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Retiring before the age of 65 is a dream for many people, but the goal is best achieved only after some detailed financial planning. By leaving your employer, you may lose health insurance, and if you plan to travel or continue driving, your other insurance rates can go up. Here are some factors to keep in mind about insurance when you’re deciding whether to turn in your punch card for good.
As you get older, some insurance rates may get higher. Travel insurance to go abroad can increase. Car insurance premiums may also rise, but less than you might expect: often senior drivers have fewer accidents because of their experience behind the wheel, making their insurance less than that owned by teens. While your status as an employee won’t affect these directly, it’s good to take a hard look at your insurance rates before retiring so you can predict rising costs.
You can start drawing on Social Security at any time between age 62 and 70. However, if you start taking these benefits before full retirement age of 66, you will only get a reduced retirement benefit. Regardless of when you start taking social security payments, you only become eligible for Medicare at age 65. So if you retire early, you need to have a plan for your health coverage.
COBRA is a federal plan that allows you to continue your employer’s coverage for 18 months after leaving your job, but you are on the hook for the entire cost of premiums and possibly an additional administration fee. You don’t have to take COBRA, so shopping around for cheaper health insurance to make sure you are covered until you reach the age of Medicare eligibility is a wise choice.
There are a number of financial considerations when you decide to enter retirement. Insurance is a safety net for all aspects of your life, from your leisure activities to your health. Check in on those things you want to be available to you after you leave the workplace, and make sure you have the right insurance. It’s always good to ask questions before you make an irrevocable choice.