Before you start, keep this in mind: Figuring out when you can retire isn’t predominantly driven by your savings; rather, it’s driven by your expenses. Determining the income you need each year to support your lifestyle is important, as well as estimating your future health care costs and insurance options.
Fortunately, you have several options to choose from based on your individual situation.
Employer-sponsored health insurance for retirees
Your school district may offer the option to continue your health insurance coverage as you enter retirement. If so, be clear on what is actually offered and their approach on covering premiums for spouses/partners/dependents. Rising costs are leading many employers to change the retiree benefits they offer, so approach with some caution and be sure you have enough flexibility to go with the changes.
Health savings account (HSA)
An HSA is a tax-advantaged account to help people save for medical expenses that high-deductible health plans don’t cover. Your district may offer this in lieu of employer-sponsored insurance after retirement.
COBRA coverage
COBRA typically extends your current employer-sponsored plan for up to 18 months after you retire. It can be quite expensive. You may be able to use funds from an HSA to pay for premiums.
Affordable Care Act
This public market place for insurance varies in cost by age, state, insurer, plan level, and year. Depending on your income, you may qualify for subsidies.
Private insurance
This is often significantly more expensive than the public exchange, but it may be preferable if you have the resources or specific medical needs. Be careful not to miss the open enrollment period.
Spousal health plan
If your spouse is still working, they may be able to enroll you in their plan, which can be the easiest and most cost effective option. Be sure to talk together about the timing of your retirement and the possibility of other options to bridge the gap.
Work part-time
Some retirees choose to work part-time for the insurance, which can still give you flexibility and plenty of time off depending on the job.
In general, plan for escalating costs over time. Health care costs are anticipated to rise by an average of 5.5% per year over the next decade (CMS). Invest in healthy habits to help you enjoy life and make living more affordable.
Consider whether early retirement is worth cutting back on enjoyable lifestyle expenses in order to pay for health care costs—there is no wrong answer, but it’s important to understand the costs and benefits.