Don't Fall Into the Retirement Health Care Gap

Better health care has led to a healthier nation and longer life spans overall. Today many ambitious workers expect to continue working until age 65, or even later. But since 47 percent of current retirees actually retired before they had planned, we know that our plans don't always work out as we had imagined. Events such as unexpected disability, company downsizing, or personal factors could cause you to retire earlier than you had planned. Since you aren't eligible for Medicare until age 65, you could wind up without health insurance just when you need it most.

Some people make the mistake of assuming that their employer-sponsored health care plan makes a provision for retired employees. This is true of some companies, and retiree health benefits have indeed helped some people to retire before age 65. But due to the rising costs of health insurance, many employers are revamping their employee benefits packages. Unfortunately, over recent years we have begun to notice that retiree health benefits are rapidly disappearing.

If you do retire before you're eligible Medicare, you have another option. The Affordable Care Act provides Americans with a way to shop for their own health insurance coverage through a federal or state-run exchange (depending upon your state of residence). In some cases, your former employer may actually offer you a stipend to help cover the cost of premiums. This has become a popular option in recent years, as companies seek to lower their health care expenditures while maintaining employee satisfaction.

There is only one problem with this scenario: Health care premiums tend to be run quite high for those with chronic health problems. You can't be denied health insurance coverage due to your condition, but the premiums may be beyond your financial capabilities. If you're forced to retire early due to a health problem, this could put you in quite a bind!

So here is what you need to know about early retirement and health insurance: Watch your mail, and read all communications from your company's human resources department. They should keep you updated on important changes to retiree health care benefits, so that you can adjust your retirement plans accordingly. In the event that you're forced to quit work earlier than you had planned, you'll know your options. In the meantime, remember that sound financial planning can help you to avoid unhappy surprises at retirement time.