Social Security retirement benefits are an essential part of most retirees’ income planning. The majority of retirees say Social Security is a major source of income for them. It is the primary source of income for half of older adults, according to the Social Security Administration. And for 40% of older Americans, it is their only source of income.

Deciding when to claim Social Security retirement benefits is one of the most crucial financial decisions you will make. Claiming benefits at the wrong time costs Americans $111,000 per household, according to a study. However, the rules governing Social Security are complex and confusing, and reliable information can be hard to come by. Furthermore, once you file a claim for benefits, you have limited chances to go back if you realize you’ve made a mistake.

In this post, we will look at the basic rules that define how your Social Security retirement benefits are calculated, discuss the advantages and disadvantages of claiming early or later, and describe what is the best time for most people to claim, according to research.

How Are Social Security Retirement Benefits Calculated?

The Social Security Administration calculates your benefits based on what you earned from jobs in which you paid Social Security taxes. The SSA takes the highest 35 years of earnings and bases your benefit on those earnings. The basic process is:

1. The SSA tabulates the earnings it has on file for you for each year of your employment
2. The SSA indexes the earnings each year to bring them up to the general wage levels in the year in which you turn 62. This page shows two examples of how the SSA indexes earnings. This page lets you choose a year and lists the indexing factors for each of the years prior to that.
3. The SSA chooses the 35 years with the highest indexed earnings.
4. The SSA totals your indexed earnings over those 35 years and divides by 420 (the number of months in 35 years) to get your Average Indexed Monthly Earnings (AIME).
5. The SSA then applies a series of formulas to your AIME to arrive at your monthly retirement benefit, known as the Primary Insurance Amount (PIA). In 2025, the formulas are as follows:

Monthly benefit (PIA) equals

• 90% of the first $1,226 of average indexed monthly earnings, plus
• 32% of earnings between $1,226 and $7,391, plus
• 15% of earnings above $7,391

For example, take a worker whose total indexed earnings for their career were $2.5 million. Their AIME then is $5,952.38 ($2.5 million divided by 420 months).

If they become eligible for Social Security in 2025, then the SSA calculates

• 90% of monthly earnings up to $1,226 = $1,103.40
• 32% of earnings between $1,226 and $7,391. For this worker, these earnings were $5,952.38 – $1,226 = $4,726.38. Multiplying this amount by 32% gives $1,512.44.
• 15% of earnings above $7,391 ($0 for this worker)

The sum of $1,103.40 and $1,512.44 is $2,615.84. The SSA rounds down to the nearest 10 cents, so this worker’s PIA is $2,615.80.

The dollar amounts in these formulas are sometimes called bend points because the graph of PIA vs. AIME bends at these dollar amounts. The bend point dollar amounts often change from year to year.

Source: Social Security Administration

The reason for the bend points is that Social Security is intended to replace a larger percentage of earned income for lower-wage workers, so the PIA includes a larger percentage of lower earnings amounts and a smaller percentage of higher earnings.

What Determines Your Actual Retirement Benefit Amount?

However, your PIA isn’t necessarily the same as your actual Social Security retirement benefit. Your actual benefit depends on four factors.

Two of the factors are your work history and earnings, as we just described. If you have fewer than 35 years of earnings, the SSA enters $0 for the years in which you had no earnings.

The two other factors are your birth year and your age when you claim benefits.

Your birth year determines your full retirement age, which is the age at which you are entitled to 100% of your Social Security benefit.

If you were born between 1943 and 1954, your full retirement age is 66. If you were born between 1955 and 1959, your FRA is 66 plus a certain number of months. And if you were born in 1960 or later, your FRA is 67. If you claim earlier or later than your FRA, your benefit is reduced or increased accordingly.

The chart below shows your full retirement age according to the year you were born.

The age at which you claim benefits has a huge impact on the amount of your benefits. You can claim benefits as early as age 62 or wait until age 70 or later. If you claim earlier than your full retirement age, though, your benefit is reduced.

If you claim at age 62 and were born in 1960 or later, you get 70% of your full benefit. This chart shows the percentage of your full benefit you receive if you claim early.

If you claim later than your full retirement age, your benefits are increased. As shown on this page, if you were born in 1943 or later, your benefits increase by 8% for each year you delay filing for benefits past your full retirement age, up to age 70. There is no further increase after age 70.

The chart below shows the percentage of your full benefits you would receive by claiming at certain ages. It assumes you were born in 1960 or later.

The SSA’s online calculator shows the effect on your benefits of claiming early or delaying.

Breakeven Dates

By waiting to claim your benefits past age 62 or even past your full retirement age, you forego receiving benefits for several years, but your monthly payments, when you start receiving them, are higher than for someone who claimed earlier. 

So, how long would it be until you have received the same total amount of money as someone who claimed earlier? It can take a while until you break even. For example, compared to someone who filed at age 62:

• If you file at age 65, you will break even at age 75 years and 11 months
• If you file at age 67, you will break even at age 77 years
• If you file at age 70, you will break even at age 78 years and 9 months

There are online calculators to help you determine the breakeven age for various situations.

If you file for benefits and then change your mind, you may be able to withdraw your claim within 12 months after you start receiving benefits. You must pay back any benefits you have already received. You can then reapply for benefits at a later date. However, you can only do this once.

Why is 70 the Best Age for Most People to Apply for Benefits?

The best age to claim benefits depends on your individual situation. Your financial status, health, and life expectancy all affect the answer. There are valid reasons both for claiming benefits early and for delaying. However, for the majority of retirees, research finds that 70 is the optimum age to file for benefits.

Only 4% of retirees wait until age 70 to claim Social Security, but 57% of retirees would receive the most money over their lifetimes by claiming at that age. This is according to a 2019 study by United Income, a financial planning company that examined data for around 20,000 people from the University of Michigan.

The study found that the next best ages to file for benefits were 67, 69, and 68. More than 80% of the people studied would have done best to wait until their full retirement age or later to claim benefits. However, most people claim earlier: about 70% of retirees file for benefits before age 64.

Another study in 2022 found that more than 90% of people should wait until age 70 to claim benefits, even though only 10% of retirees wait that long. According to the study, retirees give up $182,370 in lifetime benefits by claiming early.

Here are some advantages to waiting until age 70 to file for Social Security:

• Increases your total benefits by 25% or more over your lifetime
• Provides a form of longevity insurance – a major concern for many retirees is outliving their money
• Increases spousal benefits compared to filing earlier

More than half of retirees in their 70s and 80s could increase their incomes by more than 25%, simply by filing for benefits at the right time.

Will Social Security Still Be There When I’m Ready to Claim?

It’s not a secret that Social Security is facing insolvency in 2035. This is according to the 2024 report issued by the Congressional Budget Office. Insolvency means that Social Security will be unable to pay benefits in full and on time. It does not mean that Social Security will disappear or be unable to pay any benefits.

Estimates are that Social Security would be able to cover about 80% of benefits if nothing is done. Retirees might find their benefit checks are reduced or receive the full amount but later than scheduled.

The cause is mainly demographic: As the U.S. population as a whole gets older, there are more people receiving retirement benefits and fewer people paying Social Security taxes. Also, retirees are living longer, and birth rates are declining, so the number of workers paying into the system is decreasing.

The fear of missing out is one major reason many people claim benefits early. They’re afraid Social Security will not be there later if they wait.

According to most experts, this fear is unfounded for most retirees.

Although the Social Security commissioner and other authorities are confident that a solution will be implemented, they believe large-scale benefit cuts are unlikely, especially for lower-income retirees.

Among the fixes that have been proposed, according to a report by the American Academy of Actuaries, are:

• Gradual increases to the full retirement age
• Reductions to the annual cost-of-living adjustment
• Increases in taxes, such as raising the tax rate and eliminating the taxable maximum

Another possible fix is providing Social Security with supplemental revenue from the general government treasury.

Higher-income individuals and households, however, could see a reduction in their Social Security benefits. For example, the Congressional Budget Office in 2022 proposed adding more bend points to reduce the PIA for higher-income retirees.  Meanwhile, a solution included in the American Academy of Actuaries report is to apply a means test to reduce or eliminate benefits for retirees with large incomes or assets.

Of course, no one knows what will eventually happen. With a popular and politically sensitive program like Social Security, the most popular solution seems to be to do nothing. In the 1980s, Social Security also faced a shortfall, which Congress finally addressed when the program was within weeks or months of being unable to pay full benefits on time.

You might consider consulting a financial advisor on how best to prepare and also petition your lawmakers to address the coming Social Security shortfall. The sooner the problem is fixed, the less drastic changes will be needed.

How About Claiming Early and Investing the Proceeds?

Some financial advisors and personalities, most notably Dave Ramsey, suggest claiming Social Security benefits at age 62 and then investing the money in stocks or a mutual fund. By investing your check each month, the theory goes, you can get a greater lifetime return than by claiming later, even if the amount of your checks will be higher.

It sounds good in theory: over the last 30 years, the S&P 500 has returned a compound average of 10.7% per year, which is greater than the five to eight percent increase in your benefit that you get by waiting.

But do the numbers work out? Some people have taken a close look.

Devin Carroll of Social Security Intelligence pointed out that the difference in monthly benefits between claiming at age 62 and at age 67 is $662. In order to receive a monthly payout of $662, he says, you’d need to invest $160,000 and get an annual return of 21%.

Meanwhile, the difference in monthly benefits between claiming at age 62 and at age 70 is $1,265. To get this monthly amount, you’d need to invest more than $300,000 with an annual return of 17%.

Also, as he stated, the increase in Social Security benefits gained by waiting is completely risk-free. However, to achieve returns of 17% or 21%, you’d need to take on significant risk. There is a big chance you won’t achieve these returns year in and year out. You might even lose money.

This was also the point made by Jesse Cramer of Best Interest. He examined three hypothetical cases:

• investing Social Security funds in a savings account
• investing in a mixture of stocks and bonds with average annual returns
• investing in the same mixture but with subpar returns for the first few years

The results:

If you claim early and invest in a savings account, you come out ahead only if you pass away at or before age 77. Most 62-year-olds will live beyond that age.

