Venus Williams didn’t only make history earlier this week as the oldest woman to win a WTA singles match since 2004, she also highlighted an important aspect of retirement planning: covering the costs associated with health care.
After all, if a star athlete is concerned about paying for health care, shouldn’t it be a top priority for everyone when planning for how they will pay for that part of their retirement?
During an on-court interview, the tennis superstar said she returned to tennis because she needed health insurance. "I had to come back for the insurance. They informed me this year that I'm on COBRA, so it's like, I got to get my benefits on,” quipped Williams.
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The cost of health care ain’t cheap
While Williams may have been half joking, it does highlight the fact that health care in retirement is expensive, even if you retire at age 65 when Medicare kicks in.
According to Fidelity’s most recent estimate, as of 2024, a 65-year-old may need $165,000 in after-tax savings to cover health care expenses in retirement, which is up 5% from 2023. That’s with Medicare, which covers about 80% of your health care costs.
Waiting until 65 does mean you won’t have to self-insure, but many people choose to retire before 65, which is where the planning comes in.
“There is state subsidized insurance if you can keep your income below a certain level to qualify for it; others have to use COBRA, and the rest use private insurance,” says Derrick Longo, a wealth advisor at Exencial Wealth Advisors.
“It's the unknown that scares people. They have spent their whole life being on their company’s insurance, and they don’t know how to get their own insurance until they get Medicare,” he says.
If you are married and one spouse continues to work and has health insurance, enrolling in his or her employer’s health plan is the cheapest option. If you are single or your spouse doesn’t have health coverage, here’s what you can do:
The down low on COBRA
The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows workers to keep their employer-sponsored health insurance for a period of time after terminating a working relationship (voluntarily or otherwise), typically for 18 months, although it can last for 36 months, according to Whitney Stidom, vice president of consumer enablement at eHealth.
With COBRA, you usually pay full price for your employer's health plan — not the subsidized price employees get, which Stidom says can be “prohibitively expensive.” (It was apparently too expensive for Williams.)
As a result, it may not be your best option if you have more than 18 months until you are covered by Medicare.
Self-insuring under the Affordable Care Act
If COBRA is too expensive or you need health insurance longer than it is in effect, you can purchase insurance on your own through the Affordable Care Act, but be aware of the limitations when going this route.
For starters, Stidom says new retirees who stopped working usually have a 60-day window to enroll in a new health plan. The same window applies if they moved to a new state or coverage area. You can also sign up during the open enrollment period in the fall for the coming year.
The cost of the plan will depend on your age and where you live, she says, noting an early retiree can pay $500 or more a month for individual coverage. It gets more expensive if you are insuring a spouse and children. Depending on your income, you may qualify for subsidies that can reduce the monthly premiums you’ll pay for ACA coverage.
“Some folks are surprised to learn that they can earn up to 400% of the federal poverty level and still qualify for subsidies. In the contiguous United States, that’s about $62,000 per year for a single person or $84,000 per year for a family of two,” says Stidom.
The importance of planning
Regardless of the type of health insurance you choose, the important thing is to plan for your coverage before you retire. You don’t want to go into it blind and then be shell-shocked by the price.
A need for quick cash could cause you to withdraw from the wrong retirement savings account, do something drastic like begin collecting Social Security earlier than planned, or have to go back to work. If you collect Social Security before your full retirement age, which is 67 for people born in 1960 or later, you will face an up to 30% reduction in benefits.
“Plan for it, get some quotes, and get comfortable with it so you know what the cost is going to be” before you retire, says Longo.
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