Healthcare is one of the largest expenses in retirement, and one of the biggest risks for people who retire before age 65.
Retirement Tip of the Week: Before the open enrollment period ends on Jan. 15, peruse Affordable Care Act plans to see which will be best for you in early retirement – even if you don’t need to enroll right now.
Nearly 14 million people have signed up for health insurance through the Affordable Care Act, either on the federal exchange, in their state’s exchange or on HealthCare.gov, during this enrollment period, The Wall Street Journal reported. But even those who don’t need to enroll just yet should consider looking through the options if they plan to retire before age 65.
Most workers do not qualify for Medicare until age 65, which means people who are hoping to start retirement sooner and leave the workforce completely could be without health insurance if they’re not covered elsewhere, such as through a spouse’s plan. Even couples where one spouse becomes eligible for Medicare also have to worry about the younger, non-working spouse and his or her healthcare.
Some financial advisers suggest shifting to part-time work, or finding a less stressful and more enjoyable job that offers health insurance until retirement. That isn’t always the ideal plan, however, in which case, looking for individual health insurance is crucial.
“A lot of people coming into early retirement have been on a group plan for quite some time and it can be shocking to look for health insurance on their own,” said Nathan Teater, manager of small business sales at eHealth. There are so many factors to consider – what budget the retiree has, what plans cover their favorite doctors, what health issues are addressed, for example. Americans picking out their own plans should compare across various carriers when shopping for individual health insurance.
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There are also more subsidies available, though not everyone is aware they are eligible for those, said Paul Wingle, vice president of individual and family plans at Aetna. For example, there used to be a cut off for assistance on the exchanges for anymore making 400% or more of the poverty line, but that barrier was removed, Wingle said. “If you’re talking about people who are near or at retirement age, they tend to be older, and because they’re older, insurance costs more,” he said. “This assistance is especially helpful for them.”
Individuals interested in analyzing plans can check the federal or state exchanges or Healthcare.gov. Aetna and eHealth also have portals on their site to compare plans. This isn’t the only time someone has the option to sign up for a plan.
Americans get 60 days once losing a plan to enroll in another, so for workers planning to retire early at some point this year they can use the open enrollment period to research what they’ll want later on. “You’re still able to get the same plan at the beginning of the year,” Teater said. Open enrollment is also a good time for anyone, including those who have already retired early, to review their current coverage and adjust based on their needs and budget.
Healthcare is crucial for most people, but especially those who will soon be on a fixed budget and aren’t yet eligible to sign up for Medicare. Medical costs become more prominent as a person ages, and these expenses rise year after year. The average couple retiring at age 65 can expect to spend $300,000 in retirement on healthcare alone, not including long-term care, according to estimates from Fidelity.
Medical expenses are also one of the top reasons for bankruptcies, and can make or break a person’s retirement goals – or security.
“You don’t want to get to retirement and then have a health crisis that wipes out a significant portion of your retirement savings,” Wingle said. “Sometimes you don’t plan for something to go wrong for your health. There’s always a risk though.”