If you invest in a mixture of 60% stocks and 40% bonds, which has returned an average of 9.3% per year since 1950, you come out ahead if you pass away before age 88. This is the majority of 62-year-olds, as he said.

So it’s advantageous to claim Social Security early and invest the proceeds? Not so fast.

He also looked at a third scenario. What if you have substandard returns for the first few years? A 60/40 stock-bond mixture has had multiple 10-year periods with returns of less than 2% per year. What if you start investing during one of those periods? This is known as sequence risk. In that case, you only come out ahead if you pass away before age 75.

So, by taking benefits early and investing them, you are betting that the stock and bond markets will provide historical average returns. Meanwhile, the increase in Social Security benefits that is gained by waiting comes with no risk.

His conclusion: “There is no net benefit to taking Social Security early to invest it.”

What Are Some Reasons to Claim Early?

For the majority of retirees, research shows they can maximize their lifetime benefits by filing at age 70. But there are some situations in which it’s beneficial to claim earlier.

For example, if your personal or family health history leads you to believe you have a shorter-than-average life expectancy, you might consider claiming early.

Another situation is if Social Security funds are needed to meet living expenses or to keep you from having to liquidate investments during a down market. The majority of people retire unexpectedly – for health reasons, caregiving responsibilities, or job loss. In those cases, claiming Social Security early may supplement your savings and help give you a more comfortable retirement.

A third situation, as we described earlier, is if you’re a higher-income retiree and you think your benefits might be cut if you wait until later to claim. While most proposals to fix Social Security feature higher taxes or reductions in benefits to younger people, there could be reduced payouts to current retirees with higher incomes or significant personal assets.

If you want help in finding the best Social Security claiming strategy for your situation, SSA Tools offers free guides and online tools. Maximize My Social Security is a tool developed by Dr. Lawrence Kotlikoff, one of the nation’s foremost experts on Social Security. It helps you compare different claim dates to enable you to get the most benefits.

The post The Best Age to Claim Social Security According to Research appeared first on Smart and Silver.

Are you thinking of starting a new business after you retire? If so, you’re not alone. More than half of American small business owners are 50 or over. Starting and running a business comes with challenges, but it can be rewarding for active retirees who want to bring in income while serving their communities. Although many retirees open businesses out of passion and a sense of purpose, any income you earn will help you pad your retirement savings so you can spend a little more or leave a larger inheritance. Here are some considerations for starting a business in retirement.

Almost a quarter of new businesses in 2013 were started by people aged 55 to 64, according to the Kauffman Index of Entrepreneurial Activity. A 2009 study sponsored by AARP found that of people who changed their occupations, about 31 percent said they went from working for others to working for themselves.

There are multiple reasons for this. Some retirees open businesses to supplement their retirement income and savings, but others decide to hang out their shingle to be productive and contribute to society in a way they weren’t able to do earlier in life.

“I want to keep doing this. I really do want to help people,” says Isabel Chamberlin, a retiree who runs Paws4Fitness, which conducts fitness boot camps for dogs and their owners.

Why Retirement May Be a Good Time to Start a Business

There are several reasons why retirement can be a great time to start a business:

You Have Few or No Financial Obligations

The majority of businesses are started by college students or recent graduates. One reason for this is that these people have no one depending on them for income. They have no career to think about and no family yet to support. In retirement, you are also free of commitments. Your kids are grown and self-supporting, your mortgage is paid off or close to it, and you are free to take a little bit of financial risk because no one is dependent on you for income.

You Have Time

Running a business takes a significant commitment, and it can be difficult to launch a new enterprise while working full-time and raising a family. After retirement, there’s no job to go to, and much of your day is yours. You have the hours and energy to pour into entrepreneurship.

Running a Business Helps You Stay Active

Although you might not have quite as much energy as you did in your 20s, many new retirees are still healthy and vigorous. After the novelty and initial enthusiasm of retirement wear off, retirees often start looking for a new endeavor on which to focus their energy and passion. Starting and running a business gives retirees a channel for their energy and efforts.

You Can Take as Much Time as You Like

Because there’s no pressure to succeed as a retiree entrepreneur. So you can take your time in growing your business and spend as much or as little time as you like. Some retirees like to go full speed ahead into a second career, while others prefer a more relaxed approach and enjoy the freedom of not working all the time. You can work on your business while retaining the flexibility to pursue hobbies or do volunteer work.

Types of Businesses Retirees Start

Many retirees leverage the skills and contacts they brought from their careers to start businesses in consulting or services. Others reinvented themselves and went in a new direction, like Chamberlin. After working in corporate sales for over 40 years, she decided to start Paws4Fitness to indulge her love of exercise and dogs.

Some of the most successful companies combine careers and hobbies. One husband-and-wife team started a business to sell cookies based on the husband’s love of cooking, his grandmother’s recipe, and the wife’s experience as a former marketing executive. Today it has grown to the point where thousands of cookies are shipped daily.

Recommendations for Retiree Entrepreneurs

While encouraging retirees to explore their entrepreneurial side, retirement advisors recommend they limit their investments because if the business doesn’t succeed, they have relatively little time to make up the loss. You can afford a small loss, but don’t put your home or retirement savings on the line.

Taking small steps at first also allows you to test-drive life as a business owner and gives you an exit if the business falters or you simply decide that entrepreneurship isn’t right for you after all.

Popular Business Options for Retirees

Many retirees with a dream of business ownership are looking for a low-cost, low-stress, home-based business. Ideally, they can work part-time so they can still enjoy their leisure and other activities. Here are some ideas that they have successfully applied:

• Consulting
• Housesitting
• Conference/party/wedding planning
• Researching family ancestries
• Virtual assistant
• Computer help
• Designing websites

One woman runs a personal assistant business, helping her busy clients by shopping for groceries, gifts, and clothes, setting up parties and meetings, working with travel agents to arrange trips, and taking care of their homes while they’re on vacation. Another person helps people organize and clean up clutter in their homes and offices.

Other Recommendations

Here are some other recommendations for choosing a retirement business.

1. Choose a business that aligns with your interests and passions. Your business is more likely to be successful if it revolves around something that interests you, whether that be sports or sailing, cartography or calligraphy. It might be something you were interested in earlier in life, or want to try out.
2. Evaluate your business idea objectively. Try to determine if there’s sufficient demand for your product or service, whether you’ll feel comfortable doing it, whether you are qualified to run this business, and whether there’s too much competition.
3. Make sure running the business would be compatible with your retirement lifestyle. Most retirees don’t want to work 40 or 50 hours per week. Ensure the business can meet your goals for it while leaving time for other activities.
4. Learn about how to run a business, if you don’t have previous background. As the business owner starting out, you’re the accountant, marketer, operations manager, and production manager, all in one. Learn how to manage cash flow and about any applicable laws and regulations. Consider taking a small-business course offered at a local college, the U.S. Small Business Administration, or your state business development association. There’s also a free Udacity courseon how to build a startup.

This video describes some home-based retirement business ideas.

Resources for Retiree Entrepreneurs

Here are some resources for older adults who have an entrepreneurial bent:

The Small Business Resource Center for the 50+ offers guidance on starting, managing, and growing a small business. They also provide training, workshops, and links to small business grants.

The U.S. Small Business Administration offers business counseling, business loans, and help in calculating business costs, licensing, and more.

SCORE provides older adult entrepreneurs with personal support and mentorship. There’s also training, templates, and specialized resources for minority, women, and veteran entrepreneurs.

If you’re a military member or veteran or a spouse of one, American Corporate Partners offers year-long mentorships to help make the transition to civilian life and start a business, if that’s your goal.

In addition, the Veterans and Military Business Owners Association offers discounts, networking opportunities, conferences and webinars, and marketing assistance to military and veteran business owners.

The post Starting a Business appeared first on Smart and Silver.

NOTE: This page is about general insurance needs in retirement. For more detailed information about healthcare insurance in retirement, please visit our health insurance page.

When you retire, your lifestyle suddenly changes. You don’t need to commute to work, and you have newfound freedom to set your schedule and pursue new hobbies. Your financial situation changes as well, and this means your insurance needs will change.

You may not see the need to continue some insurance policies. However, don’t be too quick to cancel them until you consider all of the implications. Sometimes you can continue an existing policy but use it for a different goal, for example, life insurance.

This article describes various types of insurance and whether you need each in retirement. Each retiree’s situation is different, so you may want to consult a qualified financial advisor if you have specific questions.

Insurance You Need

Health Insurance

We all need healthcare, and most of us need health insurance to cover the costs. As we age, our healthcare expenditures usually increase. Retirees aged 65 and over are eligible for Medicare. But Medicare doesn’t cover all of your costs, so most retirees purchase a supplemental plan like Medigap to pay for services and costs that Medicare doesn’t cover.

Many workers are also covered under their employer’s health insurance. If you’re still eligible to keep employee health insurance as a retiree, it may be the best option if the coverage is more comprehensive and the group rate is better than what you can get elsewhere. If you no longer have employer-sponsored health insurance but are not yet Medicare-eligible, you have several options for obtaining healthcare coverage. View our health insurance in retirement page for more information.

Homeowners or Renters Insurance

Another one you almost certainly will want to keep in retirement. If your mortgage is paid off, you may be tempted to cancel your homeowners policy to save money. But this can be a shortsighted decision. If you lose your home and possessions to a fire or natural disaster, your only other way to make up for the loss is through your savings.

Your lifestyle may change after retirement. For example, you may start a home-based business or you plan to have guests over frequently than before. If that’s the case, you may want to modify your policy or liability limits. If you relocate to a new area, there may be hazards you didn’t have in your old location, like earthquakes and hurricanes, or you may need flood insurance.

Auto Insurance

All states except New Hampshire and Virginia require auto insurance. Each state sets the minimum coverage car owners must carry to legally drive on public roads. Also, most car dealerships won’t allow you to drive a vehicle you just bought off the lot without insurance, and most lenders require insurance for car loans. Auto insurance is a wise investment even if it’s not legally required. Without it, the only way to recoup your loss if your vehicle is stolen or damaged is through personal savings.

