Bridging the healthcare coverage gap

Healthcare options for early retirees

18 Oct 2019

Questions you can ask your UBS Financial Advisor

  •  How will you bridge the healthcare coverage gap if you retire before age 65?
  •  What healthare options are available to early retirees and which is right for you?
  • How do you go about estimating costs?

Whether you're retiring at age 42 or age 62, leaving the workforce at any point prior to your 65th birthday could be considered "early" in terms of your healthcare options. If you're considering early retirement, it's important to determine how you'll bridge the coverage gap from when your employer's health plan ends until Medicare eligibility kicks in at age 65.

The healthcare options available to early retirees are vast and they all come with their own advantages and disadvantages. The list below is not exhaustive, but we hope it can be used as a starting point for your search to find the coverage that's right for you.

Employer-sponsored retiree health coverage

Some employers offer healthcare coverage to their retirees. This coverage is likely to be similar to what was received prior to retirement, and the employer typically subsidizes a portion of the costs for a certain period of time, or until age 65. Retiree coverage isn't common and the provisions are likely to vary greatly from one employer to the next, but it's certainly worth asking your current employer what options might be available.

COBRA

This health insurance option was made available through the Consolidated Omnibus Budget Reconciliation Act (COBRA), and it allows terminated employees to continue coverage they had while working. 

Spouse's workplace health plan

If your spouse is still working and they're eligible for workplace health insurance, it might be an easy solution to join their plan as their dependent. Employer-sponsored health plans will likely be less expensive than other options, and your retirement may be recognized as a qualifying event for the purposes of enrollment eligibility outside of the open enrollment period.

Bridge employment

If you're considering part-time or full-time work in retirement to ease the major lifestyle change, be sure to look at the employer's benefits prior to taking the job. In addition to the potential psychological benefits of post-retirement work, you may even be able to find a generous employer who will share your healthcare costs.

From a cash flow standpoint, retirement can seem terrifying. After decades relying on working income to fund ongoing expenses, retirees rely primarily on their savings. But that's where something like a Liquidity strategy can be useful in that it's designed to match cash flow needs for the next two to five years of spending, and it can help ease the financial transition when entering retirement.

For more, see Healthcare options for early Retirees, 13 Sept. 2019.


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