Without a job and too young for Medicare, what health care insurance options remain for early retirees and their family?
A handful, it turns out. BUT - the best alternative is still the total strategy that we created to take advantage of banking on your good health while you have it and banking a chunk AFTER your bad health crops up with a living benefit.
You don't need an employer to buy health coverage straight from an insurer. In some cases, if you have a side gig that you incorporate, you may be able to write off some of health care insurance costs as a business expense, says Sam Dogen, founder of the blog Financial Samurai who has been financially independent since 2012.
Considerations: It’s costly. Dogen, 41, pays $1,760 a month, or $21,120 a year, out of pocket for a platinum plan for his family of three. They could have saved $100 to $200 a month by opting for a bronze or silver plan, but the cost would still total more than $1,500 a month.
“It’s an absurd amount of money,” Dogen says. “Either way you cut it, paying for unsubsidized healthcare is extremely expensive in America.”
New rules created under the Trump administration allow insurers to sell short-term policies – up to 364 days – that exclude the minimum benefits that the Affordable Care Act plans must provide, such as prescription drugs, maternity, and mental health care.
These plans, which often cover more catastrophic medical events, are cheaper, but come with high deductibles. Some early retirees rely on these plans for basic coverage and then use their own funds to pay for uncovered expenses, typically routine check-ups.
Considerations: Many of these short-term plans are limiting. For instance, many won’t cover any pre-existing conditions. So, if you develop a chronic condition like diabetes, you may no longer qualify for coverage when it comes time to renew the plan.
If your income is low enough in your early retirement years, you may qualify for subsidies for purchasing insurance through the health insurance exchanges or marketplaces created by the Affordable Care Act. That’s what many FIRE aspirants do, says Dogen.
“For a family of three, I need to make less than 400% of the Federal Poverty Limit, or $83,120, to be eligible for healthcare subsidies under the ACA,” he says.
Considerations: The less you make in income the more you qualify for a subsidy. Make too much, you won’t qualify. There’s also an uncertain future surrounding the ACA given the political climate.
“If you’re getting a subsidy, that’s great but I wouldn’t count on that lasting forever,” Dahleen says. “It’s subject to change at any time.”
Some early retirees choose to work a part-time job to get health insurance. For instance, Johnsrud has a friend who is a bus attendant for the school system, working an hour and a half in the morning and again in the afternoon.
“They get full benefits and if the bus isn’t running, they aren’t working,” she says, noting her friend gets plenty of time off, including summers and other school breaks off, but still maintains coverage.
Another popular part-time job among FIRE achievers is working at Starbucks, which provides health insurance to part-time workers.
Considerations: It's may not be the "early retirement" you're looking for. You lose some of the flexibility and are tied to a job for benefits only.
Those who plan to spend those golden years abroad often depend on travel medical insurance, which often comes with evacuation insurance in case you need to be flown back to the U.S., says Dahleen. These ex-pats typically pay for more routine medical and dental procedures out of pocket in other countries where health care is more affordable,
“It all depends on what your current level of health and level of risk are,” he says.
Considerations: This only works if you’re traveling overseas for much of the year. You also need to be comfortable with seeking medical care in a foreign country.