Insurance You May Consider

Umbrella Liability Insurance

Umbrella insurance increases your liability coverage beyond what your homeowners or renters and auto insurance provide. An umbrella policy isn’t typically purchased on its own; rather, it’s an addition to other existing insurance like homeowners. If the value of your assets, including savings accounts and investment properties exceeds the liability limits of your other insurance, then you might consider umbrella insurance. Umbrella insurance may also provide other coverages, such as for libel or slander. An unforeseeable car accident that results in court proceedings, a mishap involving a guest on your property, or even a remark posted on the Internet that leads to a lawsuit for libel are instances where umbrella insurance may be helpful.

Depending on your lifestyle and hobbies, you may have a greater need for umbrella insurance. If you own a certain breed of dog, coach youth sports, serve on a residential committee, or ski or hunt, you may consider purchasing umbrella insurance.

Life Insurance

You may have purchased a life insurance policy to replace your working income for your spouse and children. If you’re retired and no longer have earned income, you may be wondering whether to keep your life insurance policy. Or you may have had group life insurance through your former employer and are wondering whether to purchase a new policy.

Why to Keep Life Insurance

Here are several situations in which you may consider keeping or taking out a life insurance policy:

Cover Your Final Expenses

The median cost of a funeral in the U.S. in 2023 is $7,848 and can be $8,500 in some states. There may also be medical and legal costs in paying hospital bills and handling your will and estate. Unless you have sufficient savings or choose to prepay your funeral expenses, a small life insurance policy would cover these costs and relieve your family of the burden.

Provide Income for Your Family

If you have working income, you likely have a good idea of how much coverage you need. On the other hand, if you’re retired and don’t depend on earned income and your children are grown and independent, you may not need life insurance. Your beneficiaries will inherit your savings accounts, and Social Security has survivors benefits. You will need to determine the amount of the survivor benefits and also the tax implications to your beneficiaries when they inherit your IRAs and other savings. If you want to avoid estate taxes, a life insurance policy may be a good tax-free way to pass on funds to your heirs.

You Have Debts

Around 60% of households headed by an adult aged 65 or over had debts in 2016. These included home mortgages, medical bills, car loans, and credit card debt. Unless your savings are sufficient to cover any debts without financial difficulty, a life insurance policy may be helpful.

Some hybrid life insurance policies enable you to use some of the funds while you’re alive, for example, for medical or long-term care expenses. If you have a whole life or universal life policy, you might be able to add a long-term care rider.

This video describes some reasons you might decide to keep your life insurance in retirement:

Long-Term Care Insurance

Around 70% of people aged 65 and over will need long-term care sometime in their lives. Traditional long-term care insurance is one of the options for pre-planning for this need. Contrary to what many people think, Medicare doesn’t cover long-term care in an assisted living facility or at home. Some employers offer long-term care insurance. You may also be able to get a group rate through an organization you belong to. There are many long-term care insurance providers, and there are other options for funding long-term care. You can consult an insurance advisor about your particular situation.

For more information about long-term care, visit our Long-Term Care page.

Travel Insurance

If you plan to travel extensively in retirement, especially to foreign countries, travel insurance may be useful. A comprehensive policy that includes emergency medical care and medical evacuation services as well as trip delay and cancellation insurance may be most cost-effective.

Critical Illness Insurance

Critical illness insurance is a relatively new product that was introduced in 1996. It is intended to cover the costs of treating life-threatening conditions like heart disease, stroke, kidney failure, and cancer. Health insurance does cover some of these costs, but with the high-deductible plans that are common today, patients and their families might still be left with large medical bills. Furthermore, there are other, nonmedical costs associated with treatment, like transportation to and from treatment facilities, retrofitting vehicles to accommodate scooters or wheelchairs, and modifying a home for wheelchairs.

Critical illness insurance typically pays out benefits as a lump sum that you can use for any purpose like utilities, mortgage or rent payments, transportation, or even a vacation while you recover. This insurance is typically inexpensive, much less than the premiums for a low-deductible healthcare policy.

The drawbacks are that it usually only covers a specific set of illnesses, there may be age limitations, and payment is not guaranteed. For these reasons, many advisors suggest foregoing critical illness insurance in favor of a more comprehensive healthcare policy.

Investopedia provides more information about critical illness insurance.

Identity Theft Protection

Scams against older Americans are on the rise. The annual loss from financial fraud among adults aged 60 is estimated at $3 billion per year, and the average loss per incident is $120,000, according to a 2020 study by the AARP Public Policy Institute. The FBI reports that losses more than doubled from 2019 to 2021 and rose another 84% in 2022. Identity theft is among the more costly crimes. AARP reported that 42 million Americans were victims of identity fraud in 2021 and collectively lost $52 billion to identity thieves.

Besides the financial cost, recovering from identity theft can take substantial time and effort. With an identity theft protection policy in place, the provider will help you recover and monitor your credit report to prevent future incidents.

Professional Liability Insurance

If you’re thinking of opening a business or taking employment in retirement that involves professional services and advice to clients, this insurance may be helpful. Umbrella insurance typically doesn’t cover lawsuits and claims for professional and business services. So if you plan to take a retirement occupation as an accountant, financial advisor, graphic designer, realtor, or marketing consultant, to name a few, this coverage can keep you from having to pay out of pocket for legal defense costs and settlements.

Pet Insurance

If you love your furry, four-legged friend like a member of your family, you want to give your pet the best care you can. Unfortunately, the cost of quality veterinary care can add up to thousands of dollars. This can force you to have to decide between your pet’s health and your pocketbook.

May pet owners find pet insurance provides peace of mind, even comparable to health insurance for themselves and their families. You can decide whether this insurance is right for you based on your ability and willingness to pay out of pocket for an unforeseen pet illness or injury that may require surgery or other extensive treatment.

Need guidance on deciding whether to get pet insurance or choosing a policy? This video might help:

Insurance You Probably Don’t Need as a Retiree

Disability Insurance

You may have had disability insurance to replace your income if you became unable to work. If you’re in your 60s and retired, you no longer need disability insurance because you no longer have working income. Most disability insurance ends at around age 65 in any case. Above that age you probably can’t get it, or if you can, the premiums are excessive.

If you’re still working in your 60s or embarking on a new career, you may qualify for group disability insurance through your employer. It may have lower coverage limits and shorter benefit terms than an individual disability insurance policy. But it could help you pay for some living expenses.

Social Security Disability Insurance

People unable to work because of illness or injury are eligible for Social Security Disability Insurance (SSDI). However, applying for SSDI is complex and time-consuming, and approval is difficult because the Social Security Administration’s definition of disability is stricter than for most private disability insurance. If you’re also receiving Social Security retirement benefits, your SSDI is reduced based on your retirement benefits. If you’re at or above your full retirement age, SSDI benefits are no longer payable.

But if you’re in your early 60s, working, and not yet receiving Social Security retirement benefits, then applying for SSDI might make sense if you become disabled. If you’re at least 62, you can file for both Social Security retirement benefits and SSDI and ideally receive both until you reach full retirement age.

The post Insurance Policies You Need and May Not Need appeared first on Smart and Silver.

Former First Lady Rosalynn Carter said, “There are only four kinds of people in this world: those who have been caregivers; those who are currently caregivers, those who will be caregivers, and those who will need caregivers.”

Regardless of your state of health now, the odds are fairly high that you will need some form of assisted living some time in your life. Almost 70% of seniors age 65 or over will need long-term care services in their lives, according to a study by the U.S. Department of Health and Human Services. One-third of people age 65 and over will never need long-term care, but around 20% will need care for five years or longer.

This video explains the truth about retirement in your later years.

The average length of a stay in a long-term care facility is 3.2 years. At $3,000 up to $15,000 per month, long-term care facilities are expensive and becoming more so. So it’s no surprise that long-term care costs account for more than one-third of bankruptcies in the U.S. The national median cost of in-home care is $4,957 to $5,148 per month, while the median cost of an assisted living community is $4,500 per month.

How can you plan for long-term care costs? Here we present some options for funding long-term care for yourself or a loved one.

What is Long-Term Care?

The Administration for Community Living defines long-term care as “a range of services and supports you may need to meet your personal care needs … things like getting dressed, driving to appointments, or making meals.”

It may be hard to imagine now, but someday we all might need assistance with day-to-day tasks of living. An unforeseen injury, illness, or just the process of getting older may require you to pay thousands of dollars per month for help with bathing, getting dressed, and preparing meals.

How is Long-Term Care Different from Skilled Care?

There’s an important distinction between skilled care and long-term care. Skilled care means specialized therapy either in a nursing home (nursing home care) or at home (home health care). Examples of skilled care are physical therapy, occupational therapy, speech therapy, and wound care. It requires specialized training and skill to provide. Skilled care is considered a part of medical treatment and is covered for a limited time by Medicare and many health insurance plans.

Long-term care, also called custodial care, is assistance with activities of daily living, like getting out of bed, bathing and getting dressed, preparing meals, and eating. It also includes doing laundry, shopping, and transportation to and from appointments. Custodial care isn’t considered part of medical treatment and isn’t covered by Medicare and most health insurance.

What Other Long-Term Care Living Arrangements Are Available?

Retirement Communities

Retirement communities are typically for adults aged 50 and over. The benefit is that they offer community with other adults of similar age and ready access to services as needed. The same community may offer individual homes or apartments for independent adults, an assisted living facility for those who need some support with daily living tasks, and a nursing home for people who need more extensive assistance.

Residential Care Communities

These go by various names, including group homes, board and care homes, and personal care homes. They are typically small, private facilities with 20 or fewer residents who live independently but receive personal care and meals. Residents pay monthly rent and may also receive medical care and prescriptions.

Home and Community-Based Services

There are various services available to older adults who can remain in their homes. These services may include transportation to and from doctor appointments, home care like cooking or cleaning, and physical therapy.

