You Can't Retire Early if You Don't Solve This Piece of the Puzzle

A lot of people dream of ending their careers early so they can enjoy retirement when they're in better physical shape. And if you've saved well for retirement, you may feel comfortable wrapping up your time in the labor force in your late 50s or early 60s, even if most of your peers intend to keep plugging away for a few more years.

But if you're going to retire early, you can't move forward until you've figured out what you'll do for health insurance -- and until you have an understanding of how much it'll cost.

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You can't afford to go without health coverage

Medicare eligibility for most enrollees begins at 65. If you're retiring earlier than that and you don't have a spouse's workplace health plan to jump onto, you'll need to figure out what to do for health coverage before moving forward with your plans.

The cost of buying health insurance may be more expensive than what you've bargained for. So before assuming you can afford to retire early, actually do your research to see what costs you may be looking at.

You might, for example, assume you can buy coverage for $400 a month. If the cheapest premium for an Affordable Care Act (ACA) plan in your coverage area is twice that sum, that throws your budget out of whack.

Speaking of ACA plans, they're one option to consider. Going to healthcare.gov lets you compare plan options by tiers to get a sense of the costs you're looking at. Keep in mind that plans with lower premium costs tend to have higher deductibles.

Note that tax credits for these plans may be available depending on your income. If you have a higher income, expect to pay those costs without a subsidy.

COBRA is another option you can look at if you're retiring early. It allows you to keep your employer plan.

But with COBRA, you're paying to retain your coverage without your employer picking up a piece of that tab. COBRA could make sense if you only need to bridge the gap until Medicare for a relatively short period (since it usually maxes out at 18 months) and if your options for an affordable ACA plan are limited.

There's also the option to buy health insurance privately. Depending on your ACA plan choices, this could be a competitive option. But do keep in mind that tax credits won't apply to a private plan.

Make sure you have a plan for health insurance before retiring early

Ending your career early may be something you've been hoping to do for a long time. But having a large nest egg may not solve the problem entirely.

It's important to research the cost of health insurance before making that decision and make sure your income and savings plan can cover it. If not, there may be other options you can look at to avoid draining your nest egg.

Working part-time, for example, could make it possible to retain some type of employer coverage so you don't have to foot the bill for health insurance by yourself. It could pay to see if your current employer is amenable to a reduced schedule.

Another option may be to make a late-in-life career change if burnout or boredom are fueling your desire to retire early. If you've done the same thing for 30 years, you may be tired of that job more than working in general. Switching careers could allow you to stay in the workforce and keep your health coverage through a job you find more meaningful and enjoyable.

No matter what route you ultimately go, it pays to consider different options if you're worried that buying your own health insurance for many years could derail your long-term financial stability and goals. And you definitely should not retire early until you're comfortable that you can pay for health coverage without too much strain.

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