Well, you’ve
finally reached the big day. You’re employer is throwing
you a big retirement party, and then you’re going to go
fishing every day. Or play bingo. Or travel.
Retirement is supposed to be a joyful
occasion – the start of the rest of your life. All too
often, it brings its own set of problems and concerns,
not the least of which is health insurance.
Early retirement in particular, before
age 65, when you become eligible for Medicare, can
present some interesting challenges in the area of
health insurance coverage. It’s a fact of life: as we
age, things start to go wrong with our health. Just at
the time in life when you’ll probably need more
insurance benefits, you’ll find the options are limited.
Some things you need to consider
before making the decision for early
retirement:
- If your employer offers
retirement benefits for health insurance, are you
sure the company will be around for a long period of
time? What if they go out of business and don’t pay
your health insurance premiums?
- What if your employer
doesn’t offer retiree health insurance?
- What if you can’t afford to
pay the premiums for an individual plan?
Early retirees have four choices when
it comes to health insurance:
- Use your employer-paid
health insurance
- Purchase an individual
health insurance policy
- Continue coverage under
COBRA
- Go without health insurance
coverage
Use your employer-paid health
insurance – The first thing you need to find out is
if your employer offers this benefit. Is it part of your
benefits package? And if it is, check out the coverage
very carefully; many times retiree’s benefits are not
the same as current employee’s coverage. Co-payments,
deductibles and important coverage like prescription
drugs are likely to be changed.
Purchase an individual plan – This will undoubtedly be more
expensive than what you were paying with your employer,
and you might run into difficulty if you have
"pre-existing" conditions – health problems that you
were being treated for prior to applying for individual
coverage. If this is the best option for you, make sure
you have the policy in hand before you’re retirement
date, so you have no lapse in coverage.
Continue coverage under COBRA – COBRA (Consolidate Budget
Reconciliation Act of 1985) is the law that was passed
to force insurance companies to extend your coverage
under a group insurance plan for up to 18 months after
you leave that group plan. The problem with COBRA is
that the insurance company can charge you up to 102
percent of the employer’s cost for your coverage, so
expect your costs to rise dramatically.
Go without health insurance
coverage – this is the absolute last
resort, and should be avoided at all costs! A single
critical incident such as a heart attack or a stroke,
can leave you devastated both physically and
emotionally, as well as financially. Don’t run the risk
of losing everything you’ve worked for all these
years.
No doubt about it, you’ll face
some hard choices and tough decisions when you
contemplate early retirement. But a little pre-planning
and smart choices can make your retirement a whole lot
more enjoyable.
