hi I'm Andy panko owner of tenant financial welcome to retirement planning do you mystified this video will discuss your options for health insurance if you retire before age 65 which is when you can begin Medicare health insurance is obviously very important and probably not something you want to do without.
However it can be very expensive so for better or worse many people may let their health care options or lack thereof drive their decision as to whether or not an early retirement is possible I'm going to walk through the six options for bridging the health insurance gap between when you retire and when you start Medicare there.
Unfortunately isn't a single answer as to which option is best for you you'll have to weigh the known and potential costs with the benefits provided and you'll obviously have to do that consideration of your specific health care needs before we start remember this video is only general explanations and education it's not specific tax legal or.
Investment advice before considering acting on anything you see in this video first consult with your tax legal or investment advisor the first option is self insurance this is basically winging it and going without any kind of insurance if you get sick and need any sort of medical care you'll have to pay for 100% of all expenses this is.
Obviously a very dangerous and risky approach I wouldn't personally recommend it but it's a nonetheless an option the second option is to see if your company offers special health care benefits to their retirees if available the policy of coverage may be different than what active employees have but the coverage and our cost to you the retiree may be.
Just as good or better unfortunately retiree health care coverage like this is quickly disappearing outside of some public employers like government's or school districts virtually no company still offers free or subsidized health care to retirees there are some companies that have legacy plans that do cover people.
Who are already retired or close to it but chances are the younger you are the less likely that you'll have this benefit available to you but if you do it may be your best option to cover yourself before turning 65 and signing up for Medicare the third option only applies if you're married if your spouse has health.
Insurance through his or her employer you can most likely get coverage under that plan most employer-sponsored plans allow spouses children and certain other dependents to be covered also the employers typically subsidize a portion of the premium so this may be the most cost effective option for you the other benefit is such plans often don't.
Require any medical underwriting meaning you are automatically eligible for coverage without having to undergo a physical exam or any other medical testing the downside of spousal coverage is that obviously presupposes you have a spouse who is still working and has health insurance through work if you don't have a spouse or at least not one.
Who works and has employer sponsored coverage this unfortunately is not applicable to you the fourth option is to extend the coverage you had at your employer through what's known as Cobra which stands for the consolidated Omnibus Budget Reconciliation Act many people don't know this but Cobra isn't any special type of insurance per se.
It's simply the ability to let you keep the exact same policy coverage you had while you're still employed the good thing about Cobra is it's seamless continuation of coverage you won't need to undergo any medical underwriting you won't have to search for any new doctors you won't have to get new insurance cards and so forth also Cobra allows you.
To continue to cover your spouse and children the downside of Cobra is that it isn't necessarily any cheaper than finding other alternatives in fact it may actually be more expensive because with Cobra you pay the full sticker price of whatever policy you had at your employer when you're working your employer usually subsidizes some of the.
Monthly premium amounts so you end up paying less than the full cost and depending on the employer that subsidy could be up to eighty or ninety percent to the premium which potentially means hundreds of dollars per month once you retire in start Cobra you lose all its subsidy and have to pay the full freight yourself and on top of that you usually.
Pay an additional two percent of the premium each month as a quote unquote administrative charge for keeping your policy as a non employee also in most cases Cobra only lets you extend coverage for up to 18 months after you retirement or separation from service there are some exceptions like disability divorce that may allow you to.
Keep it for a total of 36 months but going into it you should assume you'll only be able to get 18 months of coverage out of Cobra depending how early you retire that means you still may have multiple years of needing insurance coverage after Cobra runs out but before Medicare starts at 65 the fifth option is to shop around and buy.
Your own policy there are a few ways to do this you can try to find a health insurance broker to work with and he or she can do the legwork and getting price quotes and comparing policies for you or you can simply call or email health insurance directly to see if they offer individual health insurance policies now keep in mind not all insurers offer.
Their products in all states so don't be surprised if you have to do a lot of coloring around to find insurers that would even consider quoting you a policy it can be a hassle to deal with a broker or to do all the work yourself and sifting through the various providers and plans available in your state and I think you may be subject to medical.
Underwriting if you go through this route that means the price you pay for your policy if you can even get a policy it could be really high if you have any pre-existing conditions but there's a much easier way to shop for private insurance on your own you can use what's called the marketplace or exchange which is a government-run health insurance.
Shopping platform you can visit the marketplace at wwl care gov to learn more from that site you can see if you qualify for enrollment you can shop around for plans anyone can sign up for health insurance through the exchange once a year at the end of the year and during an open enrollment period but in the case of losing your.
