You have been preparing for this transitionary period throughout the course of your career and you have finally arrived. Welcome to Retirement.
During this time, you begin to consider what steps must be taken to ensure an enjoyable retirement. Retirement Planning is an exciting and anticipatory time in one’s life. However, for some people, retirement may occur before they are eligible for Medicare, the government’s health insurance program for those 65 and older.
This situation raises an important question: “What should I do if I retire before Medicare is available?” To navigate this healthcare coverage gap, careful financial planning and attention are necessary.
To begin this process, the most crucial step is addressing your healthcare needs. Here are a few things you should consider:
- Current Health Conditions
- Potential Future Medical Needs
- Family Medical History
With this information, you will have a better understanding of potential medical costs associated with your retirement years. With that in mind, you are now prepared to explore healthcare coverage options. Listed below are a few considerations:
- Employer Sponsored Health Plans:
Check with your employer to see if they have designated retiree benefits. You may be eligible for a retiree group health insurance plan or have a portion of costs covered by your employer.
In addition, if available, you can seek coverage through a spouse’s employer-sponsored plan to provide continuous health insurance coverage until Medicare begins.
If your employer provides healthcare coverage, you may be eligible for COBRA (Consolidated Omnibus Budget Reconciliation Act) benefits. This allows you to continue to be covered by your employer-sponsored health plan for up to 18 months after you leave your position.
For those who are not yet qualified for Medicare, this may be an appealing alternative. The employee must, however, pay the entire cost of their health insurance premiums plus a 2% administrative fee. Because employers often cover a portion or all of an employee’s premium, retirees may be shocked at the cost of coverage.
- Marketplace Health Insurance:
You can enroll in a plan through the federal or state Health Insurance Marketplace. These plans may offer more flexible choices than COBRA. These plans are grouped into four health plan categories: Bronze, Silver, Gold, and Platinum. These plan levels are based on monthly premium, the costs associated when you need care, and the plan deductibles.
- Short-Term Health Insurance:
Another alternative for retirees is short-term health insurance. This could prove to be a more affordable option than obtaining individual or family health insurance policies. However, when compared to marketplace health insurance policies, short-term health insurance provides limited comprehensive coverage.
Short-term health insurance policies also have the ability to deny an application due to existing medical conditions. If comprehensive medical coverage is not necessary, this may be an appealing option to protect against high health-care costs before becoming eligible for Medicare.
- Health Savings Accounts (HSAs):
If you have an HSA, you can use the funds to pay for eligible medical expenses. An HSA is a tax-advantaged account that allows you to save money for certain healthcare expenses and withdraw the funds tax-free when used on qualifying medical expenses. Using these savings wisely before reaching Medicare eligibility may bring financial relief.
- Retirement Account Withdrawals:
During this transitory period, you may need to consider withdrawing funds from retirement accounts (such as an IRA or 401(k)) to cover healthcare expenses. However, withdrawals should be carefully planned since they may have tax implications and can limit future account growth.
- Part-Time Job with Benefits
Part-time work after retirement can provide many rewards with the extra benefit of healthcare coverage. Several companies recognize the importance of offering healthcare options to their employees and extend these benefits to part-time employees as well.
Given that healthcare expenses continue to increase, having adequate healthcare insurance coverage is a priority. Planning for retirement and healthcare expenses are important aspects of your financial plan.
If you would like professional assistance, our team at John G. Ullman & Associates is here to help you. Contact one of our advisors for a no obligation discussion: (607) 936-3785.