Many people hesitate to retire before age 65. While there are many reasons people may delay retirement, the biggest one tends to be a need for affordable health insurance. A person may begin collecting social security at 62 but cannot claim Medicare benefits until age 65. This causes many people who are eager to retire at 62 feel trapped.
When mentioning the Affordable Care Act, the initial reaction may not be a positive one. Many assume that health insurance under the ACA will be wildly expensive or not as good as their previous coverage. It is important to note that the ACA has changed since its inception, and there are many options for residents of every state.[1]
Here is where the planning starts. The monthly healthcare cost to an individual is based onexpected household income for the year you need coverage. By adjusting the income you live off in the early years of retirement,you may be able to lower your healthcare premiums until you are eligible for Medicare.Income from liquid accounts such as checking, or savings does not count as household income. Since you are also not earning any income through wages, your income counted towards healthcare premiums should already be lower. The caveat is that any social security, pension, or IRA money will count as an income source: potentially increasing your premiums. By balancing the different accounts you pull income from in the early years of retirement, you may be able to find a premium that works for you.
Using this link:Health insurance plans & prices | HealthCare.gov, you can get an estimate for premium payments. When examining the following example, keep in mind the needs, lifestyle, health, and ages are different for everyone. This is merely for educational purposes.
There are many other variables to consider when it comes to insurance, but in this newsletter, I just want to focus on the flexibility of income and how it affects premiums. For more information on the different types of marketplace plans please follow the link:https://www.healthcare.gov/choose-a-plan/plans-categories/
For a list of the items counted as income for marketplace insurance, please follow the link:https://www.healthcare.gov/income-and-household-information/income/.
One thing is true in every financial plan, personalization is key. Blanket statements are often not applicable, and you should aim to work with a financial planner that creates a plan specific to your needs.
[1] https://www.kiplinger.com/personal-finance/insurance/health-insurance/605033/i-cant-retire-i-need-health-insuranc
Additional Disclosure
The material contained in the newsletter is for informational purpose only and is not intended to provide specific advice or recommendations for any individual nor does it take into account the particular
investment objectives, financial situation or needs of individual investors. All examples are hypothetical and for Illustrative purposes.