By Jim Joseph, CFP®
Deciding to retire early is a dream of many people, but achieving this goal requires attention to many details and considerations within your retirement plan. In our long experience helping retirees navigate this special stage of life, we’ve seen how careful planning can go a long way in laying the foundation for a worry-free retirement.
One crucial area to examine in planning for an early retirement is securing healthcare insurance if early retirement occurs prior to age 65, or when Medicare-eligible. Should you take your employer-plan COBRA coverage or apply for private insurance? Are there alternatives you haven’t considered?
At FSA Wealth Partners, we help our clients address this issue via a proprietary decision tree which we specifically designed to guide clients toward a practical solution to this complex question. Let’s take a walk through how you might find your solution.
First Step: Continued Coverage From Your Employer
Most employers with 20 or more employees are required to offer COBRA coverage to former employees, however, this doesn’t mean they’re required to subsidize it. Although accepting COBRA coverage would enable you to retain your current plan, you’d be responsible for the full premiums, which could be expensive.
In addition, COBRA coverage only lasts about 18 months and you may need to also pay a 2% administration fee, so unless you’d be eligible for Medicare within this time frame, you’d be back looking for coverage once COBRA ends.
If Married, Consider Enrolling With Your Spouse’s Plan
If you’re married, you might also consider insurance offered by your spouse’s employer. Depending upon the plan, your spouse may only need to add you as a dependent on their plan, but even if the plan requires a change to “Family” coverage instead of just the employee “Individual,” the extra premium may still be far less than COBRA premiums with your own employer’s program. It’s worth considering when your spouse will also retire and if their pre-65 retirement will put you both back into this situation down the road.
If you do choose this option, be sure to still compare the premium costs and plan benefits with other options, including your own employer’s plan (even with COBRA) or insurance options in the private marketplace. Depending upon your own health circumstances, there may be valid reasons to stay with your employer’s plan (despite the added cost). It’s also crucial to be sure your key doctors (PCP and other specialists) will accept the new health insurance coverage.
Look at Marketplace Insurance
Another way to keep insurance coverage as an early retiree is to purchase healthcare from the Health Insurance Marketplace®. As an early retiree, your deductibles and copayments could be less expensive and you could benefit from premium tax credits and savings, depending upon your income. As such, the premiums you pay as an early retiree may be surprisingly small. Start your research here to review plan options and costs.
Consider Health Share Plans
A lesser known solution to retaining healthcare coverage may be through a health share plan. These plans, sometimes known as health share ministries, aren’t actually health insurance. Think of these as “crowdsourcing” for healthcare, where a group of members agree to pool their money to cover the cost of medical care for each other.
There are some drawbacks to health share plans. In addition to typically needing to submit a statement of faith, many health share plans do not cover preexisting conditions. As a new member, you may also have to pay into the plan for several months or a year before requesting coverage, and you’ll need to conduct careful due diligence to avoid later surprises, especially since health share plans are not subject to the same laws as health insurance companies.
Private Health Insurance
Another option for early retirees is to purchase private health insurance. This process is similar to looking for insurance on the Marketplace. However, since these plans are purchased privately, you may discover there are more plan options available. However, an important consideration with private health insurance is that the premium tax credits may not apply. Therefore, the cost could be higher depending on the plan and other factors.
What About Part-Time Work?
For early retirees who want to leave the grind of the 40-hour workweek but still like the idea of earning some income while still retaining the time and freedom to pursue other interests, working part-time for larger companies may also include health insurance benefits. Along with earning income that allows you to draw down less of your portfolio to meet living expenses, working for many larger employers (such as Starbucks or Amazon) may qualify you for the benefits they offer to part-time employees.
Review and Compare All Your Options
In summary, if you’re planning on retiring prior to age 65, securing reliable and affordable health insurance to cover those years prior to Medicare should be near the top of your retirement planning checklist. Not only do you need to be sure your healthcare will continue to serve your needs, but also that potentially higher premiums and other medical costs don’t overly impact your long-term retirement plan. If you’re not sure, maybe it’s time to consult with a qualified wealth advisor as to how your plans will fit your resources.
Looking for Some Healthcare and Financial Guidance?
At FSA Wealth Partners, we know that financial planning is so much more than just crunching numbers; it paves a clear path for the life you want to live, on your terms and in line with your unique goals and aspirations. Connect with a FSA Wealth Partners (FSA) today to craft personalized retirement planning that’s specifically tailored to you and your family.
To schedule a meeting, call (301) 949-7300 or email jim@FSAwealthpartners.com.
About Jim
James Joseph, CFP® is the President and Partner of FSA Wealth Partners (FSA), a financial services firm in Rockville, MD, with over 40 years of experience helping individuals, families, and business owners navigate the complexities of wealth management. Since joining FSA in 2004, Jim has been passionate about guiding clients with personalized financial and investment advice, simplifying complex financial topics, and providing tailored solutions—especially for those approaching or enjoying retirement.
Jim takes pride in the FSA Safety Net®, a unique strategy designed to help clients avoid major losses during market downturns. His belief that “you win by not losing” underscores FSA’s proactive approach to preserving wealth while still seeking growth. By focusing on risk management and using the FSA Safety Net®, Jim works to prevent small losses from becoming significant setbacks, keeping his clients’ goals intact. Jim emphasizes the importance of both active management and comprehensive financial planning.
Jim began his financial career in 1997, gaining experience at Charles Schwab and Morgan Stanley, where he crafted retirement strategies and managed portfolios. His extensive background, combined with his genuine dedication to helping clients reach their financial goals, has made him a trusted advisor. He particularly enjoys seeing clients succeed when they embrace his advice and transition smoothly into retirement, believing that starting early and leveraging the power of compounding can unlock future financial flexibility.
Jim holds a bachelor’s degree in Finance from West Virginia University, the CERTIFIED FINANCIAL PLANNER® designation, and over the years has shared his financial knowledge in publications such as The Wall Street Journal and Reader’s Digest. When not at work, Jim enjoys spending time with his three daughters, playing ice hockey, and cheering on his beloved Pittsburgh Penguins and Steelers. He’s also into aviation, working toward his private pilot’s license. To learn more about Jim, connect with him on LinkedIn.
FSA’s current written Disclosure Brochure and Privacy Notice discussing our current advisory services and fees is available at www.fsawealthpartners.com/disclosures or by calling 301-949-7300.
