Sixty-five may be the traditional retirement age in the United States, but did you know that seven in 10 retirees stop working before they turn 65 and the median retirement age for Americans is actually 62?
Early retirement may sound like a dream, but studies show that only about two in five retirees say they stop working earlier than expected because they can afford to do so. About one-third cite a health issue or disability for their early retirement.
Early retirement can be a wonderful thing, giving you more time to focus on your health, family and hobbies. But it can also pose challenges, especially when it comes to health insurance. That’s because most people can’t sign up for Medicare unless they’re 65 or older. Only people who have certain disabilities, permanent kidney failure, or amyotrophic lateral sclerosis (ALS) may be eligible for Medicare when they’re younger than 65.
Related: Learn about the requirements for receiving Medicare in 2024
Still, early retirees have options when it comes to health insurance. Whether you’re retiring early because you want to—or out of necessity—here are six health insurance options to help you bridge the gap before you’re eligible for Medicare.
1. Employer-Sponsored Pre-65 Retiree Health Benefits
Some companies offer pre-retiree health benefits that allow early retirees under age 65 to participate in the same group health plan as active employees with minor differences. However, these plans are the exception, not the rule, and most people lose their employer-sponsored health insurance when they stop working.
2. COBRA
The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives you the right to continue the group health benefits provided by your employer-sponsored health insurance under certain circumstances including voluntary job loss. However, COBRA typically only applies for a limited period of time, and you may be required to pay your entire premium for coverage up to 102% of the cost to the plan.
3. Spouse’s or Domestic Partner’s Employer-Sponsored Plan
Does your spouse or domestic partner have employer-sponsored health insurance? You may be able to be added to their employer’s plan. Leaving your job and losing your health insurance coverage may be a qualifying life event that triggers a special enrollment period where you can join your spouse’s/domestic partner’s plan. Have your spouse or domestic partner talk to their HR department for details.
4. Medicaid
If you meet certain income requirements, you may qualify for Medicaid. Medicaid provides health coverage to millions of Americans and is administered by states, according to federal requirements. Keep in mind that doctors are less likely to accept patients with Medicaid compared to those with private insurance or Medicare, so you may have to switch doctors or pharmacies.
5. Public Marketplace Coverage
Established by the Affordable Care Act, the Health Insurance Marketplace helps people shop for and enroll in health insurance. The federal government operates the Health Insurance Marketplace, and it provides plan options to anyone, including those who aren’t yet eligible for Medicare. Some states run their own Marketplaces. You can’t be denied coverage for any pre-existing condition, but costs of plans can vary widely.
6. Private Insurance
Another option is to purchase health insurance privately through a health insurance company, broker, agent or online health insurance seller. Some companies even offer short-term insurance solutions that help pre-Medicare consumers bridge the gap until they become eligible for Medicare.
Final Thoughts: Going Without Isn’t Wise
If you’re retiring a little bit early, you may be tempted to forgo health insurance altogether and wait it out until you can sign up for Medicare. However, you never know when a critical illness or injury could land you in the hospital and cause medical bills that cost you tens or hundreds of thousands of dollars. People under 65 have several solid health insurance options, so talk to an insurance expert to determine the best course of action for your unique situation.
Want more? Check out our blog, Medicare Medigap plans explained
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