Many teachers choose to retire before age 65. If you plan on leaving teaching early, you may be wondering what your early retirement health care options are. Filling the gap years when you aren’t yet eligible for Medicare is important, and you have several options to consider. But don’t wait too long! Many of your health care options will require some forward thinking, and timing is important.
1. Consider COBRA health coverage.
Your employer is legally required to keep you under their health care umbrella after you retire or are laid off. If you like your existing plan, this might be a good option as you’ll be able to keep all your current providers. That being said, COBRA has a big downside: Their premiums are significantly higher than the health care premium you paid while you were employed.
It’s also important to keep in mind that COBRA only extends your coverage by 18 months. This means that if you retire several years before 65, you’ll still have to deal with a health care coverage gap.
2. Browse the marketplace.
If you’re looking for affordable health care during your retirement gap years, you might consider looking through the public marketplace. HealthCare.gov offers several selections, and depending on your location, you may be surprised at how budget friendly the options are. Keep in mind that recent legislative changes to the Affordable Care Act may impact whether or not you’re approved for coverage and the total cost of your premiums.
Your best bet is to look around. If you feel like you aren’t finding coverage at the cost you need, don’t jump at the first option. Do some digging and see what factors are influencing your premiums and whether you qualify.
3. Get coverage through your spouse or partner.
Do you have a spouse who is planning to work several years after you retire? This is likely your best and most affordable option for health care coverage. Retiring qualifies as a life event that gives your spouse the option to add you to their plan without waiting for open enrollment. However, remember that adding yourself to your spouse’s plan will cause their premiums to increase, so budget accordingly.
4. Look into short-term health insurance.
In the event that the gap in your health care coverage is less than a year but COBRA coverage is beyond your budget, consider short-term health insurance. These insurance plans cover the vast majority of medical expenses but are only intended to bridge the gap for a few months.
5. Keep location in mind.
Many retirees consider relocating during their retirement years, and if you’re struggling to come up with a plan of action for your health care coverage, you have the option to move to a state with more affordable options. According to US News and World Report, the states with the most affordable health care are:
- New Hampshire
- South Dakota
- North Dakota
Not a bad list of options!
6. Consider private insurance.
If you have a specific set of insurance needs, private insurance is likely your best option to find the coverage you want. Private insurance is typically the most expensive. However, if you have it in your retirement budget to pay a higher premium for a few years until Medicare kicks in, you’ll likely be able to find a plan with a good co-pay and deductible rates.
7. Remember your health savings account.
An HSA (health savings account) is a form of savings that is attached to HDHP (high-deductible health plan) coverage. If you have HDHP coverage, an HSA may be a good way to continue saving for medical costs during retirement.
Of course, a HSA isn’t a replacement for insurance. However, if you’re looking at plans that don’t quite provide the coverage you need, an HSA paired with HDHP insurance coverage may be able to help cover the price gap until you qualify for Medicare.
While your HSA can be used for qualifying medical expenses before you retire, it may make the most sense to save the funds for retirement medical care. Your contributions to the HSA don’t expire and roll over from year to year. This makes it an excellent vehicle to help increase your medical budget during retirement.
8. Don’t forget supplemental coverage.
Whichever health care plan is right for you, don’t forget your supplemental insurance coverage. It’s likely you’ll require dental, vision, and critical illness coverages that are no longer available to you upon your retirement—so look at separate insurance carriers for those options.
9. Ask a professional.
Health care coverage for retirees who are under 65 can be an emotionally and financially complex topic. You want excellent coverage at a reasonable price until you qualify for Medicare, but it might feel like you’re searching for a unicorn.
If you’re struggling to find what you need, consider asking a professional. Your current HR contact or a certified financial planner are both good options.
Have more questions about early retirement or want to share more early retirement health care options? Come and join the conversation in our WeAreTeachers Helplinegroup on Facebook.
Plus, can I retire early? and how much to save for retirement.