In this video i'm going to share four options if you need health insurance for early retirement let's get started hey there this is patrick king with prana wealth on this channel we help you build your wealth faster so that you can make work optional.
Sooner so if you're new here please consider subscribing in my last video i discussed four factors to consider before retiring at age 60. one of those factors is funding your health insurance coverage before medicare kicks in at age 65. this is often the determining factor in.
Making the early retirement decision for most people can you bridge the health insurance gap until you're 65. in today's video i want to share four options if you need health insurance for early retirement number one cobra continuation of benefits if your employer has more than 20 employees.
You have the option of continuing your coverage through cobra under the consolidated omnibus budget reconciliation act aka cobra you can continue to be covered under the same group health insurance plan you have through work unfortunately you will have to pay the.
Entire premium yourself plus an administration fee of up to two percent cobra coverage is limited to 18 months so if you retire before age 63 and a half you'll need to eventually find other coverage under normal circumstances you would have 60 days after your separation from.
Service to elect to take cobra benefits however thanks to kovid you now have until 60 days after the covid 19 national emergency is declared to be over at the time i'm recording this video the state of emergency is still in effect however.
Be sure to confirm this with your benefits administrator while the cobra option is convenient you get to keep the same plan and benefits it could be awfully expensive the kaiser family foundation estimated that the average annual premium for employer-sponsored health insurance coverage for a family.
Was nearly twenty thousand dollars in 2018. that's a pretty big price tag especially if those funds are decreasing your retirement savings early on number two leveraging cobra using your hsa if you have a health savings account.
Or hsa there is a wrinkle with cobra that can work in your favor insurance premiums are not normally considered qualified medical expenses for your hsa however there's an exception when it comes to cobra continuation of coverage that's right you can pay for cobra using your hsa.
Health savings accounts are an often overlooked opportunity if you're creating a plan to retire early and have access to an hsa this could be a fantastic retirement tactic front loading your hsa with tax-free funds to pay cobra premiums would be a great way to.
Bridge the gap until age 65. if you're still working it makes sense to set up a health savings account and start contributing as soon as possible hsas were created to be used alongside high deductible health plans for 2021 the irs defines a high deductible health plan.
As any plan with a deductible of at least fourteen hundred dollars for an individual and twenty eight hundred dollars for a family hsas allow you to save and invest money to be used for medical expenses including deductibles coinsurance prescriptions vision expenses and dental care unused.
Balances are carried over to the following year the funds never expire and they can be passed on to a surviving beneficiary in addition hsas are triple tax advantaged meaning that they are funded with pre-tax dollars they grow tax-free and withdrawals are not taxed.
At all if they are spent on qualified medical expenses moreover once you turn 65 and qualify for medicare these plans simply don't go away you can use them to pay medicare premiums long-term care insurance premiums or just use it as a retirement account just.
As you use an ira number three the affordable care act marketplace another health insurance option for early retirement is the affordable care act marketplace the aca provides four levels of plans which correspond to the percentage split of health care.
Costs between the plan and the individual it's important to point out however that many early retirees accustomed to group health insurance experience some level of sticker shock over policy premiums as you would expect the greater the coverage the higher the cost.
Bronze plans have the lowest monthly premium while platinum plans have the highest bronze plans are the most cost effective if you're relatively healthy and have low medical care or prescription drug costs gold and platinum plans will make the most sense if you tend to have high.
Annual medical expenses number four private insurance if you decide not to use the aca marketplace private insurance is still available while the loss of employment is often considered a qualifying life event you may need to sign up during the open enrollment period depending on your situation.
Retiring early would likely enable you to sign up outside of the open enrollment period but different plans have different requirements similar to the aca marketplace choosing the right plan means taking a thoughtful look at your medical needs and finding the best options for you.
It may be helpful to use an agent to sort through the different plans you can find one using the national association for health underwriter's find an agent tool i'll post the link in the show notes so retiring after you become eligible for medicare is a great strategy however if your plans unexpectedly.
Change there are still options available if you need help figuring out health insurance for early retirement then visit us at pranawealth.com to see if we're potentially a good fit we do still have the capacity to take on new clients as a fee only financial advisor in atlanta we can and do.
Work virtually with clients all across the u.s we're here to help you whenever you're ready hey if you found this video helpful please help me grow my channel by liking this video and subscribing to my channel thanks so much for watching and i'll see you soon.