Most people will not be eligible for Medicare coverage until age 65. If you retire at age 62, you will have to consider the need for (and the additional cost of) alternative health insurance coverage until you qualify for Medicare.
According to a 2022 Gallup survey, the average retirement age in the United States is 61 — up from 57 in 1991 and 59 in 2002. Both planned and actual retirement ages have been increasing over the years, partly as a result of changes in retirement benefits — for example, the 1983 overhaul of Social Security gradually raised the full retirement age to 67, and there have been recent talks of raising the age further. For some workers, the idea of retiring early can be enticing, but it’s important to also be aware of the challenges of early retirement, including health insurance coverage and financial limitations.
Even though you may be eligible for Social Security payments at age 62, Medicare eligibility does not start until age 65. In this article, we’ll go over the current Medicare eligibility requirements and benefits, discuss whether counting on early Social Security benefits is advisable, and present the health coverage alternatives that you may be able to use until you qualify for Medicare.
Medicare age requirements
Established in 1965, Medicare is a federal health insurance plan designed to provide health coverage for seniors who are no longer on an employer’s health insurance plan. The typical age requirement to qualify for Medicare benefits is 65, unless the individual has a disability and has received Social Security disability benefits, or if they have end-stage renal disease (ESRD, permanent kidney failure) or amyotrophic lateral sclerosis (ALS, also known as Lou Gehrig’s disease). In order to qualify for Medicare coverage, an individual must also be a U.S. citizen or legal permanent resident.
Although Medicare is intended for retired people, the Medicare eligibility age is 65, which means if you’re planning to retire early, you won’t qualify for Medicare right away. Individuals who continue to work until or past the age of 65 will likely continue to have insurance coverage through their employer, but if you retire at 62, you may need to purchase health insurance or get coverage through your spouse’s employer plan.
How to enroll in Medicare
When you apply for retirement or disability benefits from Social Security, it also serves as your application for Medicare. Once you get approved for Social Security benefits, you’ll automatically get Medicare Part A coverage once you’re eligible. This means that if you were approved for Social Security retirement benefits by age 62, you should be enrolled in Medicare automatically upon turning 65.
If you’ve been receiving disability benefits for 24 months, you will also automatically get Medicare coverage. Those who aren’t enrolled in Medicare automatically can also sign up or switch their plan during the open enrollment period that runs from mid-October to early December each year.
Medicare coverage options and benefits
Once you qualify for Medicare, you’ll have a few coverage options to choose from. Here is a brief overview of the different types of Medicare plans:
Medicare Part A
Most people who have worked for at least 10 years and have paid Medicare taxes will qualify for premium-free Medicare Part A after reaching age 65. Medicare Part A helps cover expenses such as hospitalization, nursing facilities, home health care, and hospice costs. Seniors who are not eligible for premium-free Part A because they have not worked long enough or have not paid Medicare taxes can pay a premium to have Part A coverage.
Medicare Part B
Those who meet the requirements for Part A also qualify for Medicare Part B, which helps cover doctor’s visits, urgent care, and preventive care. However, to receive Part B coverage, Medicare beneficiaries need to pay a monthly premium and an annual deductible.
Medicare Parts C and D
Seniors who are eligible for Medicare coverage can choose Medicare Parts A and B (also known as Original Medicare) with or without including Part D (which covers prescription drugs) and with or without Medicare Supplement Insurance (Medigap plan). Medicare Part C (known as the Medicare Advantage plan) bundles Parts A, B, and (usually) D into a single plan. The monthly cost for the Part B premium still applies to the Original Medicare and Medicare Advantage plans.
Social Security benefits
You can apply for your monthly Social Security benefits between the ages of 62 and 70. This means if you retire at age 62, you may already be eligible for Social Security retirement benefits.
These early benefits may provide a small financial buffer until your Medicare coverage begins at age 65, and there are some strategies you can use to maximize your benefits. However, cashing your benefits in too early may not support your long-term retirement goals. This is because the longer you wait to apply, the higher your monthly Social Security benefits will be.
If you retire early, your Social Security benefit checks will be smaller. On the other hand, if you are willing to wait until you reach full retirement age (70) to begin collecting benefits, you could benefit from much larger payments over the course of your retirement.
Alternatives to Medicare before age 65
Health insurance can be expensive, so if you plan to retire early, you’ll want to find an affordable way to bridge the gap until you reach the age of Medicare eligibility, especially if health insurance and drug coverage costs were not factored into your retirement planning.
|Plan type||Average monthly cost||Description|
|Employer health insurance (for single employee or family)||$111 to $509||Coverage through one’s job. The cost goes up significantly when you add coverage for a spouse.|
|COBRA insurance||$400 to $700||A temporary extension of the coverage you receive through an employer. Premiums vary by state.|
|Individual plan via Healthcare.gov||$456||You can purchase an individual policy at Healthcare.gov. Premiums vary by state.|
|Short-term medical insurance||$124||Cost depends on where you live, your medical condition and age, and the level of coverage you choose.|
|Medicaid||$0||Based on income and family size. Rates may vary.|
Rikin Shah, a financial services advisor and CEO of the nationally licensed insurance agency GetSure, suggests the following health insurance options to consider until you are Medicare-eligible:
- Stay on your employer’s health plan, if allowed. COBRA can extend your coverage for 18 months after you leave a job. It can be expensive, but it is often cheaper than alternatives.
- See if you qualify for subsidies on Healthcare.gov, a health insurance marketplace. People under 400% of the federal poverty level get reduced premiums. In 2022, that amounted to $51,520 for individuals.
- Consider buying a short-term health insurance plan. These have limited benefits but lower monthly costs and are useful for bridging small gaps.
- Check if you qualify for Medicaid based on income and assets. Medicaid has no age limit, though eligibility varies by state.
- If you meet religious criteria, look into health-sharing ministries, in which members share medical costs.
- Shop for an Affordable Care Act–compliant major medical policy from a private insurer. This balances comprehensive coverage with lower rates than COBRA.
- Increase catastrophic policy deductibles to reduce premiums. This is a good interim option for healthy individuals without expensive medical conditions.
What to consider before retiring early
A person’s retirement age depends on multiple factors, including their health status, where they live, and how much they need to save to live comfortably. A recent survey of 2,000 Americans conducted by ClearMatch Medicare found that, on average, seniors retired at 61.5 years old, even though they had planned on retiring two years later, at around 63.2 years old. Here are some key findings from this poll that may help inform your own retirement decisions:
- 44% of those polled admitted that the amount they saved for retirement wasn’t enough (15% didn’t save for retirement at all).
- When asked about the most common myths related to retirement, 57% of retirees mentioned the belief that Social Security covers retirement, and 51% mentioned the idea that all healthcare costs are covered by Medicare.
- Healthcare made up $228 of the average $3,020 a month that respondents spent, 39% of which went to insurance costs, 23% to medication, and 15% to doctor’s visits.
- 88% of the respondents were already enrolled in Medicare. Of those, 55% worked with a Medicare agent over the phone or online to understand the enrollment process.
- Even if you retire at age 62, you will not be eligible for Medicare benefits until you reach age 65.
- If you choose to retire early, you may qualify for certain Social Security benefits, but you will also need to consider other coverage for your health needs until you qualify for Medicare.
- Alternatives to Medicare include extending your employer’s health plan with COBRA, taking advantage of your spouse’s insurance plan, buying short-term health insurance, and checking if you qualify for Medicaid or subsidies.
- Before making the decision to retire early, you’ll want to weigh the pros and cons and develop a retirement plan that will help you reach your financial goals.
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