How Can I Save Money
You may enjoy your retirement close to your own backyard. Or, maybe you spend your days far from home. The right health insurance plan can help you save money on out-of-pocket costs. When you visit in-network providers, you get access to the lower rates that they’ve negotiated with your health plan. When you see an out-of-network provider, your costs are typically higher. That’s why it’s important to choose a plan with in-network health care providers and hospitals in your area.
Compare Health Insurance Plans For Retirees
If youre looking for health insurance coverage as a retiree, its good to take advantage of any government programs you qualify for and shop around to ensure that you have the coverage you need. For example, even if you qualify for Medicare, you may need to purchase supplemental plans for services that are not covered, like dental work.
When evaluating different plans, there are a few different factors that you should consider. You should make sure that the insurance company has in-network providers in your area and they offer a plan that meets your specific health needs. You should also compare policy premiums and deductibles, waiting periods, and customer satisfaction.
Who Are The Experts
These questions were answered by a panel of retirement and healthcare experts:
Steve Chen, Founder, NewRetirement
Bill Smith, NewRetirement Advisors, Certified Financial Planner and Chartered Financial Analyst
Mark Miller, Founder, Retirement Revised, Social Security and Medicare Expert
Fred Riccardi, President of the Medicare Rights Center
Michelle Dash, Financial Advisor, CFP ® Candidate
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Get Coverage Through Your State Or Medicaid
If you’re retiring earlier than age 65, you may qualify for Medicaid. There are strict income limits, however, so make sure you qualify based on your state.
States calculate who’s eligible based on a percentage of the federal poverty level, and you can find your state’s percentage here.
While it’s not the right fit for everyone, it’s worth checking out if you know your income in retirement will be small.
What To Consider When Planning For Early Retirement
Maybe you’ve had a difficult year health-wise. Maybe your workplace has changed so much and it no longer feels like a good fit, or your adult children need support with childcare for the grandkids. If you want to retire early, take some time to consider your options for healthcare coverage while you wait for Medicare to kick in.
Lets look at the issues.
Your retirement age: Should you retire at 60? At 55? At 62? Only you can answer that question, but whatever you decide, youll want to understand the impact of reduced benefits on healthcare planning and budgeting.
Medicare: Unless you are eligible due to a disability, youre not eligible for Medicare until you turn 65, regardless of when you stop working.
Social Security: Workers who retire early will receive reduced Social Security benefitsas much as 30% less.
Post-employment healthcare planning: Are you sure you wont lose employer-sponsored insurance by retiring early? Find out before you make your next move. If you will no longer be covered, find out what health insurance for retirees under 65 will cost you and whether your budget can maintain the expense until Medicare kicks in.
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Retire Early With Health Insurance: Closing The Coverage Gap
What are the options for retirees to secure health insurance if they retire before they become… eligible for Medicare?
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Retiring early is very difficult, but it can be within reach, especially for diligent savers with low expenses, individuals with a strong pension, and high-earning executives with substantial assets. Figuring out when you can retire at any age is driven predominantly by your expensesnot savingsso determining how much income you will require each year to support your lifestyle is the key component of the equation. Particularly for investors who wish to retire early , estimating your health care costs and insurance options is a pivotal factor in determining whether your retirement dreams can become a reality.
Currently, there are five main options for retirees to obtain health insurance coverage before they reach age 65 and can enroll in Medicare:
These options vary significantly in terms of cost, availability, and plan coverage, so its important to understand the pros and cons in advance.
Employer-sponsored health insurance for retirees
COBRA coverage
Public exchanges
Private insurance
A spouses health plan
Working health care costs into your retirement plan
What Are The Us Federal Governments Retirement Benefits
Federal employees receive generous retirement benefits. Many people know that federal employees receive a pension. However, few people understand the full complement of federal retirement benefits. Employees in the federal employee retirement system, also called FERS, receive three benefits. A retirement annuity . A supplemental pension from ages 57-62. A continuation of their FEHB plan into retirement.
