Early Retirement – Health Insurance

Early Retirement – Health Insurance

Well, you’ve finally reached the big day. You’re employer is throwing you a big retirement party, and then you’re going to go fishing every day. Or play bingo. Or travel.

Retirement is supposed to be a joyful occasion – the start of the rest of your life. All too often, it brings its own set of problems and concerns, not the least of which is health insurance.

Early retirement in particular, before age 65, when you become eligible for Medicare, can present some interesting challenges in the area of health insurance coverage. It’s a fact of life: as we age, things start to go wrong with our health. Just at the time in life when you’ll probably need more insurance benefits, you’ll find the options are limited.

Some things you need to consider before making the decision for early retirement:

    • If your employer offers retirement benefits for health insurance, are you sure the company will be around for a long period of time? What if they go out of business and don’t pay your health insurance premiums?
    • What if your employer doesn’t offer retiree health insurance?
    • What if you can’t afford to pay the premiums for an individual plan?

Early retirees have four choices when it comes to health insurance:

    1. Use your employer-paid health insurance
    2. Purchase an individual health insurance policy
    3. Continue coverage under COBRA
    4. Go without health insurance coverage

Use your employer-paid health insurance – The first thing you need to find out is if your employer offers this benefit. Is it part of your benefits package? And if it is, check out the coverage very carefully; many times retiree’s benefits are not the same as current employee’s coverage. Co-payments, deductibles and important coverage like prescription drugs are likely to be changed.

Purchase an individual plan – This will undoubtedly be more expensive than what you were paying with your employer, and you might run into difficulty if you have “pre-existing” conditions – health problems that you were being treated for prior to applying for individual coverage. If this is the best option for you, make sure you have the policy in hand before you’re retirement date, so you have no lapse in coverage.

Continue coverage under COBRA – COBRA (Consolidate Budget Reconciliation Act of 1985) is the law that was passed to force insurance companies to extend your coverage under a group insurance plan for up to 18 months after you leave that group plan. The problem with COBRA is that the insurance company can charge you up to 102 percent of the employer’s cost for your coverage, so expect your costs to rise dramatically.

Go without health insurance coverage – this is the absolute last resort, and should be avoided at all costs! A single critical incident such as a heart attack or a stroke, can leave you devastated both physically and emotionally, as well as financially. Don’t run the risk of losing everything you’ve worked for all these years.

No doubt about it, you’ll face some hard choices and tough decisions when you contemplate early retirement. But a little pre-planning and smart choices can make your retirement a whole lot more enjoyable.

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