The Problem with Retiring Before 65

Most people feel like they can’t wait to retire. For some, the anticipation is so great that they consider retiring “early”, at around age 62. This is the first age at which you can claim your Social Security benefits, even though your monthly check will be smaller than it would have been if you had waited until your full retirement age. That fact may not bother you, if you have saved enough money in a retirement fund, purchased an annuity, or found some other way to provide yourself with a stream of income in retirement.

However, even if you feel your retirement income will be sufficient, you have one more hurdle to jump before you should retire. What will you do about health care?

There is a common misconception that Medicare is tied to Social Security, in the sense that you will automatically receive Medicare when you begin receiving your Social Security benefits. However, that is only the case for retirees who have reached age 65, the first age at which you are eligible for Medicare.

Until you reach age 65, you aren’t actually able to get Medicare. So, if you decide to retire early, you should think about how you will cover your medical expenses until you turn 65.

Some employers offer retiree health benefits. If this is the case for you, check out all of the details of the plan before you decide to rely upon it. Retiree health plans are not always identical to the health care plan you enjoy as an active employee. It may carry a higher deductible or co-pays for services, or it might have very limited prescription or dental coverage. You need to fully understand the limitations of your health care plan, so that you can factor any additional expenses into your budget.

Unfortunately, retiree health care plans are becoming a thing of the past. If you’re one of the unlucky ones, and your employer does not offer this benefit, then your other option is to purchase your own health care plan through the health care exchange. Remember that premiums can change from one year to the next, and that any stipend for which you will be eligible depends upon your annual income.

Carefully consider the cost of health care in retirement before deciding to retire early. An early retirement may indeed be a possibility for you, but careful consultation with your financial planner can help you avoid any unexpected surprises.