Health Insurance Options for Early Retirees

When considering early retirement there are many aspects of life to plan for, but one of the most expensive and often overlooked is health insurance coverage before reaching Medicare eligibility at age 65. Navigating the healthcare landscape can feel overwhelming, and without proper planning, early retirees may not make the best decisions for their unique needs.

5 Health Insurance Options for Early Retirees:

1. COBRA

One of the most well-known options for early retirees, or for anyone who loses employer-sponsored coverage, is COBRA (Consolidated Omnibus Budget Reconciliation Act). COBRA allows individuals to continue their employer-sponsored health insurance for a limited period after leaving their job. However, this option can be expensive, as the employer no longer subsidizes the premiums. You’re responsible for the full cost of coverage, including the portion your employer previously paid.

COBRA is available to employees of most private-sector companies with 20 or more employees, as well as plans sponsored by state and local governments. You have 60 days to elect COBRA coverage after your employer-sponsored plan ends. Coverage typically lasts 18 to 36 months, making this a temporary solution rather than a long-term option for those retiring well before age 65.

2. Health Insurance Marketplace (ACA)

Another popular option is purchasing coverage through the Health Insurance Marketplace, established under the Affordable Care Act (ACA). The Marketplace enables individuals to shop for private health insurance plans and, depending on income and household size, qualify for subsidies to lower monthly premiums.

This can be a valuable option for early retirees who no longer have access to employer-sponsored coverage. Plans can be compared based on cost, benefits, and coverage networks at www.healthcare.gov. Subsidies are generally available for those with incomes between 100% and 400% of the federal poverty level, helping reduce the financial burden. Enrollment is available during the annual Open Enrollment period or after qualifying life events, such as retirement. Keep in mind that even with subsidies, healthcare costs may still take up a sizable portion of your retirement budget.

3. Medicaid

Thanks to ACA expansions, Medicaid is now available to more low-income individuals and families than ever before. Medicaid is a joint federal and state program, so eligibility requirements vary by state. Currently, Medicaid provides coverage to more than 77 million Americans, including low-income adults, children, pregnant women, seniors, and individuals with disabilities.

In many states, eligibility has expanded to include adults under 65 with incomes up to 133% of the federal poverty level. If your retirement income is low, Medicaid may be a viable solution for healthcare coverage. To explore eligibility and apply, visit www.healthcare.gov.

4. Partner’s Employer Plan

If your spouse or partner is still working and has access to employer-sponsored health insurance, you may be able to join their plan. A job loss or retirement is considered a qualifying event, which means you can be added to their policy outside of the standard Open Enrollment period.

This is often one of the most cost-effective and convenient options, so be sure to explore it if applicable. The working partner should reach out to their HR department or benefits provider to understand the process and any associated costs.

5. Part-Time Work

Some early retirees choose to step away from full-time work but still stay active through part-time employment. Certain part-time roles, especially with larger companies, offer health insurance benefits, which can be an excellent bridge to Medicare. That said, not all part-time jobs come with healthcare benefits. If this is an important factor for you, be sure to verify eligibility and coverage details before accepting a role.

Deciding What’s Right for You

Health insurance is a critical piece of the early retirement puzzle. It’s essential to understand your options and weigh the costs, benefits, and long-term implications of each choice. Before making a decision, consult both your financial advisor and a licensed health insurance broker. Together, they can help you design a plan that fits your retirement lifestyle and financial goals.

Have questions? Feel free to contact us.