Everyone views retirement a little differently. Some folks love their career and want to continue pursuing their passion for as long as their health and desires will allow them to; while others are looking for the exit sign, in regards to their career, as soon as they can spot it. For those that long to be out of the workforce earlier than many of their friends and peers they must, of course, save money diligently over an extended period of time. But even the Everyday Millionaire that plans on retiring at 60, still has to deal with how to cover themselves in the event of a cataphoric medical event, which could wipe out years of savings, with one diagnosis. Thankfully for clients of Whitaker-Myers Wealth Managers, which is part of the Whitaker-Myers Group, we have a benefits team led by President Chris Vanderzyden, who help clients navigate their options when they are considering leaving employment before Medicare (government ran health insurance for retirees) kicks in at age 65. Recently, we asked Chris to spell out some of the primary options a client would consider when looking to purchase health insurance, pre 65.
COBRA – Are you Eligible?
In many circumstances, if you lose your job either involuntarily or through retirement, you can still enjoy the benefit of your companies group health insurance plan for a limited period of time. COBRA stands for the Consolidated Omnibus Budget Reconciliation Act and according to Chris Vanderzyden, President of Whitaker-Myers Benefits Plans, “you can expect to pay 2-3% more than the cost of your companies plan, while you were actively employed, but that is still less expensive than if you were to buy a policy on your own.”
Continuation coverage under COBRA is typically available for a shorter period of time, as it’s designed to bridge your gap from one coverage to another coverage. You could expect your COBRA to last you between 18 and 30 months. Keep in mind, that if you were terminated for cause, it is likely you will not be eligible for COBRA coverage.
Affordable Care Act Plans for Early Retirement
Also known as Obamacare, this type of health insurance plan can be used for those that have no other options. The problem with the Affordable Care Act plans is they have increasingly become more expensive while not providing good coverage, in our opinion. One thing to note is that, the ACA plans, will not exclude you for pre-existing conditions which was a problem that many early retirees, in their 50s and 60s, faced when looking for coverage prior to the ACA.
While the future of this program is in flux, it still may be beneficial to take a look to see if this provides you a pathway to health insurance coverage until Medicare.
Spousal Health Insurance Coverage
Perhaps a couple each carries their own health insurance coverage, during their working years, because their employers require that they only add a spouse to their plan, if the spouse didn’t have access to a plan through their own employer. Well, if one spouse is going to take the early retirement and the other is going to stay gainfully employed for a period of time, this option is going to be something to consider. This is an option that is going to save you a lot of money but will require one spouse to stay in the workforce, which in some situations may not be ideal.
When asking why most folks want to retire early, the common answer is either, “we want to slow down” or “the stress of this job is getting to me (or my health)”. The desire to work may not be gone but many people understand their current situation may be unmanageable for much longer. If this is the case, a popular option for some is to find employment where they can help ease the burden of their cash flow. This can allow for Social Security Benefits to be delayed and increased, and to provide an answer to their health insurance problem.
Below is a list of some of the more popular companies that provide health insurance benefits to part-time employees:
- Starbucks – 240 hours over a 3 consecutive month period or at least 20 hours per week. Roughly about a 5-month window before benefits will begin to meet qualifications
- Caribou Coffee – Something about a coffee trend here is brewing. Their website does not indicate a waiting period.
- Whole Foods – 20 hours per week required and benefits begin after the first 800 hours.
- UPS – This is a favorite of mine because they mix good pay, a growing industry (think Amazon!), and they provide benefits like you’re a full-time employee. However, you will need to complete 1 year of service.
- Costco – 20 hours per week and benefits would begin after a 180-day waiting period.
- Lowe’s – Another favorite of our clients because you become eligible for their health insurance benefits as of the date of hire.
- U-Haul – Here is one you probably didn’t expect. With a work from home customer service team, the company’s workforce is flexible. U-Haul offers a limited medical plan, so, a supplemental plan may be required.
- JP Morgan Chase – 20 hours a week and benefits begin after 90 days. JP Morgan, as many of the large banks did, raised their minimum wage to $15 per hour.
Health Care Sharing Programs
Many of our Dave Ramsey fans remember hearing Christian Healthcare Ministries advertise on the Ramsey Show for many years. Christian Healthcare Ministries is one example of a Health Care Sharing Program. According to their website, "CHM is a membership-based, nonprofit ministry through which hundreds of thousands of Christians voluntarily share to pay each other’s medical bills. Members who incur medical costs eligible according to our Guidelines submit their bills to CHM along with a few simple forms. Bills are then shared or reimbursed – usually by way of a check in the mail."
One of the main benefits of an option like this is that the monthly premiums are dramatically lower. According to CHM’s website their plans run anywhere from $78 - $172 per month and a have Brothers Keeper option which allows for sharing of extreme medical costs. They anticipate on average should cost about $45 per quarter, but varies because it’s based on actual medical costs shared.
Other popular Christian health care sharing programs:
Self-Insure or Hybrid with a Health Savings Account (HSA)
A fear of any type of medical insurance that can require the insured (you) to carry more of the day-to-day costs of health insurance is, how would I pay for those costs? A Health Savings Account (HSA) is a perfect opportunity to save money early in your working life to anticipate the inevitable costs that will arise in retirement, as it relates to health.
HSA’s provide tripe tax savings in that they allow for pre-tax contributions, the assets inside of the account grow tax-free and when withdrawn, if used for qualified medical expenses, can be taken out totally tax-free.
When considering if you should contribute to an HSA, please remember you must meet certain qualifications, which can be found on the Whitaker-Myers Wealth Managers Health Savings Account page.
Lastly, Have a Good Overall Financial Plan
Although we believe in financial planning at our firm, no decision should be made in a vacuum. Your entire financial situation should be understood, and given thought to, when considering health insurance options in retirement. The advisors at Whitaker-Myers Wealth Managers are here to provide you with a customized financial plan, developed with the principals of Dave Ramsey, and the team at Ramsey Solutions, incorporated at every step. Connect with our team today to learn more.
Author: John-Mark Young
Whitaker-Myers Wealth Managers, LTD is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.