Whatever your reason for retiring early, a study released in June 2014 by Fidelity Investments warns it will cost you in ways you might not expect. According to the study, early retirees can expect to pay an extra $17,000 per year in medical expenses.
The reason? Medicare coverage gaps. You give up your employer-provided health insurance when you retire, and Medicare doesn’t kick in until age 65. This means you’re on your own at a time when your health care costs are near their peak. Insurance companies charge older policyholders higher premiums, which means they’ll claim a bigger chunk of your retirement money.
As a savvy credit union member, you know the advantages of planning ahead for your golden years. One of the ways you can avoid sticker shock at your retirement party is opening a savings certificate.
You likely use savings certificates (similar to CDs at a bank) to keep an emergency fund on hand. These savings instruments are ideal for building up money in case of a rainy day. You may want to create one specifically for your health care costs.
You’ll want to keep this money separate since you’ll have different needs for it. A sudden, unexpected medical bill is different than needing a new car. You’ll likely have a little more time to pay your medical bill. Many hospitals are willing to work around your financial situation.
A 6- or 12-month certificate provides the perfect combination of accessibility and growth. Once you turn 65, you can add your remaining funds to your other retirement savings or even use it to finance a vacation!