SHOW NOTES: 2019-04-11 MiM

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Last Week’s Question of the Week: How much debt did Americans ages 60-69 have at the end of 2017? a) $1 billion or b) $2 trillion?

ANSWER: Americans ages 60 to 69 had almost $2 trillion dollars in overall debt at the end of 2017.

HOST: Your topic today applies to everyone … deciding WHEN is the right time to pull the trigger and retire. What if you are considering a pre-65 retirement, what should we all be aware of?

KLAAS FINANCIAL: This is a very important topic. Let’s start by asking listeners this question: What age or date do you have in mind to start?

Many people tell us, “Yesterday!”, while others say that their plan is to keep working as long as they can.

We would encourage our listeners to think ahead about making this transition to your post-career life. Many people are fixated on a certain age that they wish to be done with their current job, or at least a sense as to how much longer they can stick it out on the job in terms of physical or mental stamina. Sometimes the “idea” of “when” is just an idea that has nothing to do with reality of whether they’ll actually be able to pull it off.

According to the Employee Benefit Research Institute’s 2017 Retirement Confidence Survey, the average age most people think about retiring is the age of 65, mostly because of the tie with having health insurance through Medicare at 65. But in reality (according to U.S. Census Bureau data), the average retirement age in the United States is 63, with the average length of retirement being a total of 18 years.

The next question we ask our potential early retirees is: what you are planning to do between now and age 65 for your health insurance?

Because retirement knows no official age in terms of benefits, here are some parameters to be aware of:

  • 62 is the age at which you can start receiving Social Security retirement benefits — the amount is reduced until you reach full retirement at age 67. (Reference)
  • 65 is the age at which you become eligible for Medicare. Medicare eligibility kicks in just before you turn 65. Typically, there is a 7-month initial enrollment period that begins 3 months before you turn 65, includes the month you turn 65, and ends 3 months after you turn 65. (Reference)
  • Visit to learn more about eligibility and getting started with Medicare.

This is the third question we ask: how do you pay for health insurance when you retire in the 62 to 65 age range (or if you retire even younger)?

You’re not yet eligible for Medicare, which means you could experience a gap in healthcare benefits. Even if you’ve only got a month or two before Medicare begins, going without any health insurance can be a gamble. It could mean dipping into your retirement savings to pay for unexpected healthcare expenses that may occur. And your premiums can be expensive.

Early retirement medical coverage options include:

  • COBRA – You may be eligible for COBRA continuation health coverage, which allows you to remain on your employer’s plan for a certain amount of time. You may be required to pay up to 102% of the plan cost (this includes the amount you and your employer paid for coverage plus 2% for administrative costs). Speak with your employer for details, or learn more about COBRA at the Department of Labor website.
  • SPOUSE health insurance – If your partner has access to job-based health insurance, you may want to find out if you’re eligible to be added to the plan.
  • Veteran’s Health Insurance — If you’re a veteran who served with honor, you’re eligible to enroll for VA Health Care. The Veterans Health Administration is America’s largest integrated health care system with more than 1,700 VA medical centers and outpatient clinics across the U.S. If you served in the active military, naval or air service and are separated under any condition other than dishonorable, you may qualify for VA health care benefits. National Guard and reserve service members who have completed the full call-up period of active duty can apply.

HOST: Are there any other places to get early health insurance when you are under age 65?

KLAAS FINANCIAL: Yes, you can consider these ideas:

  • Short term medical health insurance & Hospital Plan Bundles — During this time period, a short term policy may be the right solution. Short term plans provide coverage for 30 to 364 days depending on your state, and is not available in all states. (Reference) Short term plans include a range of benefits that help pay for catastrophic medical events but don’t typically cover preventive care or pre-existing conditions — however, there are some plans on the market that include limited benefits for certain pre-existing conditions as well as some plans with limited preventive care benefits. You can enroll in a bundled plan that includes both short term health insurance and a hospital indemnity plan.
    1. Major Medical Insurance — If you are retiring more than 1 year before age 65, you may be looking a purchasing Major Medical Insurance, or through the Affordable Care Act. Although the Affordable Care Act’s tax penalty will no longer apply starting with coverage year 2019, major medical insurance remains the most comprehensive health insurance option and still must adhere to ACA guidelines (e.g., essential health benefits, preventive care, guaranteed issue). When you buy a major medical plan through or a state-based health insurance exchange, you may be eligible for income-based subsidies that can lower your monthly premium. They are guaranteed issue regardless of your health history, and they must cover pre-existing conditions. Furthermore, your rate can’t be based on health history or pre-existing conditions. If you’re someone who has pre-existing conditions, needs a fair amount of medical care in a given year, and takes prescription drugs, you may want to consider major medical insurance.
    2. Medical Insurance Cooperatives: these are in a few states that began through the Affordable Care Act- 4 are currently still operating, they began with 23.
    3. Faith Based Health Care Plans — These plans offer a more affordable alternative to health insurance with comparable benefits. These plans are often referred to as medical sharing plans. A group of like-minded people come together to share healthcare costs under the banner of a faith-based organization.
    4. Part-time work — Some companies offer health insurance for part-time employees, for example Starbucks is one of those.

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    Catch C.J. Klaas and Maleeah Cuevas on Money in Motion every Thursday on Madison's 1310 WIBA from 8:05-8:35am.