Retiring before 65

As far as retirement is concerned, people’s expectations are not always in line with reality. While the average expected age of retirement is 66, the actual average retirement age is 62. Somewhat surprisingly, that’s the highest it’s ever been. This means many people decide to retire before they’ve reached eligibility for one or more government programs like Medicare. If you’re one of the many Americans thinking about retiring before 65, what other options do you have?

In this article, we’ll cover a few things you should consider if you’re considering an early retirement.

Trade-offs when retiring before 65

As you’re deciding when to retire, there are several trade-offs to consider. For example, retiring earlier may mean more time spent in retirement. However, you’ll most likely have to make due with less money to enjoy it. Similarly, while you may be excited to enjoy the freedom that comes with retiring as early as possible, many people find that life without a job or other day-to-day commitments lacks a sense of purpose or meaning.

Neither of these scenarios is presented to suggest that retiring early isn’t the right choice for you. They are simply good frameworks to help you decide when to retire. Take time to consider your options; many of the choices you make early on can have a ripple effect across all of your retirement years.

Social Security

You can start collecting social security benefits as early as 62. However, the longer you wait, the higher your monthly benefit will be for the rest of your life. For example, if you start collecting at 62, your benefit could be up to 30% less than it would be at your full retirement age. This provides a significant incentive to wait as long as you can before you begin collecting.

For help making this decision, use our Social Security Optimizer. It will help you estimate your monthly benefit amounts and optimize for your maximum lifetime benefit. If you have general questions about Social Security, check out our explainer article below to learn the basics.


Health Insurance

Health insurance is an important resource for all adults, but it becomes even more essential as you near retirement age. For many, health needs become less predictable with age, so it’s important to maintain coverage. Medicare is the primary health insurance provider for Americans over 65 (over 55 million of them to be exact), but what options do you have if you’re retiring before 65?

Fortunately, the Affordable Care Act, passed in 2010, set new ground rules for individuals seeking health insurance. It established state and federal marketplaces to sell plans to people who aren’t insured through employers or other federal programs. This includes those who retire before they’re eligible for Medicare.

The Affordable Care Act initially required everyone in America to have insurance coverage or face a tax penalty. At the same time, it also provided substantial subsidies (i.e. discounts) to most people. While the recent tax reform law repealed the penalty for not having coverage, that provision won’t take effect until 2019. In 2018, you may still be charged a penalty of up to 2.5 percent of your income if you aren’t covered.

The plans available on the exchanges are structured much like the plans offered through most employers. Essentially, you pay a monthly premium to receive free preventive care and reduced costs for everything else, typically paid for with copays or coinsurance after an initial deductible amount is met. But keep in mind that many employers cover a significant portion of their employees’ premiums, so the monthly costs for individual plans with similar coverage may seem higher than what you paid while you were fully employed.

As we mentioned, there are subsidies available to help pay for plans on the individual market. The amount of help available is determined by your income. In 2018, you may be eligible for these subsidies if your estimated household income is under $48,240.


There are several things to consider when you’re shopping for a plan. For example, most states use some form of “age banding” to determine the premium amount for a plan. This means that older people are charged more than younger people. While the Affordable Care Act set guidelines for how much more a plan can charge, there are differences between states for how age-based pricing works. For example, some states use decades to determine their pricing while others set different prices for each year.

In addition to premiums, it’s important to make sure that your doctors and drugs are covered on a potential plan. Many plans on the exchanges try to keep costs down by limiting the size of their network of doctors and hospitals. There are also differences in which drugs are covered and at what cost, so make sure to do your research before signing up.

Depending on your situation, you may also want to consider COBRA, a government regulation that allows you to stay on your employer plan for a set period of time. Typically, if your company has at least 20 employees, you are entitled to stay on your employer plan for up to 18 months. While you are responsible for the entire premium (including what was previously covered by your employer), it may still be cheaper than an individual market plan, and it would allow you to maintain your current network. If you think COBRA might be right for you, check with your benefits department for more details about how it works at your company.

How to shop and sign up

Leaving your job to start retirement is considered a “qualifying life event”, which means you can sign up for a plan during your “Special Enrollment Period”. Typically, you only have 60 days from the event to sign up, so act quickly! Otherwise, you may go without coverage until the annual Open Enrollment Period in the fall.

You may have heard of, which is the federal exchange for individual insurance. It’s also used by states that chose not to establish their own exchanges. If your state is in the following table, there is another website you should visit to shop for individual coverage. We’ve provided the appropriate links for your convenience. Otherwise, you can find plans at by entering your ZIP code.

California Covered California
Colorado Connect for Health Colorado
Connecticut Access Health CT
District of Columbia DC Health Link
Idaho Your Health Idaho
Maryland Maryland Health Connection
Massachusetts Health Connector
Minnesota MNsure
New York New York State of Health
Rhode Island HealthSource RI
Vermont Vermont Health Connect
Washington Washington Healthplanfinder

Related articles, tools, videos, and more

Renew has tons of great resources to help you figure out retirement.

Group Created with Sketch.
Not sure where to start?

Read our quick-start guide for help, including which questions you should be asking as you approach retirement.

Read our quick start guide

Group Created with Sketch.
Not sure where to start?

Read our quick-start guide for help, including which questions you should be asking as you approach retirement.

Read our quick start guide