Program of All-Inclusive Care for the Elderly (PACE) is a Medicare and Medicaid program that provides for people’s long-term care needs in their homes instead of an assisted living facility. Medicaid recipients don’t pay premiums for long-term care through PACE. Medicare recipients pay a monthly premium for long-term care and a premium for prescription medications.

Subsidized Senior Housing

For older adults with low or moderate incomes, there is senior housing available in some states that is funded by local and federal government programs. Residents live in individual units in an apartment complex and pay rent based on their income. The housing community may offer help with meals, housekeeping, and shopping.

To find out about housing and other resources for older adults, visit our Services [LINK] page.

Do Medicare and Medicaid Cover Long-Term Care?

Medicare

Medicare, Medigap, and most health insurance plans do not cover long-term care. This is because long-term care is not considered a medical expense. This includes nursing home care; most nursing home care is custodial care and is not covered by original Medicare.

Medicare Part A does cover up to 100 days of skilled care at a skilled nursing facility or in your home, if skilled nursing care is determined to be medically necessary while you recover from an illness or injury that required hospitalization. During that time, Medicare will help out with all of the patient’s services, including custodial care.

For the first 20 days, Medicare will cover 100% of the approved costs. For each of the remaining days up to day 100, the patient must pay a daily co-payment. However, a Medigap plan may pay 50% to 10% of the co-payment, leaving the patient with little or no expense for those 100 days. Medigap may also subsidize payment beyond 100 days.

Medicare Advantage (Part C) may cover long-term care, depending on the plan. Medicare Advantage plans are sold by private insurance companies. There are many plan choices, with different costs and coverages. Also, some plans have provider networks and require patients to use long-term care providers who are in the network.

To learn more about Medicare Advantage plans:

• Refer to this e-book produced by the Centers for Medicare & Medicaid Services.
• See the coverage options page at Medicare.gov
• Consult your State Health Insurance Assistance Program

Medicaid

Medicaid does cover the cost of long-term care for seniors and others who meet their state’s Medicaid eligibility requirements and have a demonstrated need for long-term care. In fact, Medicaid is the primary payer for long-term care services in the U.S.

Medicaid has three programs for long-term care for seniors:

• Nursing Home Medicaid covers institutional care in a Medicaid-participating nursing home facility for all Medicaid recipients. It does not cover room and board, only the cost of long-term services and support.
• Medicaid Waivers, also called Home and Community Based Services (HCBS) Waivers, provide for care at home, including home health care and custodial care.
• Aged, Blind and Disabled Medicaid, also called ABD, provides long-term care services at home for eligible recipients.

Nursing Home Medicaid pays for services for all eligible recipients. However, HCBS Waivers have a limited number of enrollees; when the waiver program is full, the remaining eligible recipients are put on a waiting list to receive services. Also, in some states, HCBS Waivers are available only to certain groups of Medicaid-eligible recipients.

For more information about Medicaid and long-term care:

• Visit the American Council On Aging’s Medicaid long-term care page
• Visit the Medicaid Planning Assistance long-term care at home page

What Are Other Options for Paying For Long-Term Care?

Long-Term Care Insurance

Long-term care insurance is intended to cover long-term care services, including custodial care in your home, a nursing home, or a community facility. Typically, long-term care policies reimburse policyholders up to a daily maximum amount, such as $150, and up to a maximum service period, such as three years. There are a wide variety of plans available with different coverages and limits. Some things to consider when comparing long-term care plans are:

• Types of services that are covered and not covered
• Annual premium
• Daily maximum reimbursement
• Length of service period
• Waiting period
• Refund policy

The daily benefit can range from $50 to $500 depending on the policy. Many policies have an “elimination period,” which is a waiting period before coverage starts, such as 30 to 90 days. During this time, you must pay for long-term care services yourself.

Long-term care insurance providers can be strict about issuing policies. Those with preexisting health issues may be declined coverage.

A drawback of long-term care insurance is that you usually don’t get your premiums refunded if you don’t use the coverage. A few plans do allow your premiums to be fully or partially refunded, either to you or to your beneficiaries, but the premiums are much higher, as much as three times higher than a no-refund policy.

Another drawback of long-term care policies is that premiums are subject to increases. Average premiums have doubled since 1990 and have increased steeply in the past few years. One policyholder saw his premium increase by 200%. Premiums are going up because, as the population gets older, companies’ costs increase. Also, fewer people are canceling their policies than companies expected, so companies will potentially have to pay out more.

While some believe premiums on long-term care policies written today will not increase as fast as older policies, premium increases are still a concern.

Policyholders facing a premium increase must choose between paying the higher premium to keep their coverage; reducing their coverage or increasing the waiting period; or canceling their policy and trying to find a lower-cost plan elsewhere.

One benefit of long-term care insurance is the premiums might be deductible as a medical expense. However, the premiums must exceed 7.5% of your adjusted gross income, the deduction is limited based on your age, and the policy must meet regulations set by the National Association of Insurance Commissioners.

More than 100 companies offer long-term care insurance in the U.S., but most policies are purchased from 15 to 20 providers. If you’re working with a broker to choose a policy, be sure the broker can provide a choice of policies. Some brokers can only work with one company, and the policies they offer may not be the best for your needs.

If you have a health savings account, such as through your health insurance, you can usually use the funds in your HSA to pay long-term care insurance premiums.

For more information about long-term care insurance, visit the American Association for Long-Term Care Insurance website. Also see “A Shopper’s Guide to Long-Term Care Insurance” published by the National Association of Insurance Commissioners.

Group Long-Term Care Insurance

Some employers offer group long-term care insurance as a benefit to employees. This insurance can be more affordable than an individual policy but is not widely available.

Long-Term Care Annuities

A long-term care annuity is a deferred annuity that can be used for long-term care. Whereas LTC insurance providers can be strict about whom they’ll insure, long-term care annuity providers are much less stringent. Some will even issue policies to anyone, though if you have a health issue you’ll have a lower level of benefits. An advantage of a long-term care annuity is that long-term care benefits paid out by the policy are not taxable, whereas regular annuity payments are.

Hybrid Policies

Hybrid policies are life insurance policies that also offer the option of long-term care coverage. You can use your death benefit, which is the amount your beneficiaries receive upon your death, to pay for long-term care while you’re alive. If you don’t use the funds for long-term care, your beneficiaries receive the full benefit. Unlike traditional LTC insurance, the premium is set upfront and doesn’t change. But the premiums are two or three times higher than standard long-term care insurance because you’re paying for both the whole life policy and long-term care coverage.

Hybrid policies may be suitable if you don’t qualify for a traditional LTC insurance policy because of age or preexisting health conditions. If you already have a whole-life policy with a large cash value, you can roll over the policy to a hybrid plan.

The American Association for Long-Term Care Insurance website has more information about hybrid policies.

Veterans Benefits

If you’re a veteran of the U.S. Armed Forces, you may qualify for nursing home, assisted living, and home health care through the Department of Veterans Affairs. You’re eligible if:

• You’re signed up for VA health care, and
• The VA determines you need LTC services to help with your medical treatment and personal care, and
• The services are available in your area

Available services include nursing and medical care, skilled nursing, custodial care, and respite care for caregivers.

Visit the VA website for more information.

Medicaid

As mentioned earlier, Medicaid covers long-term care services for eligible recipients. But you must meet the income restrictions. Medicaid only covers nursing home care; in most states, home health care is only available in limited situations.

Medicaid provides coverage for as long as nursing home care is needed, and there’s no waiting period. However, your choice of nursing home may be limited because many facilities don’t accept Medicaid. If your facility stops accepting Medicaid or becomes too full, you might have to find another place to move to. Also, you might not be able to get a private room or have your spouse as your roommate, The level of coverage also isn’t as extensive as with most LTC insurance plans.

Rely on Family

Traditionally, care for older relatives was provided by children and other family members. In recent decades that has become less common in the U.S. Many older Americans are reluctant to become a burden on their children or other relatives. This is why they consider long-term care insurance or other options. But over 40 million Americans, or 17% of the U.S. adult population, provide unpaid care to an adult over the age of 50.

The Older Americans Act of 1965 provides funding to states to support older Americans living at home and their caregivers. It helps seniors live independently by supporting various support programs. These include nutrition programs like Meals on Wheels, preventive health services, and transportation assistance. They also provide family caregivers with information, referrals, counseling, and respite care.

Self-Insuring

Another option is to use your personal savings to fund long-term care services. You can also use health savings accounts to pay for long-term care or skilled nursing if a doctor certifies you need these services for at least 90 days.

But when planning for future long-term care, you’ll need to make sure you’ll be able to cover the costs while still providing for other living expenses for yourself and your spouse. In 2021, the median monthly cost of a private room in a nursing home was $9,034. The cost of an assisted living facility was $4,500. You can see the current and projected future costs of long-term care in your local area at this website sponsored by Genworth, an insurance provider.

The big unknown, however, is how much care you will need. Your health, lifestyle, and heredity are major determinants of how much care you’ll need.

Estimating Costs

A 2017 study by Price Waterhouse Coopers found long-term care costs $172,000 on average over a person’s lifetime. For 25% of people, lifetime long-term care costs are less than $26,000 but for another 25% of people, lifetime LTC costs exceed $240,000. In seven percent of cases, costs exceed $500,000. In one percent of the time, LTC costs are close to $1 million.

As far as nursing home care, 60% of people never need it. Of those who do, 18% stay less than one year, and 10% stay longer than three years. About 50% of nursing home residents are 85 years old or older, 35% are 75 to 84, and 15% are 65 to 74 years old.

Statistically, you can plan for a three-year stay in a semi-private nursing home room starting at age 85.

Going back to the Genworth website, the median cost of a semi-private room in a nursing home in 2023 is $8,390 per month or $100,680 per year. So the cost for three years is $302,040.

The website helps you estimate the future cost of nursing home care depending on your local area. Based on your current age and the return you expect on your savings, you can estimate how much you should invest to plan for long-term care costs at age 85.

For example, the table below shows how much you might budget, assuming 3% inflation rate and 7% return on your investment.

