The prospect of early retirement sounds great. You’ll finally have time to do all those things you’ve always wanted to do, and you’ve been diligent about saving money to make it work. But what about health insurance? Securing affordable health insurance in your retirement years is one thing that many people forget. And there’s no quicker way to lose your life savings than by having your health take a turn for the worse while you’re uncovered.
While you were working, your employer probably paid the majority of your health insurance costs. But things change once you retire. The Boston Globe reports that a Kaiser Family Foundation study shows that, in 1988, 66 percent of large employers offered company health insurance coverage to employees who retired early. By 2010, that number had dropped to just 28 percent. And the way things are looking, the number will likely continue to drop. Fortunately, there are several insurance options for individuals who want to retire early.
The most feasible and accessible option is usually to get coverage under your spouse’s policy. But that’s not applicable to everyone, and it’s not always possible, so many people look to COBRA for coverage. Under COBRA you can continue the same health insurance coverage you had under your former employer’s plan for up to 18 months. Prices are often high, since the plan is no longer subsidized by your employer, but it’s still cheaper than paying out of pocket if you get sick.
Another option is to purchase an individual health insurance plan. These plans vary in price and scope, and most people can obtain an affordable plan that suits their health needs. But even better than the above options is to set up a high deductible health plan and health savings account prior to retirement. An HSA will let you save money year after year, accumulating tax-free funds to pay for future medical expenses. If you’re relatively healthy, that money accrues as you age. If you need to dip into the account to pay for medical expenses, you can. And you’ve still got that high deductible plan in place should you happen to fall ill or face an emergency.
Whichever route you choose, you can’t just wait for Medicare to kick in. Going without health insurance is a serious risk, both to your health and to your bank account. Planning ahead and ensuring you’ll be covered is the best bet for hanging onto your money and your livelihood and enjoying that early retirement.