If you’re dreaming of early retirement, you may find one key obstacle stands in your way. The good news is, it’s a hindrance you may be able to overcome with careful planning — or some research at the time you’re hoping to give notice.
So what’s the potential issue? Here’s what you need to know.
Is this the reason you can’t retire early?
The Allspring Global Investments Survey revealed the key reason millions of Americans believe they have no option but to stay on the workforce longer than they’d prefer. According to the data, 48% of workers said they’d quit their jobs sooner if they didn’t have to rely on the health insurance coverage their employer provides to them. This includes:
62% of Gen Zers
58% of millennials
45% of Gen Xers
36% of baby boomers
It’s unfortunate so many people — especially those with a long time left until retirement — feel forced into staying on the job solely because they’re concerned about covering their medical expenses.
How to ensure healthcare doesn’t prevent early retirement
For those dreaming of an early departure from the workforce, there are ways to make sure that health insurance doesn’t derail your chance to gain your freedom ASAP.
First and foremost, if you’re 65, you can sign up for Medicare, which is offered through the federal government. While Medicare has some serious coverage limitations and you may face substantial out-of-pocket costs, you also have the option to supplement coverage with a Medigap or Medicare Advantage plan. Unfortunately, for most people, early retirement happens well before age 65, so Medicare may not be an option if you want to quit work at a younger age.
This still doesn’t mean you need to give up your dream of early retirement. Some other options to consider include:
Invest in a health savings account (HSA): HSAs allow you to invest pre-tax dollars to pay for medical services if you have qualifying high-deductible health plan coverage. You can also enjoy tax-deferred growth and tax-free withdrawals if the money is used for qualifying medical care. In some cases, you can use HSA funds to pay for qualifying health insurance premiums. If so, maintaining individual coverage after your employer stops paying for it may not cost as much as you think.
Look into COBRA coverage: COBRA allows workers to stay on their employer’s health insurance after leaving their job. Typically, COBRA coverage can last up to 18 months, or up to 36 months under certain circumstances. While your coverage can become more expensive once your employer stops subsidizing premiums, COBRA may be the answer if you want to keep employer-provided coverage in place for as long as possible but want to retire early.
Buy individual coverage: Obamacare made it easier for older people to buy health insurance on the individual market since you can no longer be denied coverage due to preexisting medical conditions. Many people also qualify for subsidies that defray the cost of premiums. Leaving your job and giving up employer-provided coverage is a qualifying life event, so you won’t need to wait for open enrollment to sign up for a policy. This can be an affordable option for many people that makes early retirement possible.
If you’re worried health insurance will affect your ability to retire early, you can get around this problem by saving more money to buy insurance from other sources. This will take some advance planning, since you’ll likely take many years over your career to invest enough. But if early retirement is worth it to you, this is a sacrifice you may not mind making.
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