One question I've gotten a few times about the possibility of retiring early is "what are you going to do about health care?" That's a very good question, right? If you retire at 55, what are you going to do to secure health insurance before you reach the age where Medicare kicks in?
Well, US News has some options for health care before 65 as follows:
- Retiree medical insurance. To encourage employers to maintain their healthcare coverage for early retirees, the healthcare reform bill promised to reimburse employers for high healthcare costs for retirees age 55 and older who are not yet eligible for Medicare. So far, more than 5,000 employers have signed up for the Early Retiree Reinsurance Program.
- COBRA coverage. You can buy back into the group health insurance plan offered by your former employer using COBRA continuation coverage, typically for up to 18 months if your company had at least 20 employees. If your company offers you COBRA when you get to be 63 1/2, then you could use COBRA for 18 months and then go right into Medicare.
- Other forms of group coverage. If your spouse is still working, you may be able to get health insurance through his or her employer. A lot of professional associations and societies and some churches have group coverage.
- Individual insurance. Shop around carefully when selecting an individual insurance policy.
- High risk pools and pre-existing condition plans. Many states have high-risk pool programs that help people with medical problems get health insurance.
- Part-time job. If you are still able and willing to work in retirement, some companies provide health benefits to part-time employees.
- Exchanges coming in 2014. People who retire before age 65 will be able to purchase health insurance through insurance exchanges beginning in 2014, with tax credits for those with low and moderate incomes. On July 1, 2012, you could take COBRA for a year and a half and then be able to purchase health insurance through the exchanges in 2014.
So far, here are my leading options:
- Don't fully retire, but work enough at my current or another employer to get health care benefits for my family.
- Put my wife to work and get coverage through her job. She will be free to work once our kids graduate and since her background is in health care, I'm guessing that medical benefits would be part of any package she'd receive.
One thing I will NOT do is voluntarily retire without some sort of health care option in place. It's too risky to do so (for many reasons) and I will not do it.
For those of you who retired early (or those planning on it), what did you (or are you planning to) do regarding health care coverage?
"Put my wife to work"? I'm sure you didn't mean that to sound as authoritarian and patriarchal as it does, right? Does she want to be "put to work" just as you're retiring?
Posted by: Stephanie | May 21, 2011 at 01:32 PM
Some states have an extension for COBRA. In California, CalCOBRA is a near-automatic, 18 month extension of COBRA. The premium rate is very similar COBRA; only instead of paying the premium to the company's administrator, the premium is paid directly to the medical plan.
This would get you a total of 36 months of coverage at rates that might be better than buying an individual plan (depending on the individual's health and age, of course).
Posted by: KaseyD | May 21, 2011 at 01:46 PM
Oh yeah...
"Free to work" is an oxymoron.
And, FMF, Don't you think your wife might like to "retire", too? Hasn't she earned retirement from her 24/7 job, just as much as you have from your job? Going back to work when the kids are grown and you retire sounds to me like jumping from the frying pan into the fire....not fun.
But perhaps she would want to get out of the house when you begin hanging around disrupting her established routine? IMHO, it should be her call what she does outside the home in retirement; it should not part of your unilateral retirement plan.
Posted by: KaseyD | May 21, 2011 at 02:03 PM
In September 1992 when I retired at age 58 my wife and I were still covered by my employer's health coverage. I don't believe there was any cost. I had been with the leading aerospace contractor in the country for 32 years and that was one of the benefits. After I retired they took over another major defense contractor and many of the great retirement benefits that I still receive were phased out for the current workforce. When we first went on Medicare we joined an HMO and the monthly premiums were $0 because they were making enough from the government's contributions. At that pointed we dropped my ex employer's health coverage, but later on when the HMO started charging monthly premiums we resumed my former employer's group plan that today costs us $291.04/month for the two of us.
1934 turned out to be a great year to be born for these reasons.
The Cold War was in full force -juicy defense contracts - an expanding workforce - good raises.
I never had to go to war.
I never had a single day of unemployment.
My education, (1951-1956) in England, and (1956 -1963) in Canada, Denver and California, up to an MS degree in engineering only cost me the price of textbooks, my employers paid the rest.
Those were the Eisenhower through George H. W. Bush years that were quite prosperous. The National Debt went from $270Billion to $4Trillion in 36 years. How things have changed to the state of affairs the country now finds itself 19 years later with a $14 Trillion National Debt and $1+ Trillion annual deficits for many years to come!
Posted by: Old Limey | May 21, 2011 at 02:12 PM
I am currently 47 years old. Once I hit 55, I will qualify for retirement healthcare benefits with my employer. I really enjoy my work, so I am not sure at what age I will ultimately decide to do something else. It is good to know that I will have this option, however.