Previously, I have written extensively about all of the benefits of federal employment. Today Ill try to explain federal employee health insurance benefits after retirement.
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How Should I Handle Health Insurance If I Retire Early
Obviously, its easier if neither you nor a member of your family has a pre-existing condition. In any event, heres some strategies for obtaining low cost insurance you may want to consider.
- Buy a high deductible health insurance policy. You can insure a family of four for less than $100 per month with a $10,000 per year deductible. If you believe your familys medical expenses will be minimal, this is an effective strategy.
- Move to a foreign country. There are many delightful places in Europe and Latin American with socialized medicine. Comprehensive health insurance in these countries is a fraction of the cost of similiar coverage in the United States.
- Game the system. By doing some sophisticated estate planning , you can become indigent in the eyes of the law and get free health care in the United States. When the hospital sends you the bill, you can merrily round file it and escape payment.
If you or a member of your family has a pre-existing condition, and you want to remain in the United States without gaming the system, there is another way to continue your health insurance:
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Consider Consulting Or Freelancing
Likewise, you might see retirement as a second act to sell your services to the highest bidder. Your years of experience would prove valuable to many employers looking to hire someone seasoned in their line of work and not in need of training.
Because youve got the chops to be an authority in your industry, you can command top dollar for your knowledge and expertise. This keeps your skills relevant and gives you the option of remaining attached to the workforce for earning extra money.
You might also lean into a different career path closely related to your previous line of work. For example, if you worked in accounting for 30+ years, you might think about translating this experience into becoming a financial content writer for large online publishers or a local newspaper.
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Budget And Plan For Retirement
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 healthcare costs with their expected growth rate. For example, the Centers for Medicare & Medicaid Services estimates healthcare 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.
What To Do For Health Insurance While Youre Waiting On Medicare
Medicare is a federal health insurance program for adults 65 and older, and for some younger Americans who have a qualifying disability. The program was originally designed to take over for health insurance in retirement after employer coverage has ended, but has grown to be the go-to health plan for adults over 65.
Medicare is broken into four main services:
- Medicare Part A: This part covers hospital stays, stays in long-term health care facilities like nursing homes or hospice, and at-home care .
- Medicare Part B: This part works like regular health insurance, covering doctor visits, preventive services, and outpatient care.
- Medicare Part D: This part offers prescription drug coverage.
- Medicare Part C: This part works a little differently. Part C is a type of Medicare health plan that contracts Medicare Part A and Part B services to a private insurance company . These plans are also commonly referred to as Medicare Advantage Plans.
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Retiring At 62 Or Before 9 Ways To Cover Your Health Costs For An Early Retirement
There are a lot of hurdles to overcome when figuring out how to retire early before 65. However, early retirement health care is one of the most fiscally challenging. Medical care is going to be expensive no matter when you retire, but the picture is more serious for those who retire early, by choice or otherwise.
Medicare isnt available until age 65 and self-insurance in your 40s, 50s, and 60s can be prohibitively expensive. Never mind that you typically face more health challenges as you age and are therefore more likely to use health care.
Use the NewRetirement Retirement Planner to find out now if you can afford an early retirement and explore the following 9 possibilities for how to cover early retirement health care costs:
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NerdWallet, Inc. is an independent publisher and comparison service, not an investment advisor. Its articles, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only. They are not intended to provide investment advice. NerdWallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. Examples are hypothetical, and we encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Our estimates are based on past market performance, and past performance is not a guarantee of future performance.
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Get Personalized Estimated Health Care Costs
As part of our advice service, youll receive a retirement plan that includes a personalized health care estimate for your retirement years, taking into account your health status, coverage choices, retirement location, income, and more.
If youre already a Vanguard Personal Advisor client, set up an appointment with an advisor to access the health care cost estimator.
