A massive challenge for Americans planning to retire early is determining how we’ll obtain affordable health insurance. The earlier you want to retire, the more challenging it is to determine how much you need to bridge the gap until Medicare eligibility at age 65.
Health insurance costs increase faster than the rate of inflation. Medical expenses also tend to rise as we age, reflected in higher insurance premiums for older individuals.
The Affordable Care Act (ACA) provides tax credits for low income households. Your health insurance costs depend on how you are able to structure income in early retirement. It is vital to understand the rules.
While these facts present challenges, careful planning can meet them. A tougher planning issue is the lack of political stability in the system.
If the health care system changes substantially, any projection of health care expenses until we become Medicare eligible would be nothing more than a blind guess. Projected savings needs could be off by six figures in either direction.
Instead of guessing, our plan is to cash flow our expenses year to year by continuing to earn some income in “retirement.”
The upside to this approach is that it allows us to start our transition to early retirement sooner.
The downside is we have to take measures to insure we can continue to earn income in a manner that is consistent with our desired lifestyle. Earning income can also make our insurance more expensive.
Open enrollment has started and continues through December 15. Assessing health insurance options is a tedious and confusing process. However, it allows me to provide insights and resources to assist your planning.
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