By Heidi Huiskamp, Founder and CEO of Huiskamp Collins Investments, LLC
I meet with clients every month who want to hang up the “nine to five” and jumpstart their retirement chapter prior to qualifying for Medicare. I get it. Some people have health challenges, some folks want to start enjoying more quality of life…the reasons why are as varied as the clients. Many have conveniently skipped over the important and very real concern about planning for healthcare coverage preceding their eligibility to sign up for Medicare, usually at age 65. I’ve sat across from pre-retirees who are so desperate for an end to their working years that they are considering “taking their chances” and foregoing healthcare coverage altogether for a couple years until they reach Medicare age. Please don’t let this be you! A lot of Americans are one serious illness or one accident away from financial ruin if they play “Russian roulette” with health coverage. There are options for early retirees that make financial sense no matter what your situation.
A common solution for retirees who worked for a company of 20 or more employees is COBRA. If this is you, you or you and your family are eligible to continue being covered under your company’s healthcare plan, generally for 18 months post-retirement. There’s a caveat, though. If you will be eligible for Medicare within 18 months of separation of service, you can pay for COBRA coverage for your dependents for up to 36 months after you leave your place of employment. Let’s say Bob is 63, born on June 1st, and retires on January 1st. His wife, Joyce, is 62 and is a covered person on Bob’s company health insurance policy. Bob can pay for COBRA to cover himself and Joyce until he turns 65 in 18 months and then can pay the COBRA premiums for the additional months until Joyce is also eligible for Medicare. The same holds true if Bob wants to continue coverage for his dependent daughter, Susan, up to a total of 36 months post-retirement. The downside is the cost. Most companies subsidize their employees’ health insurance premiums, but you’ll pay “full-freight” plus a two percent administrative fee for COBRA coverage. This could represent a big chunk of your monthly retirement expenses. For some, though, the sacrifice is worth it.
Another option is securing insurance through the exchange, www.healthcare.gov. Pre-existing conditions cannot be considered, so the issuance of a policy for you or your family is guaranteed. The only allowed questions are sex, age, location, and tobacco use. You can choose to pay for single or family coverage. There are questions about household income and some shoppers will be eligible for government subsidies to lower the overall cost of insurance. Many plans offer screenings and preventative services with low co-pays and/or deductibles. The marketplace offers plan categories of bronze, silver, and gold to differentiate among the services that are covered, co-pays, deductibles, and total out-of-pocket expenses. All of this sounds great, but there are also downsides. Depending on your income, the sticker shock of monthly premiums versus the coverage you may be used to can take your breath away. Services covered and out-of-pocket costs can run contrary to the needs of your family. It makes sense, though, to take the time to do the exercise of applying to see what is available and at what bottom-line cost, with or without subsidies.
A final alternative is “off-exchange” providers. You can apply for coverage for you or your family, but coverage is not guaranteed as pre-existing conditions are taken into account and your application must go through an underwriting process to see whether plans would agree to cover you or not. Also, subsidies of premiums are not available.
Finally, if you are already covered by Medicare, it’s valuable to know that you can potentially save on Medicare premiums after a life-changing event simply by filing a form SSA-44 with the Social Security Administration. If you get married, divorced, lose a spouse, or have a reduction in work (retirement), among other things, you may be eligible for a break on your premiums. It’s worth a shot to file the form.
Would you like to have a no-pressure conversation about retirement or investment planning? I would love to have the opportunity to meet with you! Please call me at 563-949-4705 or email me at heidi@hhcinvestments.net.
Securities offered through J.W Cole Financial, Inc. (JWC). Member FINRA/SIPC. Advisory services offered through J.W. Cole Advisors, INC. (JWCA). Huiskamp Collins Investments, LLC and JWC/JWCA are unaffiliated entities.