Workers planning to retire early might consider working at least part-time to keep active employee health coverage until they're eligible for Medicare at age 65.
Employees and retirees "have to feel lucky if they still have retiree [health-care] benefits, and have to start planning for when they won't," says Rick McGill, head of retiree medical consulting for employee-benefits firm Hewitt Associates. He says such benefits are "a dying breed."
Retirement benefit experts have for some time been recommending that all workers--even those close to retiring and who've "earned" full retiree benefits--should assume that those benefits will likely be eliminated, either before or during their retirement, and start planning and saving for it.
Continuing to work to keep active employee health coverage is important because between 20% and 40% of people between 55 and 64 are either denied individual health coverage or forced to pay much higher premiums than the general population. Those 65 and older can save a lot by working a few years longer, McGill says. Even with Medicare, a 65-year-old couple's out-of-pocket health care costs could reach $225,000 in their remaining years, according to Fidelity Investments.
Unlike just about every other kind of compensation, such as salary or pensions, retiree health benefits can be taken away even after workers have built them up. Indeed, unless a union contract prevents it, companies typically have a free hand to reduce or eliminate retiree health benefits for both active employees and retirees.
"Employers can pull the rug out from under their older workers and their retirees at any point--there's no guarantee these benefits will continue," says Richard Johnson, a retirement researcher at the Urban Institute.
Source: The Wall Street Journal, July 16, 2008
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