Ready to Retire? Not so Fast!

Filed under: Retirement

 

It used to be that most people waited until their full retirement age, as defined by Social Security, before retiring from their careers. Depending upon your year of birth, this might be set at age 65 to 67.

But for those who have saved diligently for retirement, or who will enjoy a generous pension from their former employers, an early retirement might be possible as early as age 62. Sure, your Social Security benefits will be permanently reduced from what they could have been at full retirement age, but you might feel satisfied with the trade-off of a slightly lower income in exchange for an early retirement.

So does this mean you can go ahead and retire at 62? Not so fast! As eager as you might be, you have one more important consideration to investigate. What will you do about health care?

Contrary to popular belief, Medicare does not automatically start when you receive Social Security benefits. This is only true if you retire at age 65 – the date at which you are eligible for Medicare. If you retire before age 65, you will need some other form of health insurance until your 65th birthday.

When you keep in mind that your health care expenses are likely to increase as you age, you can see the importance of having an adequate health insurance plan! If you’re lucky, your employer offers retiree health benefits. But these plans are slowly shrinking or disappearing altogether, and even if you do have retiree health benefits the co-pays and deductible might be significantly higher than they are now. Be sure to investigate all of the expenses associated with your retiree health care plan before counting up on it.

If you won’t be receiving retiree health benefits from your former employer, your other option is to purchase your own plan through the government-run exchange. These plans come with a range of deductibles and co-pays, and you might be eligible for a stipend to cover some of the premiums. Since these stipends are based upon your annual income, you should calculate carefully and consult with a professional before making a decision to retire early.

Talk to your financial professional about your hope to retire before age 65, and together you can craft a plan to make sure your health care needs are covered by adequate insurance. Factor any premiums, deductibles, co-pays and prescription costs into your estimated budget, so that you aren’t faced with any unpleasant surprises once you retire.

 

This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.