Health insurance is seen as a huge hurdle for early retirees, but the answer to finding affordable coverage could be simpler than you think.
It is one of the most discussed reasons why people refuse to retire before the age of 65. There are many reasons why someone does not retire, including lack of income, fear of running out of money, loss of identity, boredom, and a sense of purpose. Surprisingly, one of the biggest we come across is health insurance. Read also : The mental and physical health of infection preventionists suffered in the pandemic. As we age, the presence of health insurance becomes as much a necessity as income. Some see this as a higher priority as it allows insurance to dictate if/when they can retire.
You can start collecting Social Security from the age of 62 or until the age of 70. However, you cannot access Medicare until age 65. The gap between age 62 and 65 forces many early retirees to delay retirement until they can access Medicare to ensure they have adequate health insurance. But maybe it doesn’t have to be that way.
Enter Obamacare
On March 23, 2010, the Affordable Care Act (ACA) was enacted to ensure that all Americans have the right to health insurance. This new law came with a lot of criticism and confusion. At the time, many of the criticisms of the ACA concerned the possibility of higher premiums, low levels of coverage, increased taxes, and limited enrollment.
Twelve years later, we have a much better understanding of the ACA and how it can benefit us all, including those under 65. See the article : First likely case of monkey pox in Cook County reported in Forest Park, health officials say.
When we mention the ACA as an option for those who want to retire at age 65, the first reaction is usually not positive. People assume that insurance coverage is terrible and expensive. This is not true. The ACA has matured quite well since its inception and gives you control over how much coverage you want and need.
The My Home State Program website, www.nj.gov/getcoverednj/, provides New Jersey residents with a comprehensive and easy-to-understand list of coverage options. Providers are listed so you can make sure your doctor is in the networks. Plans are administered through companies you know, such as Horizon Blue Cross Blue Shield and AmeriHealth. The best part is that you don’t need a PhD. to understand the offers. Surprising, I know.
Residents of other states can learn about their options at healthcare.gov or find information about their particular state’s program by visiting www.healthcare.gov/marketplace-in-your-state/.
The Cost May Surprise You – in a Good Way
The cost of health insurance through the ACA, however, causes real confusion. This is another big disincentive to retiring before age 65 without health care through your employer or your spouse’s employer. To see also : Social Notebook: Mental health support evident at Signs of Hope. The monthly cost to you, the enrollee, is based on your projected household income for the year you need coverage. Here’s the good news: When you retire, you may have little or no income.
For clients retiring before age 65, most of the money they live on first could be money in their checking/savings accounts or money other than IRAs. These are your most liquid assets. If that’s the case, when you apply for health insurance, your low income could make your premiums much lower than you expected. Your health insurance through the ACA can be significantly reduced in cost, or maybe even free. In retirement, you can determine your sources of income. This kind of flexibility can help.
The registration process is simple. If you plan to retire, this is considered a “life event,” which qualifies you to apply and enroll upon retirement.
Maybe Retirement Is in Your Reach Afterall
This is not an endorsement of the ACA, but a way to provide options and clarity on a topic that can be uncomfortably confusing. It’s annoying to see people putting in their final years of work to reach the magic number of 65. If they had known they had this option, they might have enjoyed a few more years of retirement.
If you’re thinking about retiring before age 65 but think you can’t because of health insurance, we encourage you to investigate this option. The websites mentioned above are easy to navigate and easy to understand. We have seen this method used as an effective tool for early retirement.
We’re not health insurance experts, but we’ve seen the health insurance market mature nicely, and you could benefit from it if you expect to retire early.
This article was written and presents the views of our contributing advisor, not Kiplinger’s editorial staff. You can check advisers’ records with the SEC or with FINRA.
T. Eric Reich, CIMA®, CFP®, CLU®, ChFC®
President and Founder of Reich Asset Management, LLC
T. Eric Reich, President of Reich Asset Management, LLC, is a Certified Financial Planner™ professional, holds his Certified Investment Management Analyst certification, and holds the Chartered Life Underwriter® and Chartered Financial Consultant® designations.
