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Early Retirement and Health Insurance

Question: My husband and I are planning on retiring at age 50 (we have approx 13 years left)...meaning we hope to quit our 8-5 corporate jobs and find something more fun perhaps working part time at the local greenhouse or golf course. Many articles in magazines or stories on talk shows focus on how much to save but no one ever discusses healthcare options for those of us who want to retire early and will be without Medicare until age 65. We suspect healthcare will take a chunk of change but don't know how much or even where to find individual coverage. Can you please provide some guidance. Peggy, Minneapolis, MN.

Answer: You're right that the deal-breaker to early retirement is usually health insurance. It's expensive. Early retirement is probably out of the question for two groups of people: those who can't afford to absorb expensive annual health-insurance costs until Medicare kicks in at age 65 and anyone with a serious medical condition, such as diabetes or heart disease, that makes it next-to-impossible to get decent coverage.

Assuming you don't fall into those two categories, you should shop around and learn everything you can about deductibles, co-pays, networks, out-of-network costs, and other nuances of health-insurance policies.

I'd look into high-deductible plans. Basically, the higher the deductible, the lower the premium. The most popular high-deductible plans are those with preferred provider organizations that give price breaks for staying within a network. Still, coverage can range from bare-bones (read cheaper) to reasonably comprehensive (read expensive).

Better yet, consider a health savings account. You use these tax-advantaged savings plans in conjunction with a high-deductible policy. For a family in 2008, the catastrophic insurance policy has a minimum deductible of $2,200 and an out-of-pocket limit of $11,200. The maximum a family can contribute into the tax-sheltered account is $5,800. HSA contributions are made with pretax dollars, and any unused money in the savings account is rolled over for future use. Withdrawals are tax-free so long as the money goes toward qualified medical expenses.

You could also check out professional associations, trade groups, and even chambers of commerce offer group health plans to members, but they will probably be more expensive than an HSA or a high-deductible plan.

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