How to Find Health Insurance if you’re Retiring Early

How to Find Health Insurance if you’re Retiring Early

Medicare, the government healthcare program for retirees, doesn’t kick in until you’re 65. But what if you want to retire a little earlier, or have been forced into an early retirement?

Stephanie Faris

Published December 1st, 2020

Table of Contents

Key Takeaways

  • Retiring early is possible, but Medicare doesn’t kick in until you’re 65.
  • Government marketplaces can be a great option for medical insurance if you aren’t covered by an employer.
  • A part-time job or spouse’s employer-provided insurance will likely provide the best benefits.

Medicare, the government healthcare program for retirees, doesn’t kick in until you’re 65. But what if you want to retire a little earlier, or have been forced into an early retirement?

The good news is, early retirement health insurance isn’t as elusive as it seems. There are plenty of options available, from state marketplaces to employer insurance. You’ll likely also be eligible for COBRA to cover you in the months immediately following your employment termination. This guide will help you get started on early retirement planning.

Employer-provided health insurance

If you currently have insurance through your employer, check to see what coverage is available after retirement. Some employers, especially government agencies and large corporations, provide medical insurance to early retirees who meet certain criteria. Research when coverage terminates and take advantage of those employer-sponsored benefits as long as you can.

In some cases, early retirement isn’t by choice. You may be let go due to downsizing or your position being eliminated. One of the best things to do, if it is available to you, is to negotiate retirement benefits as part of your severance package. An employer isn’t legally required to offer a severance package at all, but if one is on the table, it’s worth asking if health insurance is included. If you would have been entitled to health insurance after retirement, and you’re only a short time period away, ask if you can stay on the plan until you reach the age that you qualify for Medicare.

If your employer doesn’t offer health insurance after termination, look into COBRA, a federal program that ensures continuation of coverage. Whether your early retirement was voluntary or not, you may qualify. It’s important to note, however, that you will likely be paying a lot more for COBRA coverage than what you’re used to seeing deducted from your paycheck, as you’ll be responsible for paying the full premium. You may be able to get a better deal elsewhere.

One of the best early retirement health insurance options available to you is a spouse healthcare plan. You may have opted out of this due to your own healthcare coverage, but losing a job often qualifies as a separation from service event that would allow you to join a spouse’s healthcare plan. If you’re married, check with your spouse’s employer to see if this is an option. Note that some employers healthcare plans carry a spousal surcharge on top of your premiums. Read the fine print to see if this applies so you can assess your options and budget accordingly.

Government marketplace options

When employer-sponsored health insurance isn’t an option, government marketplaces are typically your best bet. If you no longer have medical insurance due to leaving a job for any reason, you’ll qualify for a Special Enrollment Period. That means you won’t have to wait until open enrollment comes around at the end of the year to apply for coverage.

In some areas of the U.S., though, you won’t go through the federal marketplace for insurance coverage. If you live in California, Colorado, Connecticut, District of Columbia, Idaho, Maryland, Massachusetts, Minnesota, Nevada, New York, Rhode Island, Vermont, or Washington, visit your state’s portal to apply. These marketplaces typically provide the best healthcare outside of employer-sponsored programs.

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Health insurance through organizations

Some trade organizations offer special benefits as part of your membership. Check to see if this includes health insurance for retirees under 65. Although you’ll still have to pay premiums, this type of setup often gives you the benefit of group discounts.

Don’t forget dental and vision, either. The American Association of Retired People (AARP) offers certain types of health insurance for 55 and older members. Dental AARP is administered through Delta Dental and AARP Vision Discounts are provided by EyeMed. You’ll also get discounts on prescriptions, hearing aids, and long- and short-term care insurance, among others.

Part-time work

It’s a common misconception that employers only offer health benefits to full-time employees. There are, in fact, many part-time jobs with benefits. Looking for early retirement health insurance can be easy if you’re willing to put in 20 hours or so of work a week. Here are a few top employers offering health insurance to part-timers:

  • Kaplan: If you’re interested in tutoring, Kaplan could be a great after-retirement job. Part-time employees can sign up for third-party medical, dental, and vision insurance.
  • UPS: At UPS, medical insurance is provided through TeamstersCare and kicks in after you work more than 225 hours in any three-month period.
  • Starbucks: Both full- and part-time employees are eligible for health coverage, which includes medical, dental, and vision plans.
  • REI: All employees averaging 20 hours or more each week can choose between several medical plans.
  • The Home Depot: Although you have to be full-time for medical coverage, The Home Depot offers dental, vision, and short-term disability insurance to part-timers.

High deductible health plans and HSAs

If you’re looking for a low-cost way to get covered, a combination of a High Deductible Health Plan (HDHP) and a Health Savings Account (HSA) might be right for you.

With an HSA, you’re allowed to set aside thousands of dollars each year, tax-free, to pay for medical expenses. To qualify for an HSA, you’ll need a High Deductible Health Plan (HDHP).

You can sign up for both an HDHP and HSA on government marketplaces or shop around on your own. As you’re searching for private insurance, specifically narrow your options to this combination to potentially save money.

When reviewing HDHP and HSA options, do a self-assessment of your health and see if this setup is a viable option. These options are great for individuals in good general health with little or no prescription medications who don’t foresee any major medical expenses in the upcoming year. If that doesn’t describe you, you’ll likely want a more comprehensive insurance solution.

Bottom line

Early retirement insurance can cost a little more, but it may be well worth it. Consider the time you have remaining before Medicare kicks in, then price a plan that will cover any costs that occur between now and then. If you prepare in advance, you may be able to set money aside to cover the extra expense. If you need more help with your retirement, chat with an advisor at Retirable today.


Medicare Basics

Medicare Benefits

Medicare 2022

Applying for Medicare

Medicare Considerations

Medicare Taxes

Healthcare Considerations

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Stephanie Faris

Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a writer for a credit card processing service and has written about finance for numerous marketing firms and entrepreneurs. Her work has appeared on Money Under 30, The Motley Fool, MoneyGeek, E-commerce Insiders, and GoBankingRates.

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