Planning an Early Retirement in 2027? Make This Check First

Many people hope to step away from work before the traditional retirement age. If you have built up substantial retirement savings, you may be in a position to leave the workforce earlier than most.

Retiring ahead of schedule can give you more time for travel, hobbies, and other pursuits while you still have the health and energy to enjoy them. But if you are aiming for an early retirement, you should first figure out how you will get health coverage and how much it will cost.

Skipping coverage can be a costly mistake

Medicare generally becomes available at age 65. If you plan to retire before then and cannot join a spouse's workplace health plan, you will need to secure coverage on your own.

Even if you are in good health, it may be tempting to go without insurance. That is a risky choice.

One emergency room visit alone could lead to thousands of dollars in medical bills without coverage. Even if you choose the most basic plan available, having some form of insurance is important.

Health insurance paths to explore

Early retirees have several health insurance choices, but none of them should be expected to be inexpensive. COBRA typically lets you keep your employer-sponsored coverage for a limited period, usually 18 months. Since you would be paying the full premium without an employer contribution, the monthly cost can easily reach hundreds of dollars.

COBRA can make sense if you only need coverage for 18 months or less before Medicare starts and you can manage the premiums. It also lets you stay with a plan you already know.

Otherwise, you may need to choose between private insurance and an Affordable Care Act, or ACA, plan. Because prices vary depending on the plan and your location, comparing options is the only reliable way to estimate what you will pay.

It is better to research those costs before you retire early. If you assume health insurance will be much cheaper than it really is, your budget could quickly become unworkable.

And if the price is far higher than expected, you may decide to delay full retirement and instead shift to part-time work so you can keep workplace health coverage for a few more years. That may not be ideal, but it could help protect your savings and reduce financial stress.