Retirement is all about enjoying your golden years. But what if you want to get a jump start? For a myriad of reasons, many people are contemplating retiring before their years turn golden. In fact, Gen Z aims to retire earlier than any other generation – by the age of 59. Retiring early can sound like a dream until you consider the cost of health care. But there are numerous options for health insurance for early retirees. Let’s explore.
Health care costs in America
Before we explore the various options for health insurance for early retirees, let’s talk about one thing that isn’t an option: simply choosing to ignore the need for health insurance.
Health care costs in America are simply too high to shoulder the burden alone. An estimated 100 million Americans carry at least a collective sum of $195 billion in debt.1 It follows, then, that more than half a million people declare bankruptcy each year while citing medical debt as at least one factor in their decision.2
Health insurance for early retirees: 8 options to consider when retiring before 65
With the high cost of health care in the United States, it may feel like early retirement is out of the picture. Fortunately, early retirees do have health insurance options. Let’s dive into eight options to see which might fit best into your retirement plans.
Insurance from a spouse
Perhaps the simplest workaround for keeping your insurance coverage in early retirement is to stay on your spouse’s insurance plan.
But what if both you and your spouse are both eyeing early retirement? Or what if you aren’t married? There are other options for health insurance for early retirees.
Marketplace
Another way to keep insurance coverage as an early retiree is to purchase health care from the Health Insurance Marketplace. If you purchase health insurance from the Marketplace while you’re working, you might expect to find similar high costs during early retirement.
However, as an early retiree, you might discover that your deductibles and copayments are much cheaper. That’s because certain household sizes and income amounts result in premium tax credits and savings. As such, the premiums you pay as an early retiree may be surprisingly small. You can visit healthcare.gov to see plan options and estimate cost.
As you plan for early retirement, being able to estimate insurance costs will help you better determine how much you need to save for retirement.
Health share plans
Perhaps a lesser known option to getting health care coverage is through a health share plan. These plans, sometimes known as health share ministries, aren’t actually health insurance. Instead, health share plans are a group of members who agree to pool their money to cover the costs of medical care for one another. Generally, care coverage is limited to basic health care and catastrophic care.
You also want to note that there are some tricky parts of navigating health share plans. In addition to typically needing to submit a statement of faith, many health share plans do not cover preexisting conditions. As a new member, you may also have to pay into the plan for several months or a year before requesting coverage.
With any type of health care coverage, you want to do your due diligence so you’re not faced with any surprises. This is especially true with health share plans since they are not subject to the same laws as health insurance companies.
Private health insurance
Another health insurance option for early retirees is to purchase private health insurance. This process is similar to looking for insurance on the Marketplace. However, since these plans are purchased privately, you may discover there are more plan options available.
However, an important consideration with private health insurance is that the premium tax credits do not apply. Therefore, the cost could be higher depending on the plan and other factors.
Medicaid
Since you are no longer bringing in an income when you retire early, your household income is likely going to drop significantly. Due to this drop in income, you may qualify for Medicaid.
Medicaid is a federal program, but it is state run. Therefore, you will want to investigate the offerings specific to your state.3
COBRA
Most employers are required to offer coverage through the Consolidated Omnibus Budget Reconciliation Act (COBRA). However, they are not required to subsidize it. As a result, you would likely be required to cover the full health care premium. Plus, this coverage runs out relatively quickly, with a maximum amount of coverage of 18 months in most instances.
COBRA can be helpful when looking to initially bridge the gap between early retirement and when Medicare kicks in. However, it is important to consider the high cost and compare it to other options, such as purchasing a plan through the Marketplace.
Employer-sponsored health insurance benefit
While this option is becoming increasingly rare due to the high cost of health care, some employers offer health insurance as a retirement benefit. In fact, there are some employers who will even continue to cover a portion of the monthly premiums.
It is also important to note that this retiree health benefit is usually designed as a supplement to Medicare. When you reach the age when you can sign up for Medicare, you may be able to keep your retiree health plan as a supplemental policy.
Part-time work or Barista FIRE
If you’re interested in retiring early, there’s a good chance you’re already familiar with the Financial Independence Retire Early (FIRE) movement. One contingent is Barista FIRE, which still involves part-time work, usually for health care benefits. The biggest perk to Barista FIRE is that you can typically leave the traditional 40-plus-hours workforce much earlier. Why? Because part-time work means you draw down less of your portfolio, meaning you need less saved for retirement. Plus, if you are able to find part-time work that includes health insurance benefits, that’s one less thing to worry about.
Some big-name companies like Starbucks and Amazon offer health insurance benefits to part-time employees.
Final thoughts on health insurance for early retirees
Although many people are interested in retiring earlier than the traditional retirement age, losing health insurance in the process can feel like water poured on the flames.
Fortunately, there are various options for health insurance for early retirees. Explore the options and use retirement planning resources to prepare accordingly.
1 KFF Health News, “100 Million People in America Are Saddled With Health Care Debt,” June 2022.
2 CNBC, “This is the real reason most Americans file for bankruptcy,” February 2019.
3 Medicaid.gov, “State Profiles.”
RO3204969-1123
