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Overview
When considering early retirement, you must factor in your insurance needs. Because Medicare kicks in at age 65 and you may have other plans besides working until that age, AARP early retiree health insurance could help you bridge that insurance gap.
Types
There are several different AARP benefit options for those in the 50 to 64 age range. For example, AARPHealthcare.com lists some options on its website, including custom-designed plans and HSAs, lower-cost supplemental options, basic plans with lower premiums, supplemental coverage for retirees with existing insurance, dental insurance, prescription discounts and vision plans. Also, if you are over 65 (not necessarily retiring early per se), there are even AARP supplements to your Medicare.
Time Frame
Timing when you retire and the use of AARP support is critical. You may decide to retire early at 45, 55, 60 or some other age, or your employer may offer you an early retirement pension package. There may be penalties if you decide to withdraw funds from your pension earlier than at age 65. If you have an individual retirement account (IRA), you could still earn returns on these funds for a few years as you withdraw funds from another source. Or you may want to roll over assets from other plans into your AARP.
Size of AARP Need
How many people will make use of AARP early retirement health insurance? It is difficult to say as fewer people are retiring early, but there will be heavy use as baby boomers leave the work force. According to a report by AARP.org, at least half of baby boomers should be able to retire comfortably; however, the other half will likely require more support from the government and younger generations. And some will not be able to afford to retire at all.
Considerations
If you are considering AARP early retirement, you must consider the future financial issues you will face as you enter this life-changing event. How much income will you need in retirement if you do not plan on working? How would you like to spend your retirement (annual vacations, travel, cost of living considerations)? Did you consider the regular increases in health insurance premiums and emergency expenses? What role will your housing play in your retirement?
Expert Insight: Tax Considerations
Premiums paid by an employer to buy health insurance coverage for employees and their dependents are excluded from the employee's income. The exclusion may also apply to companies that want to self-insure by paying into a fund for the employee's medical expenses. However, if a self-insured plan discriminates in favor of higher-paid employees, the amounts paid for medical expenses are included in the individual's taxable income. Consult a licensed tax preparer for further details.