Effects Of Access To Post
Insured workers might hesitate before deciding to retire early , because of concerns about post-retirement health insurance. For many in their age bracket who might face high medical costs, the need to continue health insurance coverage can be especially important. For the near elderly who are considering early retirement, what are the choices in health insurance coverage, and how are those choices likely to influence their decision about early retirement and their health insurance coverage if they retire?
RAND researchers Lynn Karoly and Jeannette Rogowski find that policy initiatives that aim to increase access to affordable post-retirement health insurance are likely to motivate some of the near elderly to retire early. In addition, with more options for obtaining post-retirement insurance, insured workers who do retire early are more likely to be insured after retirement.
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Federal Employee Retirement Health Benefits And Medicare
There are a lot of factors when trying navigate FEHB, Medicare, and Medicare Advantage .
As someone decades away from being about to apply for Medicare, I havent studied them deeply and do not feel qualified to discuss this in great detail. To get more information on the topic, I interviewed Brian Sigwart. Brian is a certified financial planner with Cummins and Associates Financial Group. He has been providing financial wellness classes for over a decade at over 25 federal agencies in the DELMARVA area.
Affordable Care Act Exchanges
Before the ACA went into effect, early retirees often faced breathtaking health insurance premiums, if they could get coverage at all. Insurers were allowed to deny people with even minor preexisting conditions and charge much higher rates for older people. Insurers also routinely capped payouts, so that people with serious illness or injury were potentially exposed to catastrophically high bills.
Those practices ended with the ACA, which also provides most people with subsidies to help make health insurance more affordable. You can start your search for a policy at HealthCare.gov, which will point you to your states insurance exchange or to the federal one if your state doesnt offer an insurance marketplace.
Most people have to wait for open enrollment in November to get a policy, but losing coverage because of retirement is considered a qualifying life event that allows you to take advantage of a special enrollment period.
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Policies Can Affect Insurance Coverage After Retirement
Health insurance options after retirement have implications for the health insurance status of retirees who leave their jobs before becoming eligible for Medicare. In a recent study, Karoly and Rogowski find that policies mandating access to continuation benefits such as COBRA and HIPAA can increase the likelihood that workers who retire before Medicare eligibility will be covered by health insurance upon their retirement. More specifically, because continuation and portability mandates allow more workers to buy coverage without preexisting-condition exclusions, and, in the case of COBRA, at group rates, these policies can increase the number of workers who will be insured after retirement.
The analysis, based on data from the 1984 to 1987 SIPP, shows that since the enactment of COBRA, which became effective in 1986, early retirees are less likely to become uninsured than are their counterparts who retired before COBRA was in effect. In the post-COBRA period, the probability of retaining one’s own employer coverage after retirement increased compared to the pre-COBRA period, from 72.0 percent to 78.5 percent. At the same time, COBRA appears to have reduced the probability of moving from own-employer coverage to being uninsured. Before COBRA was enacted, this probability was 7.5 percent in the post-COBRA period, it is 2.9 percent.
Planning Ahead For Future Costs
After your immediate health-coverage needs are sorted out, itâs a good idea to talk with your financial advisor about ways you might prepare for your long-term health care needs, says Storey. The cost of regular health care is often dwarfed by the cost of long-term care, which can easily top six figures per year8 and isnât, for the most part, covered by Medicare. Seventy percent of Americans who are currently age 65 or older will require some type of long-term care during their lifetime9, and long-term care insurance premiums increase the older you are when you apply for coverage. If you havenât already purchased it, your financial advisor can help you determine whether long-term care insurance makes sense for you or your spouse, factoring in age, medical history and other considerations.
In addition, if you know youâre about to leave the workforce â whether youâve decided to take early retirement or you believe a layoff is imminent â itâs a good idea to ask your doctor and your dentist whether there are any procedures they would recommend you take care of while youâre still covered by your employerâs health plan.
And, of course, it canât hurt to start exercising and eating right, if youâre not already. As Storey notes, âThe best health insurance is staying healthy.â
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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.
