Start Thinking About Health Insurance Before Retirement

You’ve worked for most of your life, and now you’re getting ready to enjoy the fruits of your labors in retirement. While retirement is everyone’s goal, some people forget to consider some of the changes that will happen to their life and their finances once they do retire.

While you have most likely considered what your monthly expenses will be after retirement, you need to make sure that you’re getting full consideration to just how much of your budget your health insurance healthcare costs can eat up.

Let’s look at a few things you need to consider as you get ready for retirement…specifically how old you will be, as this can have a major impact on your healthcare costs post-retirement. Here is the basic information you will need to gather before talking to a professional.
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Retiring Before You’re 65

If you’re lucky enough to be retiring before you reach the age of 65, there’s some good news; as of January 2014, you cannot be denied insurance coverage due to pre-existing conditions. (1)

Unfortunately, it’s not all good news for early retirees. While companies are required to offer you coverage, there is no legal requirement regarding how affordable that coverage must be.

This can lead to Health Insurance coverage that costs over $1000 a month between the ages of 55 and 64. If your goal is to retire before the age of 65, you’ll need to factor this monthly expense into the financial planning you’re making for your retirement.

Retiring At 65 Or Older

Once Americans are age 65, most of them become eligible for Medicare. What many do not understand, however, is that there is not just one overall “Medicare” plan.

When most people think of Medicare, they think of the original Medicare program. There now also exists on the market the Medicare Advantage Plan. These plans include prescription drug coverage and cover many other health costs, but unlike Medicare part B, you pay just one premium each month for both the medical and prescription drug coverage.

Medicare advantage premiums range from nothing to almost $400, which for the most part is lower than Medicare part B premiums. (2)

Another Option to Remember

There is one other option to consider when trying to plan for your health care in retirement. Depending on how long you have worked at your job, you may have the option to continue your work health coverage into retirement. (3)

This can take two forms; some employers offer retiree health insurance plans, where retirees can continue to participate in the group insurance plan through the business. If an employer does not offer this option, you may be eligible to stay on your current insurance plan under COBRA.

This is a program established in 1985, which allows employees to keep their group health insurance even after reducing their hours of work or leaving their job. Of course, if you haven’t given much thought to how much (if any) of your monthly premiums are covered by your employer as a benefit to you, you may be surprised at your monthly premium amount under COBRA, as you will have to pay the full premium amount yourself.

You’ll need to do some investigation in your company to determine which of these two options are available to you, and how much they will cost monthly if either of them is available.

Everyone’s situation is different, but usually, you should plan on at least $10,000 per year per person in your household for Health Care costs, including insurance premiums, out of pocket expenses such as co-pays, and any health problems not covered by your choice of insurance, such as dental expenses.

One final note… No matter your age, and no matter the arrangements you plan to make for Health Care coverage after retirement, you should plan to review your coverage every year. Due to changes in coverages and premium amounts, you could find better coverage at a lower monthly cost.

It’s never too early to start planning for retirement; start researching your healthcare options now.

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Sources
(1) https://www.hhs.gov/healthcare/about-the-aca/pre-existing-conditions/index.html
(2) https://www.medicare.gov/sign-up-change-plans/different-types-of-medicare-health-plans
(3) https://www.healthcare.gov/retirees/

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