Retiring at 62 or Before? 6 Ways to Cover Your Health Costs for an Early Retirement

retiring at 62

The Big Takeaways…

  • Using spousal health benefits can save you from heavy premiums, and often guarantees high quality coverage during your gap into Medicare eligibility.
  • Certain programs such as the Affordable Care Act or COBRA can be good strategies if you need to self insure, as well as using a Health Savings Account.
  • Try the NewRetirement Planner to determine how an early retirement might impact your ability to cover health costs.

Taking an early retirement — retiring at 62 or before — may be something you have been planning for years, but one aspect of an early retirement that is often overlooked is the cost of health insurance.  Early retirement usually means that you are leaving work before the age of 65 when you qualify for Medicare.  So, if you are retiring early, you will need to self insure or find a creative option.

Here are 6 possibilities for early retirement health insurance:

1. Use Obamacare for Early Retirement

Whether you love the program or hate it, for a few years, Obamacare did make early retirement health insurance much more affordable.

One of the ideas behind Obamacare was that everyone could get insurance — pre existing conditions were not a factor. This was especially useful for people in their 50s and 60s — most of whom have had or are facing some kind of health issue.

While you can still get coverage if you have a pre existing condition, Obamacare insurance has gotten a lot more expensive since Trump took office. Many insurers have significantly raised premiums, in part because the Trump administration decided to stop payments to insurers that cover the discounts they are required to give to some low-income customers to cover out-of-pocket costs.

Nonetheless, it is still worth it to explore your Obamacare health coverage options on

2. Early Retirement Insurance — Are you eligible for COBRA?

In certain circumstances if you lose your job, you can still be eligible to benefit from your company’s group health plan for a limited period of time. Using the Consolidated Omnibus Budget Reconciliation Act (COBRA), you can expect to be paying about 2% more than the full cost of health insurance on your old company’s plan,” says founder and CEO of Northwoods Financial Planning, Corey Purkat.

“It is going to be more expensive than if you were still employed at a company, but it will still be less expensive than paying for your health insurance on your own,” he says. “The only way someone wouldn’t be eligible for COBRA would be in situations where there was a very good reason a person was let go, such as a criminal investigation.”

3. Spousal Benefits Can Enable Insurance for an Early Retirement

An option that you may have if you are married is to use your spouse’s health insurance plan, Purkat explains.

“I see in many cases, one spouse may be retiring early, but the other is still working full-time,” he says. “This is a great situation, because if you can cover the years before you turn 62 with your spouse’s insurance, it can save you a lot of money.”

4. Self-Fund with an Health Savings Account

If you are retiring at 62 or before — or anytime before Medicare eligibility at 65 and are really left with no other options, you can always self-insure, explains Purkat.

“Unfortunately this can be the most expensive option,” he says. “But, if you have time on your side, I always recommend a Health Savings Account (HSA) to help with some of the high co-pays.”

An HSA is a good option, regardless of your age, and can be a huge help if you retire early and need funds to pay for a high deductible health plan or other out-of-pocket health care costs.

“This type of savings account has triple tax benefits and also grows tax-free as you let it sit there,” Purkat says. “With this option, it makes it a bit easier for someone to self-fund their health insurance and then use funds from an HSA to pay for premiums and costs in between times.”

5. Insure, But Stay Healthy

The biggest thing to remember about early retirement, though is to stay active and healthy, Purkat shares.

“The worst thing you can do in retirement is sit around the house all day,” he says. “Be sure to exercise, stay involved in your community or even work a part-time job. These acts will all contribute to your overall health and well being and can help keep your health care costs lower.”

6. Have a Good Retirement Plan

Covering your health costs whenever you retire — early or late —  is important.

Having an overall plan for how to fund retirement is absolutely necessary.

A really good retirement plan defines how much money you have now and into the future and it describes how much you are spending now and into the future.  The NewRetirement retirement calculator is an easy to use tool that helps you figure this out.  This tool was recently named a best retirement calculator by the American Association of Individual Investor’s (AAII).

How will you cover health costs in retirement?


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