What Are Your Well being Insurance coverage Choices If You Retire Earlier than Medicare?
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Early retirement is a very common goal, but how exactly do you define “early”? For most people, “early” means quitting work before benefits such as Social Security and Medicare are available to retirees. Uncertainty about whether retirement assets can last without these programs is often the reason people postpone retirement.
If you dream of sleeping in the world or traveling the world before you are eligible for retirement benefits, all is not lost. As with any goal, you need to decide to tackle it head on and find ways to make it work in your financial plan. Here are some ways to meet your medical needs if you are retiring before age 65.
Option 1: Take out insurance through the federal market
· · You have the option of finding health insurance that is similar to that of your employer – Due to the implementation of the Affordable Care Act, your employer coverage and Healthcare.gov coverage offer similar coverage, deductibles, and premiums.
· · Depending on your income, you may be eligible for subsidies – The cost of health insurance coverage through the Federal Exchange depends on how much taxable income you report. In some cases, these subsidies can adjust the cost of coverage to what you are currently paying through work.
· · The cover can be very expensive – Without the subsidies, you are exposed to the full burden of healthcare costs. Depending on where you live and what the deductible is, the cost can be as high as $ 1,000 or more per month. While you may want to keep the deductible you have through your employer, you may need to increase it to make the premiums affordable.
· · Changes in legislation related to the Affordable Care Act can make planning difficult – The laws governing the plans available on the exchanges have changed in the past and there is reason to believe that more changes will follow. This can make it very difficult to plan the cost of this line item in your budget for the future.
Option 2: use the COBRA cover
· · You can keep the same coverage – The Consolidated Omnibus Reconciliation Act (COBRA) is a rule that requires employers to offer you access to coverage after a certain period of time. Instead of looking for a similar plan, you can use the same plan.
· · It can still be at a lower cost than what is covered by it Healthcare.gov – The cost of coverage is essentially the same as the premiums you would normally pay plus the costs paid by your employer. If you work for a large company, the total cost can still be cheaper than the cost of replacing it alone due to cost savings that may be negotiated by the employer.
· · In most cases, insurance cover is only available for 18 months – As the cover only lasts a maximum of 18 months in most cases, COBRA is only a temporary solution for early retirement. Once coverage is gone, swapping can become your primary option.
· · It’s still way more expensive than what you’re likely to pay for today – If your employer pays a large part of the cost of your insurance benefit, you may experience a sticker shock.
Option 3:: Private health plans
· · Cost efficient– Since these plans do not conform to the rules of the Affordable Care Act, you may be able to find adequate coverage for your situation at a significant discount. The premiums for this coverage can also be more stable.
· · Custom and flexible coverage– There are many types of cover that you can use to create a cover that suits you. This coverage can often be purchased at any time throughout the year
· · No coverage for pre-existing conditions– One reason this coverage is less costly is that there is often no coverage for pre-existing conditions.
As you can see, all of these options have some downsides, but you may not know how much of a downside unless you do your research. Here are some things you can do to start planning right now:
· · Contact your HR department: If you think COBRA is a likely option, contact your Social Services department to find out how much it costs today. If you have insurance on the Federal Exchange, rate it now. Yes, there is a reasonable chance that prices will change, but it does give you a basis to plan on.
· · Improve Your HSA: If you have an HSA, make sure you are getting the most out of your contributions to the account now. You can use the account to pay COBRA tax free. HSAs can not Generally, they’re used to pay tax-free health insurance premiums from the stock market or other private insurance, but they can be used to cover medical expenses out of pocket (and, finally, they can also be used to pay Medicare Part B premiums become).
· · Consider investing in vehicles that don’t show up as future income: By investing in accounts like the Roth 401ks and Roth IRAs, you can lower the amount of taxable income you will get in a year from withdrawing from these accounts. This can help you qualify for health care exchange subsidies, and ultimately, it allows you to keep your Medicare premiums down as well.