What to Do if You Retire Before Medicare Eligibility

Who wouldn’t want to retire early? For many people, an early retirement would be a dream come true. But if you’ve long relied on your employer’s group health insurance benefits to cover the cost of your healthcare, you will need to replace that coverage if you retire before age 65 (the age of Medicare eligibility). Going without health insurance is not recommended for anyone, but especially those over 60 who often experience more medical problems than they did in the past. So, what are your options?

Sign onto your spouse’s healthcare plan. If your spouse is still working, the easiest solution is to simply sign up with their group health insurance plan. Or, if one of you can get a part-time job that offers healthcare benefits, you can use that plan to cover both of you.

Investigate your COBRA options. Before leaving your job, check with your employer’s human resources department about COBRA coverage. Under COBRA, those who leave employment can continue participating in their group health insurance plan, although premiums are usually higher than before. COBRA coverage can last for 18 months after you leave the job, but there are some  exceptions to this rule. If you qualify for an exception, your coverage can extend for 36 months.

Shop on the state health insurance exchange. Those who don’t have employer-based coverage can enroll in a health insurance plan through their state exchange, or the federal exchange if their state does not participate. In California, the state exchange is called Covered California, but you will have to check with your new state if you relocate during retirement. Some people can qualify for subsidies to help cover part of the cost of their premiums, depending upon income and household size.

Consider a health savings account. If you’re in good health, a low-premium, high-deductible plan can help you minimize your monthly costs. If you choose this type of health insurance plan, consider a health savings account which allows you to set aside pre-tax dollars to be used toward your deductible, co-payments, and other healthcare expenses. This option is best considered while you’re still working and planning for retirement, because you can roll over unused funds each year and then continue to access the money once you retire.

It is best to research your health insurance options before diving into an early retirement, but we can help you at any time. Just give us a call and we’ll help you decide how to proceed.