Employer-sponsored coverage at some point during the year due to retirement or layoff or voluntary separation you can qualify for what's called a special enrollment period and sign up for coverage within 60 days of losing your employer sponsored coverage now while the government exchange helps facilitate the process of shopping for health.
Insurance it's important to keep in mind the insurance you end up getting is not from the government like Matt care the marketplace is simply the conduit that matches you with insurers you'll ultimately end up buying a policy direct from a private health insurer but in order to be offered through the marketplace the policies have to meet.
Certain requirements and cover certain health conditions and policies in the marketplace do not require medical underwriting and cannot deny you because of any pre-existing medical conditions now while those provisions are good for those who need health insurance it means policies aren't necessarily going to be cheap but thankfully.
Policies on the exchange for different levels of cost-sharing so you can pick what type of plan may be best for you the different plan types are categorized by a certain metal color for example if you think you are not likely to need a lot of medical services you can select a plan that has a low monthly premium but will require you to pay more of the cost.
If and when services are needed plans like this are called bronze plans typically in addition to paying a monthly premium you'll have to pay about 40% of the cost of whatever services or treatments you end up using at the other end of the spectrum our Platinum plans in these plans you normally pay only about 10% of the cost of services but to.
Compensate for that you'll have to pay much higher monthly premiums and then there are silver and gold plans in between with different levels of premiums and cost-sharing the important thing to know about these metal rankings is that the underlying plans aren't necessarily different the only difference is how much you pay.
Versus how much the insurance company pays as an example a health insurer may offer a plan called ABC and you'll have the choice to buy that ABC policy as either bronze silver gold or platinum but regardless of what metal category you choose the policy will have the same network of doctors and hospitals we'll cover the same types of procedures.
And services and so forth the only difference is how much you'll have to pay and premium each month and how much of the cost of services you'll have to shoulder versus how much the insurance company will pay another thing to keep in mind when buying health insurance through the marketplace is that you might be.
Eligible for a government subsidy that helps defray the premium amount you'd otherwise have to pay these subsidies are called premium tax credits and they're based off your gross income specifically if your gross income is no more than four times the federal poverty line you may be eligible for subsidies the amount of tax credits you're.
Eligible for are a function of your income and they're on a sliding scale the lower your income the larger your subsidy and vice versa here are the gross income federal poverty lines for 2020 these are for the lower 48 states in Washington DC Alaska and Hawaii have slightly different and slightly higher poverty lines as you can.
See the federal poverty line increases for each person you have in your household if your household is just you the poverty line is only twelve thousand seven hundred sixty dollars if it's you and your spouse seventeen thousand two hundred forty dollars four times that is nearly sixty nine thousand dollars so for example if you're married and your.
Gross incomes below sixty nine thousand dollars you may qualify for some amount of health insurance premium subsidy to help reduce the cost of buying private insurance through the marketplace now there are some possible tax planning opportunities around these premium tax credits all else equal if you can keep your gross income low while you have.
Private insurance you can help reduce the cost of that insurance the details of the specific planning techniques are beyond the scope of this video but things like taking income from a Roth account are not considered gross income and could help keep you in the range of premium tax credit eligibility also not that I am necessarily advocating this.
But temporarily pulling some income from a home equity loan or from a cash value life insurance policy can also help keep you within the subsidy eligibility range the sixth and final option for bridging the health care gap is to consider joining a faith-based Health serang plan these are groups of people usually centered around a Christian faith who.
Pull their money together to help each other pay medical services when needed it's important to note these plans are not actually insurance they're literally just a bunch of folks who basically form a cooperative to combine money together for the helping each other pay for certain health needs now even though faith-based.
Health insurance plans are not formally insurance they frankly look and act very similar to health insurance but they are careful to not use any of the same terms used in the real health insurance world but functionally they're very similar traditional insurance where you pay some ongoing amount similar to a premium you have to pay a certain amount of the cost.
Of each service needed just like the concept of coinsurance and so forth if you are in a faith that would potentially allow you to join one of their health sharing arrangements you need to pay close attention to how the agreement is structured what's covered and what's not generally speaking these groups won't cover as many types of.
Services as traditional health insurance depending on your particular health needs that can be a problem but health sharing programs are usually a bit cheaper than traditional insurance there are a bunch of other unique differences between health sharing arrangements and regular health insurance so before attempting to join any of these.
Agreements make sure you thoroughly understand all its terms and provisions well that's it for my summary of how to bridge the health insurance gap between when you retire and when you can start Medicare at age 65 I sincerely hope you found this video helpful if you haven't already subscribe to this channel so you can be the first to know when new videos.
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