Posted by: JimL | May 21, 2011 at 03:40 PM
"The National Debt went from $270Billion to $4Trillion in 36 years. How things have changed to the state of affairs the country now finds itself 19 years later with a $14 Trillion National Debt"
Going from $270B to $4T in 36 years is 7.7% annual increase.
Going from $4T to $14T in 19 years is 6.8% annual increase.
Posted by: Jim | May 21, 2011 at 04:27 PM
Jim:
I realized when I wrote it that the percentage increases are quite close however what disturbs me the most however is the sheer size of the National debt since the interest we have to pay on it is taking an increasing share of the annual budget and leaving less and less for meaningful programs that benefit us all. If interest rates rise as many feel they must, the problem is exacerbated.
At some point not too many years into the future the rapidly rising costs of the top four components - Dept. of Health & Human Services - Social Security Administration - Department of Defense - Treasury Department, will leave precious little for discretionary spending on all of the other government programs that the country needs, such as Energy - Transporation - Education - Agriculture - Housing - Labor - NASA etc. etc.
Posted by: Old Limey | May 21, 2011 at 08:07 PM
COBRA costs a FORTUNE. I know, as I have had to carry it for 12 months now. I will be saving >$300/month when I go on medicare 6/1. This is HUGE as my unemployment nets only $330/week.
Posted by: Holly | May 22, 2011 at 05:59 AM
Old Limey,
I share your same concerns. Having a similar rate of increase on a much larger base is very alarming. When factoring the costs of these programs in future years, it cannot be sustained.
If our own personal household debt levels has dynamics like these, we would be headed for bankruptcy in very short order.
Posted by: JimL | May 22, 2011 at 08:34 AM
I agree, COBRA is not usually the most cost-effective choice, although I would recommend everyone sign up until they get something better. Your options after that are much better if you already have COBRA. Under HIPAA you are guaranteed coverage as long as you don't let your existing coverage under COBRA lapse.
I retired at 44 with the same issue. I signed up for COBRA and shopped for an individual policy with a high-deductible that was HSA compatible saving me hundreds of dollars over the cost of my COBRA policy.
http://money.usnews.com/money/blogs/On-Retirement/2011/04/13/how-to-find-health-insurance-in-retirement
http://money.usnews.com/money/blogs/On-Retirement/2011/04/27/how-to-save-money-on-health-insurance
Posted by: Sydney | May 22, 2011 at 11:36 AM
Please note that the first and last options listed are part of the new health care reform bill. If conservatives succeed in repealing this law these options would go away. These are real options that would help real people. My father was forced to retire at 55 due to health problems. His employers plan only covers 5 years of health care before Medicare, meaning at age 60 he will have a 5-year gap of coverage!!! The exchanges coming in 2014 are his best chance at an affordable health care plan to bridge that gap. So my point to conservatives is this - your actions affect real people in real ways.
Posted by: Mark B. | May 23, 2011 at 08:14 AM
This is something I think about often, though at 36 I have a ways to go. I also have to think about the fact that my wife is almost eight years younger than me, so even if I could afford to retire 'on time', there would still be her coverage for all that time to worry about unless she was working that whole time.
Of course everything will change ten times between now and then, so who knows!
Posted by: Money Beagle | May 23, 2011 at 09:46 AM
I have a problem that we are going to leave the people who are currently on entitlements and make a train wreck for those in the future. Solution? If you don't need SS or Medicare- give it back. Maybe "need" is even too loose- maybe can afford to do it on your own. Why does Paul Ryan leave them out? Why is the majority of the Tea Party filled with those who are fully entitled?
These programs were not created for those who saved plenty for retirement- or had great pensions- it was created for the rest. My father and grandfather both gave their SS checks to charity.
I am not sure why my children should pay for you and not for me or themselves......
Other solution- get out of the middle east. Let Israel take care of itself and do North American oil. As a wife and mother of soldiers---I would appreciate it if they were fighting for us and not for Arab oil.
Wake up America!
Posted by: Jan | May 23, 2011 at 10:56 AM
The thing is that it seems to me people act as if the national debt ballooned all of the sudden out of the blue in the past couple years. Weve had a massive debt for decades which has been growing at a steady pace virtually the whole time. It doesn't seem people were panicking over it 5, 10, 20 years ago. Why is that?
Posted by: jim | May 24, 2011 at 03:47 PM
FMF, you seem to suggest that if you want health insurance, you have to get it through a job. But what about private insurance? A high-deductible plan will cost about $200/month for someone in their fifties. Not cheap, but still affordable.
Posted by: Concojones | May 28, 2011 at 12:33 PM