Covering Health Insurance Prior To Medicare Eligibility

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Covering Health Insurance Prior To Medicare Eligibility

A record number of workers decided to go for early retirement at the beginning of the coronavirus pandemic. It’s estimated that over 1 million workers decided to call it quits at the beginning or first stages of the pandemic. This was due to many people having reached their financial goals as well as combinations of severance and early retirement packages being offered by their employer.

The decision to retire early is one you cannot make until you reach a certain point financially as well as the fact that you have all your needs covered including a place to leave. However, many of those who went into retirement before 2021 are now re-entering the workforce. Many claim it’s because of the rising costs of inflation as well as unexpected costs when it comes to their healthcare. This oversights or unexpected challenges are bringing people back to work. If you are considering early retirement, you need to consider these challenges before you make your decision.

Turmoil For Early Retirees

For those who retired at the beginning of the pandemic, they were meant with immediate uncertainty that played a key role in whether or not they could remain retired or not. These people, many of them with 20-30 years of work under their belts, were expecting a simple retirement where they can afford their homes, healthcare costs and other expenses. However, with the pandemic lasting longer than most expected, turmoil has hit the economy and none are immune to it. Ear;y retirees had the added pressure of not being eligible for Medicare or social security, two major financial benefits that allow retirees to stay retired.

Challeges Of Retiring Early

Nearly everyone has the goal to retire early. Financial advisors always recommend that you invest carefully and focus on being patient. Your portfolio in 2022 may be down, but in 2024 you could see record highs. That means you cannot look at what your portfolio is at, especially in a 401k or IRA where you cannot access the money until you are in your mid 60’2 as well. When you’ve invested all your retirement funds into these programs, the advantage was that you got certain tax breaks. However, the disadvantage was that you would have limited access to these funds until you were eligible. This, along with additional challenges makes retirement a bit trickier:

  • Health insurance coverage: One of the biggest shocks people have when they opt for early retirement is the cost of health insurance. The reason it is much higher than expected is becaus ethey usually are on a group plan which means major discounts along with their employer covering part of the costs. Indidivudal coverage can be more expensive and cut into your monthly budget.
  • Inflation: While financial advisors always recommend that you account for inflation in your long-term planning, few could have seen the rise that we have experienced this year. While things are finally starting to come down in price, the fact remains that the cost of living has gone up at least 20% for most.
  • Unexpected costs: Along with inflation costs going up, people who retire early are also often not prepared for surprise costs. For example, if you own a car and you calculate that you will need to pay $200 a month for gas as well as $100 for wear and tear, those are reasonable budgets. However, what about if your vehicle needs major repairs? The same goes for your home. A major expense that you are not prepared for can throw your entire monthly budget off its track.
  • Zero income: Even with a monthly budget set, not having any type of reliable income can cause you to rely more on your budget, making unexpected cost increases more impactful. Many who retire early have to deal with minimal income which puts a major strain on their available funds.

It’s easy to see why so many people have to wait until their benefits kick in before they can retire. The cost of living can be ridiculously high, even if you have your home and car paid off. That’s why it’s smart to research where you are at and look at your annual expenses to get a better idea of what you usually need to cover your costs.

Simple Solutions

The good news is that there are solutions that retirees have found to help cover the cost of living or even regain a bit of income. It’s important to remember that financial decisions should be based on your personal situation and not based on what seems to work best for others. Your situation is completely different from others which is why it’s always a good idea to converse with an advisor to understand all your options and how to best move forward. These options may help:

  • Work with a health insurance advisor: When it comes to health insurance, there are two factors that you have to consider, the cost and the coverage. Obviously, both are important. However, given your situation, the best way to ensure that you are getting the best coverage at the lowest possible price is by working with an advisor. Their assistance comes at no cost to you and they can eliminate any lapses in your coverage you are not aware of.
  • Take advantage of labor shortages: Companies are struggling to find workers right now. While you are retired, you may not be done working. Instead of working 40 hours or more for a job you do not enjoy, you can find part-time work at companies that have simple but important tasks that need to be done. These jobs are less pressure, less time and depending on what you’re doing, can even give you a good workout on days you have to work.
  • Set up an HSA: There are many advantages to having a health savings account. This is something you should research before you retire as it can help cover costs of medical care and offers a variety of interest and tax free benefits.
  • Focus on income: Income does not necessarily mean what you make from working a job. Research your financial and investment options. Do you have money invested in growth stocks? Speak with your broker and see if dividends would be a better option. They can pay you a quarterly allowance which will significantly lower your dependency on your savings.

It cannot be stressed enough how your situation is completely different from someone else who is considering early retirement. The smartest way to approach your planning is to work with the professionals, especially when it comes to finance and health insurance. They can give you an idea of what to expect regarding costs and how to plan for your future.

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