Consider yourself lucky if you retire before 65. But what will you do until you’re eligible for Medicare?
Early retirees face high premium costs for individual health plans. A married couple retiring prior to 65 will often spend $20,000 to $30,000 per year for health premiums, until they become Medicare-eligible, says Leah Miller, CEO of Red Anchor Wealth Management in Charleston, South Carolina.
“The health care gap can be quite the black hole for retirement funds, and early retirees tend to not see it coming,” says Miller.
Health expenses are increasing at almost double the rate of inflation, cautions Nathan Garcia, managing director of Westbourne Investments in Alexandria, Virginia.
Here are ways to plug the gap.
- Work part time. “It’s not even about the money, but being eligible for employer-sponsored health insurance. This is the reason you see so many elderly people working at Home Depot, Walmart or Starbucks,” says Maksim Netrebov, president of Maks Financial Services in Princeton, New Jersey.
- Consider COBRA. Find out if your employers’ benefits follow you into retirement, says Sean McDonnell, a certified financial planner with Advance Capital Management in Southfield, Michigan. If not, you may elect COBRA coverage for up to 18 months. “It’s often the best deal available,” says Miller.
- Consider options such as coverage through your spouse’s insurer, or a state-sponsored exchange. Know what you can afford. “Remember to factor in deductibles and the annual out-of-pocket maximum to build your budget,” says Garcia. Bottom line: “Get some form of health insurance. Health expenses are the No. 1 reason for bankruptcy.”