Health Insurance Options If You Retire Before Age 65, #237
If you retire early (before 65), you’re too young to qualify for Medicare. So what are your health insurance options? In this episode of Retire with Ryan, I’ll address five different options you have to get health insurance. I’ll also share some ways you can lower the cost of your premiums to keep coverage affordable until you qualify for Medicare.
You will want to hear this episode if you are interested in...
[1:01] Health insurance options if you retire early
[3:03] Option #1: Don’t get health insurance
[4:11] Option #2: See if you qualify for Medicaid
[5:38] Option #3: Get on COBRA
[7:46] Option #4: Investigate individual plans
[8:57] Option #5: Get a plan through the ACA
[12:36] How can you save money on premiums?
[14:53] What is the biggest unknown?
Health insurance options if you retire early
Let’s explore your different health insurance options:
Option #1: Don’t get health insurance. While there may no longer be a penalty for not having health insurance, this choice comes with significant risks. Even a minor accident or illness can result in expensive medical bills, potentially impacting your financial stability.
Option #2: Go on Medicaid. If your household income as a married couple in Connecticut is under $25,000, you might qualify for Medicaid. Larger households can qualify with higher income thresholds. Medicaid offers comprehensive coverage but is only available to those who meet specific income and asset criteria.
Option #3: Use COBRA for “Continuation of Health Coverage.” COBRA allows you to maintain your current employer-sponsored insurance for up to 18 months. However, this option can be expensive because you must pay the full premium, including what your employer previously covered, plus a 2% administrative fee. Learn more about when COBRA might be the right choice for you by tuning in.
Option #4: Investigate individual plans. Many insurance companies offer individual and family health plans. A licensed health insurance agent can guide you through the available options and help identify the best plan for your specific needs and budget.
Option #5: Get a plan through the ACA. The Affordable Care Act (ACA) offers plans with income-based subsidies that make health insurance more affordable for many retirees. Some states with their own healthcare exchanges allow you to input basic information and instantly calculate your estimated monthly premium and subsidy eligibility.
Most people are eligible for some level of subsidy through the ACA, though the amount depends on your income and household size. Subsidies are now tiered, meaning there’s no longer a strict income cutoff. So even if you earn more than the Federal Poverty Level, you may still qualify for a partial subsidy.
How can you save money on premiums?
Earned income, distributions from retirement accounts, realizing capital gains, dividends and interest, all qualify as income. Your income has to be under certain tiers to earn subsidies. One way to control premium costs is by controlling where your income comes from.
For example, you could take a limited amount from your IRA and 401K and take other money from a taxable account or savings so you don’t have a lot of “income” and therefore qualify for a subsidy.
You can also take money out in advance if you know you’re going to need it. For example, you could take distributions from your retirement accounts this year and set that money aside to live off of for the next year (so your income is lower that year to qualify for subsidies).
You can do all of this knowing that when you turn 65 and qualify for Medicare, you can take more out of retirement accounts (because the threshold will be different).
Resources Mentioned
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