How to get insurance if you retire at 62? A guide to bridging the gap before Medicare

For most Americans, Medicare eligibility begins at age 65. This leaves a crucial three-year health insurance gap for those who choose to retire at 62. Navigating this period requires a strategic approach to ensure you and your family maintain reliable and affordable medical coverage without interruption.

Quick Summary

The main options for securing health insurance after retiring at 62 include COBRA continuation from your former employer, purchasing a plan on the Affordable Care Act (ACA) Marketplace, or joining a spouse's employer-sponsored plan. Medicaid may also be an option for those with lower incomes.

Key Points

• Medicare Gap: Retiring at 62 means a three-year health insurance gap until Medicare eligibility begins at 65 for most people.

• ACA Marketplace: The ACA offers a Special Enrollment Period (SEP) after job loss, allowing early retirees to purchase comprehensive plans, potentially with subsidies based on income.

• COBRA: Continuing your previous employer's plan via COBRA provides identical coverage but is expensive and typically only lasts 18 months.

• Spouse's Coverage: A straightforward and potentially cost-effective option is to join a working spouse's employer-sponsored plan.

• Medicaid: Those with limited income in retirement may qualify for free or low-cost Medicaid, depending on their state's rules.

• Careful Comparison: Before committing, compare the costs, coverage, and duration of all available options to ensure you have a secure bridge to Medicare.

Bridging the Health Insurance Gap: Why Age 62 Requires Action

Retiring before age 65 means you will not yet qualify for Medicare, the federal health insurance program for seniors. This three-year window, often called the 'Medicare gap,' can leave early retirees vulnerable to significant medical costs if they lose their employer-sponsored coverage upon leaving their job. Fortunately, several pathways exist to secure comprehensive health coverage during this time. Your best choice will depend on factors such as your financial situation, health needs, and whether you have a working spouse.

Option 1: The Affordable Care Act (ACA) Health Insurance Marketplace

The ACA Marketplace, available through HealthCare.gov, is a popular and accessible option for early retirees. Losing your job-based insurance is considered a 'Qualifying Life Event' (QLE), which triggers a Special Enrollment Period (SEP). This allows you to enroll in a new plan outside of the standard Open Enrollment period.

Key features of ACA plans:

• Potential for Subsidies: Many with reduced income may qualify for government subsidies to lower premiums.
• Lower Out-of-Pocket Costs: Eligibility for cost-sharing reductions can lower deductibles and copayments.
• Essential Health Benefits: Plans cover comprehensive services.
• Pre-existing Conditions: Coverage cannot be denied or priced higher due to pre-existing conditions.
• Income: All retirement income sources influence subsidy eligibility.

Option 2: COBRA Continuation Coverage

COBRA allows temporary continuation of your former employer-sponsored coverage.

Pros:

• Identical Coverage: Benefits remain the same.
• Temporary Bridge: Can cover up to 18 months, useful for short-term needs.

Cons:

• High Cost: You pay the full premium plus fees.
• Limited Duration: Does not cover the entire gap to Medicare.

Option 3: Health Insurance Through a Spouse's Plan

If your spouse is employed with health benefits, you may join their plan.

Considerations:

• Cost: Premium will increase; compare this cost to Marketplace plans.
• Coverage: Ensure the plan's network and benefits meet your needs.
• Enrollment: Can join during spouse's Open Enrollment or via an SEP.

Option 4: Considering Medicaid

For those with lower retirement incomes, Medicaid may offer free or low-cost coverage.

Medicaid:

• Income-Based: Eligibility depends on income and household size, varying by state.
• State Rules: Not all states have expanded Medicaid; check your state's specifics.
• Enrollment: Can apply anytime based on monthly income.

Alternative and Considerations

• Short-Term Health Insurance: These plans are cheaper but offer less coverage and often exclude pre-existing conditions. Use with caution.
• Health Savings Accounts (HSAs): Funds can pay for medical expenses in retirement. Contributions stop once on Medicare.

Comparing Your Health Insurance Options

Here is a summary table to help you compare the primary options for getting insurance if you retire at 62.

Feature	ACA Marketplace	COBRA	Spouse's Plan	Medicaid
Cost	Varies; potential for subsidies	High (full premium + admin fee)	Varies; depends on spouse's employer	Low or free, for qualifying incomes
Coverage Duration	Annually renewable until Medicare	Limited (typically 18 months)	As long as spouse is employed	As long as you remain eligible
Enrollment Period	Special Enrollment (upon retiring), or annual Open Enrollment	Within 60 days of qualifying event	Depends on spouse's employer policy	Any time, based on income eligibility
Pre-existing Conditions	Covered	Covered (as continuation of prior plan)	Covered	Covered
Best For...	Bridging the full 3-year gap, lower income	Short-term coverage, maintaining current providers	Married couples where one spouse is still working	Early retirees with very low income

The Next Step: Making an Informed Decision

Choosing the right health insurance in early retirement is crucial. Research plans on the official ACA website to compare costs, coverage, and potential subsidies. Carefully evaluate each option to find the best fit for your situation.

For more detailed information and tools to compare plans, visit HealthCare.gov. This resource can guide your decision-making.

Frequently Asked Questions

Can I enroll in Medicare when I retire at 62?

No, unless you have a qualifying disability or a specific health condition like ALS or End-Stage Renal Disease, you are not eligible for Medicare until you turn 65.

Does my 401(k) withdrawal affect my ACA subsidy eligibility?

Yes, withdrawals from your retirement savings accounts, such as an IRA or 401(k), are generally counted as income when determining your eligibility for ACA premium tax credits.

How long can I stay on COBRA coverage?

COBRA coverage typically allows you to stay on your former employer's plan for up to 18 months. This is not long enough to cover the full three-year gap until Medicare.

Is short-term health insurance a good option for early retirement?

Short-term plans are generally not recommended for early retirees, as they often do not cover pre-existing conditions and offer less comprehensive benefits than ACA plans.

What if my spouse is also retired?

If your spouse is also retired, you cannot rely on their employer-sponsored plan. Your best options would be to explore ACA Marketplace plans or Medicaid, depending on your income.

What is a Special Enrollment Period (SEP)?

An SEP is a time outside the standard Open Enrollment period when you can sign up for health insurance. Losing your job-based coverage when you retire triggers an SEP.

Will I pay a penalty for not signing up for Medicare early?

Since you are not yet eligible, there is no penalty for not enrolling in Medicare at age 62. You will enroll during your Initial Enrollment Period as you approach age 65.