eligible to receive premium tax credits.

Read Also: Benefits Of Retiring At 62

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