Health Insurance Options for Retirees Younger Than 65

Retirees under age 65 face a unique challenge: As they don’t yet qualify for Medicare, they’ll need to secure some other form of health insurance coverage. From employer-sponsored plans to individual marketplace policies, there are many options available. Here’s what you need to know.

A financial advisor can help you create a retirement plan that addresses your health insurance and healthcare needs.

Health Insurance Options for Retirees Younger Than 65

The following are some of the health insurance options retirees younger than 65 can consider to bridge any gaps in their insurance until they qualify for Medicare:

• Insurance from a spouse: One of the most straightforward solutions for health insurance for retirees under 65 is gaining coverage through a spouse's employer-sponsored plan. If a retiree's spouse is still working and has access to a health insurance plan, adding the retiree to that plan can be a cost-effective solution. Employer-sponsored plans often provide comprehensive coverage, making them an attractive choice.
• Individual and marketplace health insurance: Purchasing individual health insurance through the health insurance marketplace is another option for retirees under 65. The health insurance marketplace offers a variety of plans, with different levels of coverage and costs. You can compare plans and choose one that best fits your healthcare needs and budget. And depending on your income, you may also qualify for subsidies that can significantly reduce the cost of your premium.
• Health-sharing plans: Health-sharing plans are an alternative to traditional health insurance. These plans are not insurance, but are designed for members to share healthcare costs among the group. They often have lower monthly costs compared to traditional insurance plans, but come with limitations and exclusions. Health-sharing plans can be a suitable option for retirees under 65 who are generally healthy and looking for a budget-friendly way to manage their healthcare expenses .
• Medicaid and state programs: For retirees under 65 with limited income and resources, Medicaid can provide comprehensive health coverage at little to no cost. Eligibility for Medicaid varies by state, so it's important to check your state-specific requirements. Some states also offer additional health insurance programs for low-income residents that retirees may qualify for, making these programs a valuable option for those in financial need.
• COBRA coverage : COBRA (Consolidated Omnibus Budget Reconciliation Act) coverage allows retirees to keep their employer-sponsored health insurance for up to 18 months after leaving their job. This option can be expensive, since you’ll be responsible for paying the full premium plus an administrative fee, but it offers continuity of care during a transition to another insurance plan. COBRA can be a good short-term solution for maintaining the same level of coverage you had while employed.
• Employer-sponsored insurance options for retirees: Some employers offer health insurance options specifically for retirees. These plans can vary significantly in terms of cost and coverage, so it's important to review the details carefully. Employer-sponsored retiree health plans often provide a seamless transition from active employment to retirement, offering stability and peace of mind for retirees under 65.

Other Considerations When Retiring Before 65

Retiring before the age of 65 presents a unique set of challenges. Considering some of the other implications to retiring before 65 can help you prepare for and navigate this transition:

• Assess your financial readiness: Before deciding to retire early, assess your financial readiness. Retirees should calculate their expected expenses, including healthcare costs, and ensure they have sufficient savings or income streams to support their lifestyle. Creating a detailed budget that accounts for health insurance premiums, out-of-pocket medical expenses, and other living costs can also give you a clearer picture.
• Part-time employment: For some retirees, working part-time can provide a dual benefit: additional income and access to employer-sponsored health insurance. Some employers offer health insurance benefits to part-time employees, which can bridge the gap until you’re eligible for Medicare. Part-time work also helps retirees stay active and social.
• Health savings accounts (HSAs): HSAs can be a valuable tool for managing medical expenses in retirement . If you had an HSA while you were employed, you can use the funds to pay for qualified medical expenses tax-free. Continuing to contribute to an HSA if you’re still eligible to do so can also provide a financial cushion for future healthcare needs.
• Plan for long-term care: Another critical consideration for retirees under 65 is planning for long-term care. Long-term care insurance can cover services such as nursing home care, assisted living, and in-home healthcare , which are not typically covered by regular health insurance or Medicare. Securing long-term care insurance at a younger age can result in lower premiums and ensure you have the coverage when you need it.
• Stay informed about policy changes: Healthcare policies and health insurance regulations can change , impacting available options and healthcare costs . It’s important to stay informed of any changes to healthcare laws, Medicaid eligibility, and insurance marketplace offerings so you can make informed decisions and adjust your strategy as needed.
• Consult a financial advisor: Given the complexities of early retirement and healthcare planning, consulting a financial advisor can be beneficial. Financial advisors can provide personalized guidance, help retirees evaluate their options, and develop a comprehensive retirement plan that includes strategies for managing healthcare costs in retirement .

Bottom Line

Getting health insurance as a retiree under age 65 involves exploring a variety of options to find the best fit for your needs and budget. From leveraging a spouse's employer-sponsored plan to considering marketplace options, health-sharing plans, Medicaid, COBRA and employer-sponsored retiree insurance, there are numerous pathways to secure health coverage before Medicare eligibility. Each option has its own benefits and considerations, making it important to thoroughly evaluate your choices and select the most appropriate plan for your situation.

Retirement Planning Tips

• When you're making serious retirement or financial planning decisions, it can be helpful to seek the help of a financial advisor. Finding a financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you're ready to find an advisor who can help you achieve your financial goals, get started now .
• If you're looking for other ways to pay for health care costs, a health savings account (HSA) can allow you to invest for future medical expenses and enjoy special tax breaks. Find out here if you're eligible .

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