This assumes the cost of care is equal to the national median. The website will show you the cost in your local area.

State-Sponsored Insurance

The shortage of appealing solutions for funding long-term care has prompted at least one state to begin providing LTC to its residents. Starting in July 2023, the State of Washington implemented its WA Cares Fund. Most workers pay a 0.58% payroll tax into the fund. Starting in 2026, participating residents who demonstrate a need for assistance with daily living can receive up to $36,500, adjusted annually for inflation. The amount is intended to cover one year of in-home care. The fund is expected to reduce the state’s spending on Medicaid. California, Minnesota, and several other states are looking at implementing similar programs.

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Retirees are significantly underestimating their life expectancy, surveys find. Someone who retires at age 65 can expect to live to 85, according to the Social Security projection. For a couple both turning 65, at least one member is likely to live into their 90s.Are you prepared for a retirement that could last for decades?

A lot of people are not prepared for a lengthy retirement. Running out of money in retirement is a big concern for many retirees, but there are other considerations as well.

Investing too conservatively won’t provide enough growth

Unless you have huge savings amassed, putting all of your savings in “safe” investments like CDs and money market funds is unlikely to provide enough growth to last through retirement. Particularly with today’s low interest rates, many of these accounts don’t even keep up with inflation. Based on recent research, many financial advisors now recommend putting a portion of your savings in stocks, especially later in retirement, in order to provide sufficient growth. Research suggests an optimum approach is to invest more conservatively at the start of retirement, and gradually ramp up exposure to stocks as retirement goes on.

Healthcare is expensive and becoming more so

The Employee Benefits Research Institute estimates a 65-year-old couple will need $158,000 to have a 50% chance of meeting healthcare expenses in retirement, and $271,000 to have a 90% chance. This is for a couple with median healthcare costs and includes prescriptions. If you have advanced healthcare needs, over-the-counter medications, or dental care, the costs will be higher. There are healthcare costs calculators that can give you some ideas of your healthcare costs and how to minimize them.

Once you’re eligible for Medicare, you have a choice between traditional fee-for-service or Medicare Advantage, which is a managed-care alternative that offers comprehensive coverage for inpatient and outpatient services and prescription drugs, and possibly vision, hearing, and dental care.

Medicare Advantage can save you money, but you’re limited to using healthcare providers in the plan’s provider network. You also have to ensure the plan covers prescription drugs you need without additional cost. With traditional fee-for-service Medicare, you can use any healthcare provider that accepts Medicare, but will probably need to enroll in a prescription drug plan and purchase a Medigap supplemental plan to cover out-of-pocket costs.

You’ll probably want to revise your living arrangements

As people grow older, they typically want or need to revise their housing. Your residence will need to accommodate the possibility that you or your spouse will be physically handicapped later in life. You may not want to climb stairs every day. You may need wider door frames and kitchen spaces to accommodate a wheelchair, low-entry showers, and a relatively short driving distance to a hospital or medical center.

People make different choices to plan their retirement lifestyles. Many downsize to smaller homes now that the kids are grown; some move to lower cost areas or states; others move to senior communities with more social contact and less maintenance. An increasing number are choosing to stay in their homes and make renovations to accommodate their retirement lifestyle. The options are many.

Whatever living arrangements you decide on, you’ll want to plan ahead and make the appropriate arrangements in advance – it doesn’t get any easier as you get older. If you plan to stay in your home, you might consider making any major renovations before you retire, while you’re still receiving a paycheck.

You may require long-term care

The likelihood of developing Alzheimer’s doubles every five years starting at age 65. By age 85, the risk of developing Alzheimer’s each year is nearly 20 percent, according to a study reported in the Annals of Neurology.

Long-term care is more important than many people realize. Even if you are relatively healthy and active now, you will want to provide for the possibility that you or your spouse will require assisted living at some point. Seventy percent of people over 65 will eventually need some form of long-term care. At least 6.4 million people age 65 or older today will need long-term care within one or two years after turning 85. For married couples, the chance that one spouse will need long-term care rises to 91%.

Stay social

Many people get the majority of their social contacts at work and through their children’s activities. After retiring and with the kids grown up and moved out of the house, all that is gone. Over the course of years, this lack of social interaction can have devastating effects on mental and physical well-being. Retirees who age in place by staying in their homes are particularly vulnerable. Twenty-eight percent of Americans over the age of 65 live alone. Studies find that seniors who feel isolated and lonely are more likely to report poor physical and mental health, and suffer cognitive decline. Without regular social interaction, there’s no one to notice when a senior is having health, financial, or other issues, and offer help or advice.

In order to avoid these negative consequences, you will need to actively seek out ways to cultivate and maintain interactions and relationships. There are many things you can do:

• Volunteer. Your local area may have many volunteer opportunities. Hospitals, libraries, charities, churches, museums, and social service organizations are among those commonly in need of volunteers.
• Find a social hobby. Whether playing cards, joining a book club, or playing table tennis, hobbies enable you to get together regularly with others.
• Exercise. An exercise group is a good way to meet other people and stay physically active at the same time.
• Schedule family time. Call and visit your family regularly to touch base, laugh and share stories.
• Maintain contact with old friends from work or others in your life just to take a walk, have lunch, or chat on the phone.
• Attending religious services will get you out of the house and may create more chances for volunteering and hobbies.

The post How to Prepare for a Longer Retirement Than You Might Think appeared first on Smart and Silver.

After you retire, your need for good dental health doesn’t go away. In fact, it might even increase. Poor or neglected dental health is associated with malnutrition, speech impediments, and chronic pain and can even contribute to serious health conditions like heart disease and diabetes, conditions which become more prevalent as people get older.

But it can be difficult to obtain dental care in retirement. Only about a third of Americans have retiree health benefits from their former employer, and Medicare does not cover most dental exams or procedures.

Access to dental care is more than just a quality of life issue. According to the Surgeon General, people over the age of 65 are seven times more likely to be diagnosed with oral cancer than those under 65. Routine dental examinations can detect oral cancer early, before it becomes life-threatening. But according to the AARP, about three-quarters of Americans age 65 or older do not have dental coverage. Routine dental exams can also detect dental problems and prevent complications that lead to more dental and medical appointments, invasive procedures, and expenses that spiral out of control.

But many older Americans lack access to dental care, even routine cleanings, exams, and X-rays. Most may lose coverage from their employer when they retire. In 2017, less than one-third of Americans aged 65 and over had dental insurance, according to the CDC.

Furthermore, many older adults are homebound or disabled and have difficulty visiting a dental office.

The majority of seniors pay for dental care out of pocket. This can get expensive. The average cost of A routine exam and X-ray can cost $150 to $300 on average. For those needing complex procedures, the costs can be much higher: The average cost of a denture is $1,831.84 and a crown can cost $1,278.24. That might explain why one-third of adults aged 65 and over had not had a dental visit in the preceding 12 months.

Here are some ideas for obtaining dental care in retirement.

1. Private Dental Insurance

Premiums for private dental plans are reasonable – in 2024, the average premium for a comprehensive coverage policy is $52 per month. But the coverage maximums tend to be low, around $1,000 to $2,000 per year. After your maximum is reached for the year, you’re on your own for any remaining costs. However, surveys show 97% of people don’t use the maximum amount in a year. There are also deductibles, typically $50 to $100 per person, and coinsurance.

Another option is to look into group dental insurance offered by seniors’ organizations like AARP and AMAC, and professional and trade associations you may belong to as part of your work.

There are also non-insurance discount dental plans available. For an annual membership fee of $75 to $150 you can get pre-negotiated lower rates at dentists participating in the plans. Examples are plans offered by DentalSave,  Brighter.com, and dentalplans.com. Individual insurance companies like Humana, Cigna, and Delta Dental offer their own plans.

2. Medicare Advantage Plans

If you sign up for a Medicare Advantage plan, it may cover some routine dental care. About half of Medicare Advantage plans offer limited dental care coverage, according to Money magazine. Contact your provider for information about what is offered through your plan.

3. Veterans Benefits

If you are a veteran, you may qualify for reduced-cost dental coverage through the U.S. Department of Veterans Affairs Dental Care program. You can view the VA’s Dental Benefits for Veterans document or call 1-877-222-8387 for more information.

4. HSA Savings Plans

You can contribute to a Health Savings Account until you enroll in Medicare. Funds in your HSA can be used for out of pocket dental care costs. Distributions used for this purpose are also tax exempt.

5. Dental Schools

Accredited dental schools offer quality care at a lower cost. Dental students perform dental work under the supervision of instructors, who are board-certified dentists. You can search for a dental school in your area on the Commission on Dental Accreditation’s (CODA) website.

6. Medicaid

Your state’s Medicaid services may include dental care for lower-income residents. Contact your state’s Medicaid office to find out what is offered in your state.https://web.archive.org/web/20190721212357/http:/www.medicaidoffice.net/

7. Nonprofit Clinics

There are several nonprofit dental clinics around the nation that provide services free of charge or at a steeply discounted rate to those in need. Visit the National Association of Free and Charitable Clinics’ website to find a clinic near you.

8. Visit a Dental Hygienist

The majority of states allow dental hygienists to treat patients’ dental needs without the authorization or presence of a dentist. Hygienists may be able to perform cleanings, exams, and fluoride treatments and take X-rays, and the cost savings can be substantial compared to seeing a dentist.

9. Negotiate Rates with Your Dental Office

If your dentist recommends a procedure that is out of reach, they may be able to set up a payment plan or suggest a less expensive alternative. Before undergoing an expensive procedure, ask about any alternatives that may be available. Many dental offices also offer subscription plans in which patients pay a monthly fee and receive preventive care at no extra charge and discounts on common dental procedures.

Your dental office may also offer senior discounts and discounts for paying upfront in cash. The dental office may not advertise these, so be sure to ask. 

10. Compare Dental Offices

The fees charged by different dental offices for the same procedure can vary by hundreds of dollars. So it pays to shop around and compare. If rates are particularly high in your area, it may be worth it to commute to a less expensive locality.

