For many Americans who have reached financial readiness for retirement, one crucial factor can keep them turning up at the office: providing health insurance for their adult children.
It is a common scenario where parents feel compelled to delay their retirement plans so their young adult children can retain essential health coverage.
For many it can be a frustrating experience at the end of a working life to forgo the possibility of a relaxing start to their ‘golden years’ and continue the 9-5 life because of ‘children’ who are now in their mid-20’s.
Personal finance focused magazine Kiplinger reports that Affordable Care Act (ACA) is the reason behind this common predicament, as it allows children to remain on a parent’s health plan until age 26. Some states permit extensions up to age 30 depending on circumstances. Though this is not a guaranteed option nationwide it can extend the ‘dependency factor’ even longer.
This provision is highly utilized; as of October 2024, the Kaiser Family Foundation reported that 72% of young adults aged 18 to 25 were covered as dependents on a family member’s health insurance plan.
However, once coverage ends, securing new insurance is difficult, leading the U.S. Census Bureau to report in 2020 that Americans ages 19 to 34 had the highest uninsured rate in the nation, with 26-year-olds specifically holding the highest uninsured rate overall.
Fear of debt is one of the factors that deters young people from entering the insurance market when they are no longer eligible for their parents plans.
More than half of Americans aged 18 to 29 have incurred medical debt in the past five years, a KFF Health News data investigation found. Few have the reserves to pay it off.
Adding to the problem, increasing numbers of young people are finding work in the ‘gig economy’. Over 30 percent of people aged 18 to 29 said in recent surveys that they were working or have worked in short-term, part-time or irregular jobs.
For many of those, having parents in more traditional employment is a kind of de-facto subsidy to their employers who usually don’t offer health benefits as part of the ‘gigs’.
While it is a noble goal to help adult children retain insurance, financial experts caution against sacrificing retirement plans solely for this purpose. Adam Spiegelman, a CFP and Wealth Advisor at Spiegelman Wealth Management, tells Kiplinger that working longer just for health insurance can be a “slippery slope”.
In his experience, support for grown children who are new to the workforce often expands beyond insurance, covering expenses like tuition, weddings, phones, or even mortgages, potentially evolving into supporting children well into their 40s or 50s. Spiegelman insists that this expanding support may not be healthy for anyone.
Before delaying retirement, experts advise parents to thoroughly evaluate their goals, asking: “Are you continuing to work purely to provide health insurance, or does staying employed serve other purposes for your retirement readiness or family dynamic?”. If working longer provides a personal benefit, such as boosting savings or delaying Social Security benefits, it may be worthwhile. Otherwise, parents should plan their own retirement first, focusing on protecting their mental health, lifestyle, and retirement goals because time is finite.
It can be particularly tough in today’s work environment for people in their late 60’s and early 70’s to continue working for companies who don’t always value their experienced staff.
Fortunately, delaying retirement is not the only path to health coverage for adult children. Other options exist:
Affordable Care Act (ACA) Plans: Depending on their income, young adults may qualify for an ACA plan subsidy, making premiums more manageable. Even without a subsidy, they might afford a bronze plan, the lowest tier, which typically features low premiums but higher out-of-pocket costs.
Bronze plans are suitable for young, healthy individuals needing protection from catastrophic care. Parents should note, however, that Congress is divided over extending these subsidies in 2026, which could significantly increase ACA premiums.
HMOs and Medicaid: For many 20-somethings, lower-cost HMOs can be very affordable and sometimes preferable to a parent’s plan. Medicaid is also an option, depending on the child’s income.
Financial Assistance: Michael LaCivita, CFP, suggests that if a budget allows, a parent can give their child the equivalent of the employee premium the parent used to pay to keep the child on their plan, helping the child purchase individual coverage.
Another alternative, for some, would be healthshare plans, which can offer real savings, particularly for healthy young people. While not governed as health insurance, such plans, often linked to health-sharing ministries, are a way to avoid the heavy premiums for coverage which, for many young people, is rarely used.
Ultimately, if a parent is ready and financially secure for retirement, experts stress that prioritizing personal needs is acceptable, argues the magazine. In some cases, being removed from a parent’s plan can provide the necessary push for children to find employment offering subsidized insurance or adjust their spending habits to afford an ACA plan.