Let’s Have a Heart to Heart: Early Retirement Healthcare Planning, Ep #5
One of the more challenging aspects of early retirement is the topic of this episode of the One for the Money podcast: Obtaining and paying for health care. Medicare isn’t an option until age sixty-five. Stick around for the tips, tricks, and strategies portion where I’ll be discussing when it makes sense to get life insurance through your employer and when it’s better to get your own!
In this episode...
Planning for healthcare after retirement [01:08]
Options for healthcare [03:37]
Healthcare sharing plans [06:09]
Life insurance is critical for financial planning [08:57]
Why do I need to plan for healthcare?
After housing and transportation, healthcare is the third-largest expense people will have when they retire at age 65, and that’s with Medicare! Early retirees don’t have this option. Even if you elect to accept Social Security at age 62, you still won’t be eligible for Medicare until age 65. Early retirees also need to consider the health status of those relying on them for their healthcare.
Healthcare options in early retirement
The most generous healthcare plan is the employer’s retirement healthcare benefits. A fortunate few have employers who provide paid-for health care in early retirement. This perk is so tremendous that it’s no longer offered to government and private employees. However, some people have been grandfathered into this position. If you’ve worked for several decades, you should review your retirement healthcare options with your HR department.
Even if you retire early and leave your employer, you can still receive your healthcare through them for a certain amount of time. This option was made possible via the Consolidated Omnibus Budget Reconciliation Act of 1985, known as COBRA. However, you typically will have to pay the total cost of your healthcare coverage plus an additional 2% because your employer subsidizes a significant portion of these costs while you’re working for them. This practice is a perk to attract employees and provides the employer with a tax deduction.
Life insurance is critical
Term life insurance is all you need. If someone tells you that you need permanent life insurance, they are likely an agent trying to earn a much higher commission by selling it. You should only consider permanent insurance if you are on track for retirement, have a fully-funded emergency fund, and have no consumer debt. Even then, it’s hugely debatable. Life insurance cannot legally be sold as an investment because it isn’t. Another thing you need to know about life insurance is that the price you pay is based on the probability of your passing away.
Life insurance from your employer isn’t based on your health but solely on your age. Consequently, if you are in poor health, it may be in your best interest to get life insurance through your employer. If you are in good health, that will likely be more cost-effective. A benefit of getting your own policy is that you still have it if you leave your job. In the end, it’s imperative that you have life insurance if there are people that depend on you, such as children, a spouse, or loved ones.
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