Importance of Good Oral Hygiene

Oral hygiene is always important, but it becomes even more crucial as we age. Oral infections are linked to serious and potentially deadly health conditions. Regular professional care can help maintain good oral health. It’s best to take care of small dental issues while they are still manageable and before more expensive procedures are needed.

The post 10 Ways to Get Retiree Dental Care appeared first on Smart and Silver.

Healthcare is one of the biggest retirement expenses. The majority of employers don’t offer continuing health benefits after your employment ends. Only 21% of companies that offer healthcare coverage to employees also extend it to retirees. This is why one in six American workers remain in jobs they might otherwise leave.

Fortunately, you have some options for healthcare coverage during this gap period. Here we will describe these options and some important things to know about each, so you can make an informed decision.

Below are your options.

Continue your employer’s health coverage for up to 18 months. The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) allows you and your family to continue health benefits provided by your employer for a limited period of time if you lose employment. COBRA applies to employers with 20 or more employees. You likely will have to pay more for health insurance than you did as an employee.

Get on your spouse’s health plan. If you spouse is employed or retired and covered by an employer’s health plan, you may be able to get coverage on that plan. Not all employer plans offer this benefit, and there may be extra charges.

Purchase private health insurance. About 10% of Americans purchase their own health insurance. While often the most expensive choice, it’s also the most flexible because you can choose the plan and features that meet your needs. A health savings account (HSA) can help with the copays and deductibles and enables your savings to grow tax-free. You can shop your state’s online marketplace or the federal marketplace, or buy insurance through a private exchange or directly from an insurance provider.

Get group health insurance. Many professional societies and membership organizations offer group health insurance to their members. The cost is lower than purchasing an individual policy because the insurer can offer group rates. Professional associations like the Affiliated Workers Association, Association for Computing Machinery, Freelancers Union, Writers Guild of America, and even Costco, the discount warehouse, offer healthcare coverage to their members.

Enroll in health care sharing programs. These are relatively new arrangements in which groups of people join together and voluntarily share one another’s medical expenses. These programs are much less expensive than most health insurance plans but have specific conditions and limitations that many health plans don’t.

Get a part-time job with health benefits. Not many national companies offer this anymore, but getting a low-stress, part-time position with health benefits has long been a popular option for many retirees. Usually you have to work a certain number of hours per week and have worked at the company for up to a year in order to receive health benefits.

You could even start a business and get health insurance that way, even if you have no other employees.

Get Medicaid. Medicaid is a joint federal and state health insurance program that provides coverage to over 72 million Americans. It covers more than 20% of Americans and is the leading source of long-term care coverage in the U.S. The Affordable Care Act of 2010 (ACA) enabled states to expand Medicaid to cover almost all low-income Americans under age 65. Medicaid is available in all states, but the covered services vary between states.

Stay on Your Former Employer’s Health Plan

What Does COBRA Do?

If you leave your job for any reason, COBRA allows you to stay with your former employer’s health plans for a period of time if:

• Your former employer has 20 or more full-time employees, and
• You were enrolled in an employer-sponsored medical, dental, or vision plan

COBRA also covers health insurance for your spouse and dependent children.

When Can You Enroll In COBRA?

You have 60 days from the date you lost your job to enroll in a healthcare plan under COBRA. Your former employer will send details about how to enroll and will notify its plan administrator if you choose to enroll. When you first elect COBRA, you continue with the same policy you had before. This allows you to see the same doctors and pharmacies as when you were an employee. If your employer has open season while you’re enrolled under COBRA or you experience another qualifying life event, like getting married or divorced or having a baby, you can change to another healthcare plan at that time.

How Long Can You Keep Your Employer’s Health Plan?

The federal law allows you to stay with your employer’s health plan for up to 18 months as long as you do not enroll in another group health, dental, or vision plan and do not become eligible for Medicare. Individual states may allow extensions under certain circumstances. Check with your state’s insurance commissioner’s office to see what the rules are in your state.

COBRA is intended to be temporary. It’s meant for workers who are between jobs and is designed to cover your healthcare needs until you find another job.

If you are still not Medicare-eligible when COBRA runs out, you can purchase private health insurance; the Health Insurance Portability and Accountability Act of 1996 (HIPAA) allows people who had COBRA to purchase private policies with no preexisting-condition exclusions after the end of COBRA coverage.

How Much Does COBRA Cost?

Under COBRA, you may be responsible for the entire health plan premium plus a 2% administrative fee. The employer typically no longer subsidizes the cost of the health insurance premiums as it did when you were an employee. So COBRA is more expensive than a healthcare plan for employees, but the cost may still be lower than buying a private health policy because you could benefit from the employer’s group rate.

For more information about COBRA, including what happens if your employer had fewer than 20 employees, visit these sites:

FAQs: Health Care Reform and COBRA (dol.gov)

COBRA Insurance | Continuation of Health Coverage

Get on Your Spouse’s Health Plan

If you’re retiring without health benefits but your spouse is still employed, you may request to be added to your spouse’s health plan. But not all employers allow this. The ACA says employers with 50 or more full-time employees must offer health insurance to employees and their children, but not spouses. Your spouse can check with their plan administrator to find out their employer’s policy. If you are added to your spouse’s employer-sponsored health plan, the premiums will increase because they are based on the number of people on the policy.

If your spouse has private (not employer-provided) health insurance, you most likely can be added to the plan. Your spouse can add you during open season or within 30 or 60 days after you lose your employment (losing your job is considered a qualifying life event). Again, the premium will probably increase. You can check with the insurance provider for details.

Purchase Private Health Insurance

As mentioned earlier, you can purchase a healthcare plan through a federal or state government marketplace, or through a private exchange, or directly from an insurer.

Under the ACA, all health plans, whether purchased through a government exchange or privately, must cover at least 10 essential health benefits:

• Outpatient care
• Emergency services
• Hospitalization
• Maternity and newborn care
• Pediatric services including dental and vision care
• Mental health and substance abuse services
• Prescription drugs
• Rehabilitative services and devices
• Laboratory services
• Preventive services and chronic disease management

Many plans, especially those offered privately, have additional benefits.

Also, under the ACA insurers cannot base your rate on your health history or gender. They can, however, use your age, location, and tobacco use in setting rates.

Advantages of Using an Exchange:

Shopping a government exchange is convenient: all of the plans are listed on the site, and you can filter by location, covered services, and cost. Exchanges also often have free customer support by phone or online chat to help you choose a plan.

An attractive feature of purchasing through federal or state marketplaces is possibility of getting premium tax credits and subsidies to help with your monthly premiums if you meet the income requirements. Typically your income must be between 100% and 400% of the national poverty level. This page can help you find out if you can save on premiums for plans purchased through the federal marketplace.

Marketplace plans often have smaller provider networks than private insurance plans. This is because of the administrative costs that insurers pay to list health plans on the exchanges. Having smaller networks is a way for the insurers to cut costs. So you’ll want to verify that your preferred doctor and treatment facility are in-network before you buy a plan.

Advantages of Buying Private Insurance:

Private plans often have more extensive provider networks than exchange plans because insurers don’t have to pay the administrative costs.

You also have a wider range of choices on plans purchased privately. Private plans may offer additional services that exchange plans don’t, such as vision, dental, wellness services, short-term coverage, and fertility services. So if you want services that exchange plans don’t include, or want greater control over what services your plan offers, you might consider private exchanges.

Additionally, if you’re shopping for a private health plan, a licensed broker can help you. Brokers have experience dealing with insurers and knowledge of the private insurance choices. They can help you sort through the numerous choices available. They can also help you enroll in a plan. Brokers can also help with government exchange plans, but their role may be more limited.

Sometimes an insurer will offer a plan on its private website and a similar-sounding plan but with fewer benefits on the government exchanges. If the exact same plan is offered in multiple places, it must have the exact same price in each place.

You can view the federal and state marketplaces at healthcare.gov. You can schedule a time to speak with an agent or broker here. Meanwhile, the finder page on the site offers help in finding private health plans. If you’re looking for a private health plan and having difficulty getting started, Investopedia suggests the best health insurance plans for retirees.

Get Group Health Insurance

Many industry and professional groups, trade unions, alumni associations, and regional chambers of commerce offer group health insurance coverage. The organization selects and purchases the healthcare plans and makes them available to members.

The main advantage of group health plans is lower premiums. Also, family members often can be added to group plans (at additional cost). While some groups have stringent membership requirements, the group rate discount might be worth the effort of joining.

Just a few of the well-known organizations that offer group health insurance are:

• AARP
• Actors’ Fund of America
• Affiliated Workers Association
• American Institute of Graphic Arts
• Association for Computing Machinery
• Costco
• Graphic Artists Guild
• Institute of Electrical and Electronic Engineers
• Small Business Service Bureau
• The Freelancers Union
• Writers Guild of America

You can review groups you might already be a member of, such as a union, alumni association, professional organization, or your local chamber of commerce, and find out about member health benefits.

You can also search online for “membership organizations that offer group health insurance.” Check which organizations offer health insurance to members. List out organizations that might be appropriate for you, for example based on your previous career, education, or a hobby.

Then consider joining. Be sure to include the cost of membership when you decide if the group’s health insurance coverage may be right for you.

Also be sure to read the plan descriptions carefully. Some organizations may offer discounts on prescriptions but not a full health insurance plan.

Enroll in Health Care Sharing Programs

Health care sharing programs are nonprofit ministries whose members share a religious faith.

Health care sharing programs have been around for several decades. Although they’re not traditional health insurance and don’t provide the same range of coverage, the cost is much lower – often less than half the cost of health insurance plans.

With a health care sharing program, you pay a certain amount each month (similar to a premium), and the program covers your health expenses after they reach a certain level (similar to a deductible).

The monthly fees are much lower than insurance premiums, typically around $480-$800 for a family, and the amount you must reach before the program chips in is around $500 for individuals and $1,000-$5,000 for families.

Health sharing programs are less expensive than health insurance because they usually offer a smaller range of basic services, from prescriptions to maternity services. This is appealing to many people because you only pay for services you might use.

