Just as the expense of individual health insurance is a major deterrent for people thinking of leaving a job to set up their own business, so it is for those considering retiring early and walking away from the company’s health coverage.
The years between leaving the workforce and qualifying for Medicare can be marked by high costs, limited options, and complex decisions which deter many Americans from enjoying their golden years early.
For early retirees, the loss of employer-sponsored health insurance is a major hurdle. COBRA continuation coverage allows you to keep your workplace plan for up to 18 months, but you must pay the full premium—both your share and your employer’s—plus a 2% administrative fee.
This often results in monthly costs that are unaffordable for many, even those with substantial retirement savings.
Individual health insurance policies purchased through the Affordable Care Act (ACA) Marketplace are another option. While these plans cannot deny coverage for pre-existing conditions and may offer subsidies based on income, premiums for older adults can be extremely high — sometimes more than four times the cost of Medicare for a comparable plan.
Additionally, plan networks may be narrower, and the complexity of managing income to qualify for subsidies adds another layer of stress.
“A person retiring at 60 essentially enters a ‘health care desert’ where they have to go out and find some sort of coverage on their own,” Scott Sturgeon CFP and Founder/Senior Wealth Advisor at Oread Wealth Partners told Kiplinger.
“When I run projections for a client in this situation, I would probably budget at least $1,000 per month, per person in health insurance premiums as part of their cash flow plan,”
Some retirees may be able to join a spouse’s employer plan, but this is not always possible. Short-term health insurance is also available, but these plans often exclude pre-existing conditions and provide only limited benefits, making them a risky long-term solution.
Healthshare plans, also known as healthcare sharing ministries, have emerged as a popular alternative for early retirees seeking to bridge the gap to Medicare. These are not traditional insurance products, but rather cooperative arrangements where members pool their resources to pay each other’s medical bills.
Monthly costs are typically much lower than traditional insurance—often half or less—making them attractive to healthy, cost-conscious individuals.
Unlike traditional insurance, healthshare plans may have lifestyle or faith-based requirements but they are not regulated as insurance. However, many early retirees report significant savings and satisfaction with the community-based approach, especially if they are in good health and comfortable with the plan’s limitations.
Alternative plans can provide a much-needed, affordable bridge to Medicare — allowing them to retire on their own terms without sacrificing financial security.