The age of 65 was considered the retirement age of the United States with the passage of the Social Security Act of 1935. Various programs offered through the Social Security Administration, such as continuing income and health insurance stable, they aim to provide resources to older Americans who are no longer part of the workforce. . While the youngest you can be to start claiming monthly Social Security payments is 62, most people don’t qualify for Medicare health insurance until age 65.
So, if you’re thinking about retiring early, it’s important to learn about potential Medicare pre-retirement health insurance options. here are eight to get you started.
Some employers voluntarily offer health insurance plans to retirees who leave. these plans may be similar to the insurance you had when you were an active employee. To make health insurance affordable for their employees, most employers subsidize about 70% to 80% of their active employees’ health care premiums (the monthly amount you pay to have insurance).
However, an employer is not guaranteed or required to subsidize a retiree’s plan, which means you could be responsible for 100% of their premium. the average annual premium for an employer-sponsored plan before employer subsidies is $7,740 for individual coverage and $22,220 for family coverage.
However, all employers must offer leaving employees the option to continue their group health plan for up to 18 months under the Consolidated Omnibus Budget Reconciliation Act (or Cobra). There are, of course, exceptions, such as if you were fired for cause.
While this means you can keep your employer’s insurance, you’ll likely have to cover the full cost of the premium. Most employers don’t, and don’t have to, subsidize cash coverage, making this option quite expensive.
If your spouse is still working, you may be able to enroll in your employer-sponsored health insurance plan. Like retiree benefits, your spouse’s coverage could be more affordable if the employer subsidizes the cost of the premium. however, your spouse’s premium will increase when you add members to your plan. be sure to explore any cost implications before jumping into your spouse’s plan.
The health insurance marketplace is a government-run program that allows people to purchase private insurance.
You may qualify for subsidies through tax credits and cost sharing if you meet income and household size requirements. these subsidies could give you significant savings on premiums and out-of-pocket costs (subsidies for qualified single-person households can range from $12,880 to $51,520), but if you don’t qualify for the subsidies, the program can be expensive.
You can visit healthcare.gov to apply and see if you qualify for subsidies. or you can use a calculator to get an estimate of what you qualify for.
Out-of-market insurance generally refers to plans purchased directly from an insurance provider or broker rather than the government health insurance marketplace. Working directly with an insurance provider can provide more options than what is listed on the health insurance marketplace. but buying direct can be more expensive without government or employer subsidies.
Short term insurance offers limited coverage for up to one year with the option to renew twice (for up to three years total coverage). coverage with these plans may be scant. But this is why short-term insurance plans often cost less than major health insurance plans, such as those found through employers, the health insurance marketplace, or direct purchase. the average annual premium for short-term health insurance was $1,284 for individual coverage.
If you need more comprehensive coverage, these plans may not be the best option. many benefits (mental health treatment, prescription drugs and lab tests, among others) are not always covered. in addition, you may be denied coverage for pre-existing conditions, leaving you with the full cost.
Some organizations offer members lower insurance premiums by using their participating numbers to negotiate better prices or by simply spreading the cost of care among their members. premiums for association-based health plans are estimated to be $8,700 to $10,800 lower than premiums for full-coverage private plans.
Association health plans and shared health plans are two common member-based health programs and they have key differences.
- association health plans. with these, members often have similar interests, phases of life, or professional experiences. people pay a membership fee to access health benefits. With a larger group of members, the organization can negotiate lower prices with health insurance companies.
- shared health plans. members, who generally share beliefs or are members of a faith-based organization, pay a monthly contribution. This money is held in an escrow-like account and used to cover eligible medical costs for its members on a case-by-case basis.
When you’re a member of these plans, your monthly insurance cost may be lower, but many services may not be covered. organizations can choose to deny coverage for certain types of care, either to keep costs down or to maintain living standards outlined in community guidelines.
It is important to note that neither association health plans nor shared health plans are actual health insurance plans, they are programs you can join to lower your health care costs. In addition, health care providers are not required to accept the discount offered by the organization.
It may sound counterproductive to get a job in retirement. But a part-time job can be a great way to get the health coverage you need. You can also take advantage of subsidies from an employer group health plan. Just keep in mind that employers are not required to provide health insurance for part-time employees. And in some cases, coverage for part-time employees can be drastically reduced. Be sure to ask about part-time worker benefits before becoming an employee anywhere.
Please note: The more comprehensive an insurance plan is, the higher the premiums tend to be, so consider how much coverage you really need compared to what you can afford. Are you in good general health, or do you have health problems that require more complex care?
When it comes to ranking all of your early retirement health insurance options, there’s no perfect answer. because there is no perfect plan, nor a one-size-fits-all answer. We are all individuals with a unique set of needs and circumstances, especially when it comes to our health and finances. It’s important to take stock of your health care needs and your budget as you research your options.
and you can always connect with a financial advisor about how early retirement, including pre-medicare health care, will affect your overall financial plan.