Whether you have plenty of savings and want to enjoy time pursuing your interests or you've lost your job and don't want to start over, there are many good reasons for retiring early. However, finding a quality health insurance policy has been historically difficult and expensive for early retirees. Under the Affordable Care Act, many of the previous barriers to healthcare coverage for early retirees have been lifted, making retirement before 65 a possibility for more older workers.
If you retire before the age of 65, you won't be immediately eligible for Medicare, the federal health insurance program that covers medical expenses, including doctor's visits, hospital stays, medical equipment and prescription drugs. However, if you're being forced to retire because of a disability, you may be eligible to receive Medicare benefits early. An attorney who specializes in disability and Medicare can help you determine whether seeking disability coverage under Medicare is the right choice for you.
In the past, early retirees with mild to severe medical conditions had difficulty finding health insurance because individual insurers often denied applicants based on those pre-existing conditions. While some insurers granted policies to early retirees with pre-existing conditions, they often refused to cover condition-related expenses. As a result of the Affordable Care Act, which went into effect in 2014, finding insurance is now easier for early retirees because insurers can no longer deny individuals or treatment based on pre-existing conditions.
Even though the Affordable Care Act mandates that insurance companies not charge you higher rates because of medical conditions, rates for early retirees' individual health insurance policies are still high. According to CNN Money, premiums average $329 for individuals age 55-64 as of publication. However, about half of insurance applicants are eligible for government subsidies based on income. The subsidies work on a percentage basis, so individuals who will spend a larger percentage of their income on insurance will receive a larger subsidy. For early retirees, whose incomes are likely to decrease, this could mean significant savings.
Early retirement isn't always voluntary. If you're fired, laid off or quit because of circumstances beyond your control, you may not have time to use the state exchanges to locate the right insurance policy for you. Fortunately, you don't have to go uninsured between the time you leave work and the next individual insurance open-enrollment period. You can use COBRA coverage, a temporary extension of your employer's insurance policy, to bridge that gap. Short for Consolidated Omnibus Budget Reconciliation Act, COBRA is usually an expensive choice. Insurers can require you to pay the plan's entire premium cost and an administration fee, and you'll no longer receive an employer contribution. Still, COBRA coverage may be less costly than going uninsured, which could result in high medical bills.
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