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Health Insurance for Early Retirement - Explore Your Coverage Options

Edward Neeman Published: June 14, 2018 Updated: August 27, 2018

Senior couple dancing on beach

Planning for retirement can seem like a daunting task, especially if you are hoping to retire early. For many, it will be the first time they will live on a fixed income, which means stricter budgets, and financial preparations for the unexpected. Unfortunately, for seniors, the unexpected has become synonymous with healthcare.

If you’re looking to retire at the age of 60, or anytime before you turn 65 years old, you probably won’t qualify for Medicare yet. Medicare is the federally funded and managed healthcare program for seniors that helps offset the rising cost of healthcare. However, even with Medicare, most Americans are still spending a fortune on out-of-pocket costs, according to the Kaiser Family Foundation. So what does that mean for those trying to retire early who don’t qualify for federal or state assistance?

Projecting Health Insurance Costs For Your Early Retirement

Today is serving to be a particularly difficult time to project your healthcare costs, especially since the future of the Affordable Care Act (ACA) is in jeopardy. Under the ACA, you may be eligible for health insurance subsidies, or premium tax credits, that would help offset your health insurance costs, and those subsidies can be huge.

For example, Kaiser Family Foundation (KFF) did a study to see exactly how much seniors would pay with and with and without a subsidy through the marketplace, and what they found was shocking.

The Kaiser Family Foundation looked at a low-income senior, who was 60 years old and lived in Knox County, Ohio. When the 60 year old senior would be able to purchase a Silver Plan for a mere $83 a month after subsidies are taken into account. However, that same 60 year old senior would be spending around $775 without those subsidies.

Understand that the example above only applies to those who are eligible for premium tax credits or health insurance subsidies. Seniors who aren’t low income, or don’t meet the subsidy requirements may still be shelling out the full price for health insurance. What’s worse is health insurance rates increase every year, so budgeting accordingly can prove to be difficult.

According to a 2015 CNN report, senior couples will end up paying at least $250,000 for healthcare over the course of their retirement, and that’s only accounting for people who don’t retire early. Expect those figures to jump with every year you retire before the age of 65.

Factors To Consider

People are like snowflakes when it comes to healthcare, because medical costs won’t be the same for anyone. Here are some factors to consider when budgeting for your early retirement health insurance.

  • Your Income: Remember, when you retire your income will be fixed, and may not adjust for inflation or the rising costs of healthcare. Also, if you make too much money, or don’t qualify for health insurance subsidies, expect to pay more for health insurance.
  • Medical History: If you are already taking daily prescriptions, or have a family history of disease or health issues, it’s important to consider associated costs. For example, if you have a history of arthritis in your family, and you are at a higher risk, it’s important to budget whatever extra costs are associated with arthritis just in case.
  • Medicare Supplemental Insurance: You may get cheaper health care once you turn 65 years old, and are eligible for Medicare. However, Medicare only covers about 80% of your medical expenses, so it’s recommended to purchase Medicare Supplemental Insurance to cover the remaining 20% of your healthcare costs.
  • The Unexpected: The unfortunate reality is that as you age, your body won’t perform like it used. Seniors are at higher risk for a number of medical conditions that they may not have planned for, like Alzheimer's, arthritis, or diabetes. Make sure to plan according.

Your Early Retirement Health Insurance Options

Now that you have some background on what to expect in regards to your healthcare costs, it’s time to take a look at some of you early retirement health insurance options.

As mentioned earlier, early retirement puts you in health insurance limbo, so to speak. Unless you have a company that offers retirement benefits or pension, you won’t be eligible for employer sponsored coverage, and you won’t qualify for Medicare, for the most part. Basically, if you are retiring early, finding health insurance will be your responsibility. Not to worry, First Quote Health is hear to help you plan for your future with the best early retirement health insurance options.

Health Insurance Marketplace

If you are low income, the ACA marketplace is probably your best bet. As mentioned before, you can qualify for a health insurance subsidy to help lower your healthcare costs. The only downside is the marketplace is only open for 45 days out of the year, so unless you can wait or qualify for a special enrollment period, you may want to look into other options until the Open Enrollment Period.

Private Health Insurance

The private health insurance sector is alive an well, and if you don’t qualify for a subsidy, it may be your best option for affordable health coverage, especially if you don’t have an extensive medical history. The private health insurance sector still offers coverage to those with pre-existing conditions, and still may be a better option than the ACA marketplace with the expected rise in premiums. First Quote Health can help you compare affordable health insurance rates in your area. See what’s available in your area here.

Gap Or Supplemental Health Insurance

If you want to pay as little as possible each month for coverage, you can opt for short term health insurance plans, or high deductible plans. Each will require you to spend more out-of-pocket, but if you couple a high deductible plan with a supplemental insurance plan, you could end up saving big. Read more about gap health insurance options here.

Early retirement is possible, just make sure you take your healthcare costs into account, as it will most likely be your most expensive cost in retirement. Do your homework, explore your options, and don’t cut corners.