Unlike health insurance, health sharing programs can choose which services to offer. Some programs just cover basic preventive and catastrophic care. But others have more services like dental, vision, and telehealth. Some even cover expenses for overseas or experimental treatments, adoptions, and funeral services.

Like health insurance, there’s a network of preferred providers, and your costs are much lower if you stay in-network. You can enroll other members of your family for additional monthly fees.

The fees paid by members are kept in a common account by the program committee. When you have a medical need, you submit a request for payment. When the committee approves the request, your medical bills are paid by the program. With some programs, you pay the provider first and the program reimburses you.

There are some important caveats for these programs:

Since health sharing programs aren’t traditional health insurance, they aren’t bound by the same rules as insurance. So they may not cover the basic healthcare services that insurance plans are required to, like vaccinations or mental health and substance abuse services.

They can also deny membership or impose additional fees for preexisting conditions. Some programs require you to pay into the program for a year or even several years before you can submit a request for payment.

Unlike with health insurance, there are no annual or lifetime limits on medical cost reimbursements. But there may be limits on how much they will pay for certain diseases. So people with a chronic health issue may have large out-of-pocket expenses.

Health sharing programs aren’t regulated by the government. So if the program fails to reimburse you for whatever reason, or goes bankrupt, you have no recourse.

Many programs are based in the Christian faith, so you may be asked to sign a statement of faith before joining and agree to abide by some lifestyle choices. Some programs may drop coverage if you violate the lifestyle conditions such as by using illegal drugs. Some plans may end coverage when you reach age 65.

Before enrolling in a health sharing program, review the program’s rules and conditions. Some things to pay close attention to include:

• What services are covered and which are not?
• Are my doctor and hospital in network?
• What is the monthly fee and how much do I have to pay out of pocket?
• What are the lifestyle rules?
• How often does the program suspend or terminate coverage?

For more information about health sharing programs and to get free help with choosing a program, visit https://hsaforamerica.com/

Get a Part-Time Position With Health Benefits

A significant number of retirees are choosing to work part-time. About 20% of Americans age 65 or older are working or looking for work, according to a 2021 report by the Administration for Community Living. Older workers also enjoy working more than their younger colleagues, according to a Pew Research survey: two-thirds of workers age 65 or over said they were extremely or very satisfied with their jobs. Working enables retirees to stay productive, maintain social interactions, and supplement their retirement income. Likewise, many companies want to hire older workers for their experience and work ethic.

Although it’s not a legal requirement, many of these companies offer health benefits to part-time workers. If you’re considering part-time work for the health insurance, be sure to check the policies of the employers you’re considering. Find out how long you must work for the company and how many hours you need to work per week to be eligible for health benefits. Also look at the health plans offered and make sure they cover your needs.

You’ll also want to consider the job itself. Working a job you really dislike can be burdensome and, long-term, harmful to your health. Also remember that you’ll have less free time and higher costs for commuting and other expenses associated with your job.

You’ll also want to consider carefully the financial implications. Your employment income may impact your taxes and Social Security benefits. You may want to consult a financial and tax advisor.

For help searching for employment as a retiree, visit https://retirementjobs.com/

Self Employment

Many retirees start businesses as a way to stay productive and engaged and supplement their income. Freelance work and consulting are popular options. If you’re self-employed, you can search the federal government health insurance marketplace and the state marketplace if your state has one, for health coverage for self-employed individuals. You can compare the policies you find with private exchanges, membership organizations, and the other individual health insurance options listed above to decide which better fits your needs.  If your business has one or more employees besides yourself, you can also search for small business health insurance.

Association health plans are an option that has recently become available. Association health plans are where multiple employers, including self-employed individuals, group together to get health benefits. By joining together, employers can negotiate lower rates from insurers and healthcare providers.

For more information about the federal marketplace for self-employed individuals, visit the self-employed page on healthcare.gov.

For more information about association health plans, visit https://www.associationhealthplans.com/

Enroll in Medicaid

Medicaid provides comprehensive health care and long-term services to low-income Americans. Over 90 million people receive Medicaid benefits. Medicaid provides free health insurance to people with incomes below 138% of the federal poverty level. Medicaid is jointly administered and financed by the federal government and individual states. Each state manages its Medicaid program within broad federal guidelines. For example, eligibility varies between states and may depend on household income, size, disability, age, and other factors. The services Medicaid offers also varies between states. All states’ Medicaid programs must include inpatient and outpatient hospital services, physician services, lab and x-ray services, home health services, nursing facility services, and transportation to medical care, among others. States are allowed the option to also offer prescription drugs, physical therapy, optometry services, and chiropractic services, among others. Visit this page for a list of mandatory and optional Medicaid services. You apply for Medicaid through your state Medicaid agency, which makes eligibility determinations based on your state’s policies.

For more information about Medicaid and to apply, visit https://www.medicaid.gov/about-us/beneficiary-resources/index.html

You can learn more about your state’s Medicaid programs at https://www.medicaid.gov/state-overviews/index.html

Enroll at a College or University

We mention this as an additional possibility. Over 200,000 people aged 50-64 are enrolled in colleges and universities across the country. Some are furthering their education for personal enrichment, some seek to bolster their credentials for second careers or part-time jobs, and some want to get that degree they didn’t finish earlier in life.

Many private and state colleges allow older adults to enroll in courses with no or minimal tuition. As a student, you may be eligible for student health services. Going back to school is a big decision, and naturally we wouldn’t suggest doing it just for the healthcare. But if it’s something you’re planning to do already, you could inquire about the possibility of using student health insurance, even as a supplement to other healthcare coverage you have.

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You probably already have some income sources. Social Security is a major source of income for many retirees. For half of retirees it comprises 50% of their income and for a quarter of retirees it makes up 90% of their income, according to the Social Security Administration.

You may also have a pension and annuities. You may have assets like a 401(k) and your home, which can be used to produce income. Are all of these enough?

The answer depends on how much you need. A frequently cited rule is the 80% rule, which says you will need 80% of your pre-retirement income to maintain your standard of living in retirement. It assumes some of your expenses will decrease after retirement, like the cost of commuting to work, maintaining work attire, and contributions to retirement plans.

But this rule doesn’t apply to everyone. Research finds many retirees will be able to live quite well on 60% of their previous income, while others may need 100% or more. It depends on your income and expenses.

Expenses in Retirement

What are or will be your expenses in retirement? Some of your expenses immediately after retirement will be about the same as they were before, such as housing costs (mortgage or rent), utilities, food, and insurance. And, as previously mentioned, some other expenses will go down, while some may go up.

Many retirees find their total spending increases in the first few years after retirement, as they travel and dine out more often. Then, spending may decrease and hold steady for a long period, and finally increase again as costs of healthcare and long-term care kick in.

The above is a common pattern, but it may or may not be yours. You’ll have to decide what to spend in retirement, then plan to generate enough income to cover it.

How to Generate Income in Retirement

Luckily, there are many more options for generating income in retirement than ever before. Depending on your situation, you may rely entirely on your savings, use your savings along with pensions and annuities, or combine the income from a part-time job with other sources to fund your retirement.

We’ll start with the most common one, Social Security.

Social Security

Almost everyone who worked for at least 10 years qualifies for Social Security retirement benefits. The amount you qualify for depends on your income, the number of years you worked, and your age when you apply for benefits. If you aren’t receiving Social Security benefits currently, you can view your projected benefits by creating an account with the Social Security Administration.

As of August 2023, the average Social Security retirement benefit is $1,793 per month. Your actual amount will almost certainly be different from this, and you also have to consider that taxes will be taken out as well.

Pensions and Annuities

Pensions and annuities from previous employment are not as common as in the past, but around 20% of retirees still receive them. They are most common among government retirees, but about 15% of private companies offer traditional pensions to retirees.

If you’re one of the fortunate ones, your pension can form a consistent, reliable income stream in retirement. The median private pension in 2021 for private company retirees age 65 and older was $10,606 per year, and for state and local government retirees it was $22,860 per year. While this may not cover all of your income needs, it can be a good supplement to Social Security and your other income sources.

Your Savings

If you don’t have a pension from a previous employer, you can possibly create one from your savings. For example, 68% of workers have access to an employer-sponsored 401(k) plan. You may also have other savings accounts you’ve accumulated over your working years.

Income Annuities

If you have a 401(k), IRA, or other retirement savings account, you may be able to turn that into an income annuity. Since the passage of the SECURE Act in 2019, several major financial institutions have begun including annuities as part of the retirement plans they offer to customers. For example, Fidelity offers a range of annuities through The Fidelity Insurance Network. Meanwhile, Nationwide offers a target date mutual fund that enables participants to grow their savings while also receiving lifetime income.

Annual Withdrawals

Another way to generate income is to make annual withdrawals from your 401(k) account. How much can you withdraw?

Suppose that in the first year of your retirement, you withdraw 4% of your 401(k) balance. Then each following year, you increase the previous year’s withdrawal amount by a percentage equal to the rate of inflation. For example, if the inflation rate in year 2 is 2%, then in year 2 you withdraw 2% more than you did in year 1. In year 3, if the inflation rate is 3%, then you withdraw 3% more in year 3 than you did in year 2.

Research shows by following this method there’s a 90% chance your 401(k) will not run out over a 30-year retirement. This assumes your savings are invested half in stocks and half in bonds.

Interest and Dividends

Another way to generate income from your savings is through interest and stock dividends. By investing in bonds and certificates of deposit (CDs), your savings may produce interest income. CDs and High quality bonds provide a reliable income stream and help cushion your savings against declines in the stock market. The returns you get depend on the price you paid and the interest rate on the bond. There are many different classes of bonds, including U.S. Treasury bonds, state and local government bonds, municipal bonds, corporate bonds, and even overseas bonds.

The bond ladder is a common income strategy. This involves purchasing CDs or bonds with different maturity dates. You use the interest from the bonds as income. As the bonds mature, you use the proceeds to buy more bonds. CDs and bonds with maturity dates further in the future generally have higher yields, but investing in longer-term bonds keeps your money tied up so you lose liquidity. Using a bond ladder lets you retain liquidity while also benefitting from higher yields.

