Health care in early retirement can be one of the largest expenses for a new retiree. Here are 3 options you may want to consider if you are retiring before you are age 65 and need health insurance before you become eligible for Medicare:
Your first option should be to look if your former employer offers benefits or subsidies for health care insurance.
A lot of early retirees or those that accept early retirement or voluntary severance offers have some sort of employer subsidy for health insurance available.
You may be able to stay on the plan you are currently on, or at least receive a monthly stipend to help pay for another policy.
Another option is COBRA, (Consolidated Omnibus Budget Reconciliation Act).
COBRA gives workers and their families who lose their health insurance the ability to continue their health benefits provided by their employer health plan for limited periods of time, usually up to 18 months though some exceptions exist.
Under COBRA, you will have to pay not only your own portion of the health insurance premium, but also the portion that your employer paid as well. because of that, this may often be a more expensive option for health care.
However, this allows you to stay on your current health plan, which can be very important if you are happy with your current coverage. Also, if you are just using COBRA coverage to bridge the gap between your early retirement and when you are age 65 and eligible for Medicare, this may be much less hassle than finding a new health insurance policy.
The third option is to use the health care exchange which can be found at Healthcare.gov
If you use the exchange, there are a lot of options available that qualify for credits and subsidies for those with low income, which is a position a lot of early retirees find themselves in.
If you did choose a policy on the exchange, proper financial planning is very important. You can control your income be using different retirement accounts, or delaying your pension or Social Security in order to qualify you for lower cost health insurance options.
With these options and some planning, a lot of retirees are able to find affordable options for health care until they reach age 65 and become eligible for Medicare.