Insurance for Pre-Retirement (55-64)

Insurance Guide for Pre-Retirement (55-64)

The years between 55 and 65 present unique insurance challenges. You’re too young for Medicare but may face higher health insurance costs. Life insurance needs are shifting. Long-term care decisions are becoming urgent. This guide covers the critical choices for this transitional decade.

At a Glance

• Health insurance is your biggest challenge—expensive without Medicare eligibility
• Life insurance needs should be reviewed—you may need less than before
• Long-term care insurance is now or never—premiums rise and health can disqualify you
• Disability insurance still matters if you’re working
• Prepare for Medicare—understand enrollment rules before you turn 65

Health Insurance Before Medicare

If you’re not yet 65 and don’t have employer coverage, health insurance options are limited and often expensive.

If You’re Still Working

Employer coverage is usually your best option:

• Continue working, even part-time, if insurance is tied to employment
• COBRA extends employer coverage for 18 months after leaving (at full cost)
• Consider spouse’s employer plan if available

If You’re Retired Early

ACA Marketplace is your primary option:

• Shop at Healthcare.gov (opens in new tab) during open enrollment
• Premium tax credits available based on income
• Rates are higher for older adults (up to 3x what younger adults pay)
• No pre-existing condition exclusions

Strategies to reduce costs:

• Manage income carefully to maximize premium tax credits
• Roth conversions and income timing affect subsidy eligibility
• Consider Health Savings Account (HSA) contributions if on high-deductible plan
• Some states have additional subsidies

COBRA Coverage

If you leave a job with health benefits:

• COBRA lets you continue employer coverage for 18 months
• You pay the full premium (employer + employee share) plus 2% admin fee
• Expensive but may be worth it for continuity
• Compare to marketplace alternatives

Healthcare Sharing Ministries

Not insurance, but an alternative:

• Lower monthly costs
• May exclude pre-existing conditions
• Fewer regulatory protections
• May work for healthy individuals with simple needs

Life Insurance Review

Life insurance needs typically decrease as you approach retirement.

When You May Still Need It

• Spouse depends on your income or pension: Coverage to replace lost survivor benefits
• Outstanding debts: Mortgage, loans you don’t want to pass on
• Specific inheritance goals: Leave assets to heirs
• Business obligations: Key person or buy-sell funding

When to Reduce or Eliminate

• Children are financially independent
• Mortgage is paid off or nearly so
• Spouse has adequate income and assets
• Term policy is expiring and replacement is very expensive

What to Do with Existing Policies

Term life insurance:

• If coverage is no longer needed, let it lapse (no action required)
• If converting to permanent is offered, compare costs carefully
• Renewal premiums at term end are usually prohibitive

Whole life with cash value:

• Keep for death benefit if still needed
• Surrender for cash value if coverage is unnecessary
• Consider a reduced paid-up option (smaller benefit, no more premiums)
• Explore 1035 exchange to annuity

Long-Term Care Insurance

This is often your last window to purchase long-term care insurance. Waiting longer increases costs and health risks.

The Reality

• 70% of people over 65 will need some long-term care
• Medicare does NOT cover long-term custodial care
• Average nursing home cost: $8,000-12,000/month
• Home care: $25-35/hour for aides

Why Timing Matters

Age affects cost:

Health affects eligibility:

• Existing conditions can disqualify you
• Cognitive decline makes you uninsurable
• Buy while you can qualify

Policy Features to Consider

• Daily benefit: $150-250/day is common range
• Benefit period: 3-5 years covers most needs
• Elimination period: 90 days is standard (how long before benefits begin)
• Inflation protection: 3% compound growth is recommended
• Home care coverage: Most policies now include this

Alternatives to Traditional LTC Insurance

Hybrid policies (life + LTC):

• Life insurance with long-term care rider
• If you don’t use LTC benefits, heirs receive death benefit
• Eliminates “use it or lose it” concern
• Generally more expensive

Asset-based LTC:

• Single premium funds long-term care benefits
• Remaining funds pass to heirs
• Requires significant upfront payment

Self-insuring:

• Appropriate if assets exceed $500,000+ (beyond home)
• Requires honest assessment
• Consider partial coverage for catastrophic needs

Disability Insurance

If you’re still working, disability insurance remains important.

Why It Still Matters

• Peak earning years: Income loss is significant
• Years until retirement: Still time for a disability to devastate finances
• Social Security disability: Hard to qualify and benefits may be insufficient

Employer Coverage Review

• Confirm you’re enrolled in employer plans
• Understand coverage limits (typically 60% of base salary)
• Check benefit duration (to age 65? 2 years?)

Individual Coverage

If you don’t have adequate employer coverage:

• Individual policies can be purchased but are more expensive at this age
• “Own-occupation” coverage is particularly valuable
• May be worth it if income loss would be catastrophic

Preparing for Medicare

Even though you can’t enroll until 65, understanding Medicare now helps you plan.

Key Dates

Initial Enrollment Period: 7 months around your 65th birthday (3 months before, birthday month, 3 months after).

Late enrollment penalties:

• Part B: 10% increase for each 12 months you delay—permanent
• Part D: 1% of premium for each month delayed—permanent

Decisions You’ll Make

1. Original Medicare or Medicare Advantage?
2. Need a Medigap policy?
3. Which Part D drug plan?

If Still Working at 65

If you have employer coverage when you turn 65:

• You may delay Part B enrollment without penalty
• Your employer’s plan may become secondary to Medicare
• Different rules apply based on employer size

Home and Auto Insurance

Home Insurance

Review coverage as you approach retirement:

• Dwelling coverage: Still adequate for rebuild costs?
• Personal property: Downsize coverage if you’ve simplified
• Discounts: Ask about retiree and age-based discounts
• Liability: Maintain adequate limits—assets to protect

Auto Insurance

• Lower mileage: May qualify for discounts if commuting less
• Defensive driving courses: Can reduce premiums
• Vehicle changes: Retirement may change car needs
• Retiree discounts: Ask about available discounts

Pre-Retirement Insurance Checklist

Ages 55-60

• Life insurance review: Still need current coverage level?
• Long-term care research: Get quotes while healthy
• Disability coverage: Confirm adequate through employer or individual
• Health insurance planning: Understand costs if retiring before 65

Ages 60-64

• Long-term care decision: Purchase if you’re going to—window is closing
• Medicare research: Understand options before enrollment
• Health bridge planning: How will you cover ages 62-65 if retiring early?
• COBRA calculations: Know costs if leaving employer coverage

Just Before 65

• Medicare enrollment: Sign up during Initial Enrollment Period
• Part D plan selection: Compare drug plans for your medications
• Medigap vs. Advantage decision: Research options in your area
• Employer coverage coordination: Understand how it works with Medicare

Not Sure What You Need?

Take our free 2-minute quiz to get personalized insurance recommendations for your pre-retirement planning.

Take the Coverage Quiz →

Next Steps

1. Review life insurance—assess whether current coverage matches needs
2. Get long-term care quotes—decide now while you’re insurable
3. Plan health coverage—map out insurance from now until Medicare
4. Learn Medicare basics—be ready when enrollment approaches
5. Update all policies—ensure coverage reflects current situation

Similar Situations

• Insurance for Seniors (65+) - Medicare and coverage after 65

Related Guides

• Insurance for Retirees
• Health Insurance Guide
• Life Insurance Guide

Related Checklists

• Retiring Insurance Checklist - Transition coverage from employer to Medicare and beyond

Related Calculators

• Life Insurance Needs Calculator - Reassess your coverage needs before retirement

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