Holland Column

Retirement & Financial Planning

Holland Financial

Bridging the Gap When Retiring Early

Ready to retire? Many people can hardly wait! Maybe you are in your late 50s and know that retirement is just around the corner. If you’ve been a good “saver” and/or investor, you could be asking yourself if retiring at age 62, instead of waiting until your full retirement age, is a possibility. (The earliest you can take Social Security (SS) is age 62, but if you wait, your monthly benefit will continue to increase through age 70). If you’ve already made the decision to retire early, there is an important thing to keep in mind: health insurance is a major expense and rates continue to rise. So, how do you bridge the health-insurance-gap between an early retirement and applying for Medicare at age 65? There are several strategies; here are just a few:

Spouse’s Plan: If your spouse is still working, you may be able to obtain health coverage as a dependent under his/her employer-sponsored plan. Make sure to find out the details and cost ahead of time. Depending on the plan, the size of the group, and other factors, this could still be an expensive option.

Look to the ACA: Regardless of your opinion of “Obamacare,” the Affordable Care Act is still in effect and it could provide the answer to your short-term health insurance needs. You can log on to healthcare.gov to compare rates and plans.

Semi-retire: Many people equate receiving Social Security benefits with a total discontinuation of employment. But you don’t have to quit completely! If you take SS benefits at age 62, you could opt to work just enough hours to qualify for a company’s health insurance plan. Then, at age 65, you could file for Medicare and move into retirement. This could be a great transitional step between full-time work and full-time retirement. The only catch, however, is that if you are younger than your full retirement age, and earn more than $17,040 (in 2018), your SS benefit will be reduced by $1 for every $2 you earn over that annual limit. (Beginning in the month you reach full retirement age, there will no longer be a reduction in SS benefits.)

Line of Credit: If you are age 62, or older, and own a home, you could consider a reverse mortgage line of credit loan (HECM). The borrower must continue to pay homeowners insurance, property taxes and home maintenance, but a HECM could provide the money to pay for expenses, like health insurance, prior to applying for Medicare at age 65. You could also use it to meet your cash flow needs in order to delay taking Social Security payments. (Again, the longer you wait to take Social Security, the larger your monthly benefit will be.)

Whether you decide to retire in your 50s, at 62, at your full retirement age, or beyond, it’s important to have a sound financial strategy. Sit down with an experienced financial planner. With careful planning, he or she can help you achieve your goal of an early retirement.


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