Dividend-paying stocks can also be an income source. The idea is to buy stocks that have a long record of paying dividends reliably and of increasing their dividends each year. You keep the stocks and use the dividends as income. Although the price of the underlying stock may rise or fall each year, as long as the dividend is secure, so is your income.

Rental Real Estate

Another popular option is to purchase rental properties. Rental properties enable you to benefit from both price appreciation and rental income. Although there is effort required in selecting properties and managing them, real estate and property management companies can help. Turnkey properties are properties that are renovated and ready to purchase and immediately rent out, or may already be leased. Rental property purchases usually require a large upfront payment. If you don’t want to risk that amount, micro-investing platforms enable you to own fractional shares of rental properties and benefit from appreciation and rental income, with much less investment.

Your Home

An asset many retirees have is their home. You may have owned your home for many years, and as a result have significant equity. A reverse mortgage is a way to tap into your home’s value.

Reverse Mortgage

A reverse mortgage is where you borrow money using your home as security. The title to your home remains in your name and, unlike a traditional mortgage, you don’t make monthly payments. But interest and fees are added each month to the loan amount. The loan must be repaid when you no longer live in the home. The Home Equity Conversion Mortgage is the most common type of reverse mortgage and is for homeowners aged 62 or over. This page explains more about HECMs.

Rent Out Your Property

Renting an unused room in your house can help produce income while giving your some experience in real estate rental. If you don’t want to take on a long-term tenant, you can try short-term rentals through sites like Airbnb. Reputable short-term rental sites provide some tenant prescreening and offer some protection against damage to your home. Sites like Giggster also enable you to rent out your home or property for a party, meeting, corporate event, or even a film or video location.

If you don’t want to have a tenant live in your bedroom, but have an unused garage, large shed, or storage area, you could rent out storage space. Many people want to store their off-road vehicles, RVs, or boats but don’t have room at home. You can even rent out your driveway as a parking space. You can also rent other parts of your property such as your yard or your backyard pool. You can even rent out your car on a part-time basis.

Side Businesses

Retirement is a good time to cultivate your hobbies and passions that you might have had to put on the back burner during your working years. You may be able to turn some of those hobbies into side businesses that generate income. Here are just a few ideas. Note that some businesses require licensing and certifications, so be sure to check the laws and requirements in your area.

Gardening

If you have a “green thumb,” or you’re simply passionate about gardening, a home garden might be right for you. Gardens are attractive and enhance the beauty of your home. They’re also where you grow delicious fruits and vegetables. Plus, gardening is good for your health. You can grow food to save money on groceries and sell the excess produce and seeds to farmers markets, wholesalers, or retailers. Flower gardens yield blossoms you can sell. You may also offer gardening and landscaping services to other homeowners and local businesses.

Woodworking and Furniture Reselling

If you have the skills and time, you can make wood furniture and sell it to individuals and stores. You can also buy used furniture items, refinish and restore them, and resell them on sites like eBay, Craigslist, Facebook Marketplace, or OfferUp.

Home Maintenance

Many homeowners, especially older individuals, and businesses need maintenance services. From painting walls to installing ceiling fans to repairing appliances, there’s an endless need for handy services.

Photography

If you love photography, you might consider starting a photography business. Photographers are in demand for weddings, headshots, family portraits, real estate, fashion, and more.

Making Money Online

The Internet offers almost endless ways to make income online, without needing to leave home. While they may not cover all of your expenses, they can be a good way to bring in extra cash in your spare time, often for doing things you do anyway, like watching videos or shopping online. Here are a few examples.

Testing Apps and Websites

Companies always look for ways to improve their websites and create a better user experience. UserFeel matches these companies with individuals willing to test their websites and report on their experiences.

Take Surveys

Companies also want to find out the views and opinions of customers and potential customers. Sites like Survey Junkie and Opinion Outpost pay participants for completing online surveys.

Tutoring

If you want to help students with their studies over the Internet, being an online tutor is one way. Tutor.com helps teachers, professors, and industry professionals share their knowledge and experience with learners of all ages, from kindergarten up to and including adult continuing education learners. Tutoring allows you to set your own schedule and work remotely.

Customer Service

More and more companies are outsourcing their customer service to work-at-home reps instead of maintaining call centers and inhouse customer service staff. There are a variety of schedules available including daytime, evening, and weekends. Your job is generally to field customer questions through the phone or online chat. There are specialized positions in sales or tech support that have higher pay.

Customer service isn’t the only service you can provide remotely. Transcription, proofreading, bookkeeping, and virtual assisting are other services, to name just a few. Sites like Flexjobs and Remote.co can show you current remote positions that might interest you.

For more income ideas, you might consider part-time or even full-time retirement employment.

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If you’ve retired from the federal government, your situation is slightly different, and we touch on that as well.

Why Life Insurance?

We all understand the basic purpose of life insurance. It’s to protect your spouse, children, and other loved ones in case of an unexpected demise by replacing lost income. But if you no longer have fulltime employment, and your earned income from a retirement job is a small part of your total income, you may decide life insurance is no longer needed.

The cost of keeping life insurance increases with time. The policy you paid into at age 40 costs a lot more at age 60. A 10-year term policy with $500,000 in coverage costs on average $238 per year for a 40-year-old man, and $1,361 per year for a 60-year-old man.

If your children are grown and independent, and your spouse would be taken care of in the event of your passing, then it might make sense to save the premiums each year and take a short vacation instead.

But suppose you got married or adopted children later in life and your kids are still in school or college, or you have special needs children who depend on you? In that case, you might want to keep your life insurance.

Reasons to Keep Life Insurance in Retirement

Here are some other situations in which you might consider holding onto your life insurance policy as a retiree.

You’re Dependent on Social Security or a Pension

If you’re receiving Social Security retirement benefits, a pension from previous employment, or an annuity, these may end upon your death. If your spouse or others are relying on this income, a life insurance policy can help protect them financially. Your spouse and family members could be eligible for survivors benefits but the rules can be complex. A life insurance policy provides guaranteed protection.

You Have Debts

Over 10 million people aged 65 and over have a mortgage. Altogether, 53% of Americans aged 75 and over have some form of debt such as credit card balances and car loans. If your family or your estate would be responsible for paying this debt, a life insurance policy could make things much easier for your survivors.

Estate Taxes

Along with debts, life insurance proceeds can help your heirs pay estate taxes if you have a very large estate. If your relatives and estate don’t have enough cash to pay estate taxes, a life insurance policy can help. You’ll want to check with an estate-planning financial specialist.

You Want to Leave a Legacy

A life insurance policy can supplement other assets like IRAs and annuities for your heirs. It can provide a tax-free inheritance. It can also help with funeral and burial costs.

Your Policy Has a Living Benefit

Some life insurance policies allow you to withdraw funds for healthcare or long-term care expenses. These may be helpful, as medical and long-term care bills can be expensive. You’ll want to check the terms of your policy and compare with the costs of long-term care [LINK TO LONG-TERM CARE PAGE] or paying out of pocket.

Whole and universal life insurance policies have a cash value. When the cash value reaches a certain level, you can withdraw or borrow cash from it. You also can use the cash value to pay premiums, so you no longer have to pay out of pocket.

How to Get Rid of a Life Insurance Policy

If you’re still paying into a life insurance policy, and you and your spouse and family have decided you no longer need it, there are several options to unburden yourself of it:

• Cancel or surrender it
• Sell it
• Swap it

Cancel or Surrender It

Whole life and universal life policies have a cash value. Although it’s usually much less than the death benefit, if you need funds for an emergency or an unexpected expense, you can surrender the policy for cash. This is the easiest option. Fees and taxes may apply. You can also use the proceeds to purchase an annuity or other source of retirement income.

Term life policies have no cash value. If you stop paying premiums, the term life policy ends.

Sell It

An alternative to surrendering your policy is to sell it. This is called a “life settlement.” The companies that may buy your policy are settlement companies. You generally solicit offers from multiple settlement companies. Each company will request information about your policy and also a copy of your medical records from your healthcare providers. It may then make an offer. You choose from the offers you receive.

You can follow this process yourself or hire a broker to help you. A broker will charge for their services but often can get higher offers than you could get by yourself. The process can take 60 to 120 days to complete. The average settlement is 20% of the policy’s benefit value. Older policyholders and higher death benefits will get higher offers. A portion of the settlement may be taxable as ordinary income.

Swap It

Some term life policies allow you to convert the policy to a new whole life policy without needing another medical exam. The premiums will be higher, but the policy will remain in effect for the rest of your life and the premiums will not change. The whole life policy will also have a cash value that you can withdraw from or use to pay premiums.

How to Get New Life Insurance in Retirement

Many people have reached retirement age and decide they want to get new life insurance. This may happen for the same reasons people want to keep an existing policy: they have outstanding debt, they’re working and their spouse or family depends on their earned income, they want to leave a tax-free inheritance, or they want to help cover their final expenses.

Some older adults opt for a life insurance policy that also offer healthcare and long-term care coverage. Should they have a long-term illness, the policy allows them to use funds for their care expenses.

Adults in their 60s and over may believe they’re too old to get life insurance. While the premiums will be higher than for someone younger, it is often possible, especially if the applicant is in good health. Non-smokers and those with healthy weight and no major health issues will of course qualify more readily. Even if you’ve had cancer or another illness in the past, you may be accepted if you’ve been healthy for the past 10 years. An insurance broker can help you negotiate with providers and obtain the best rates.

Life Insurance for Federal Employees After Retirement

According to OPM, if you meet certain conditions you can keep your existing basic and optional federal employees group life insurance (FEGLI) coverage into retirement. One of the conditions is that your annuity payments start within 30 days after retirement. If your annuity is delayed because you’re retiring under the Minimum Retirement Age (MRA) Plus 10 rule, your life insurance coverage is put on hold until your annuity starts. You can also decrease or cancel your life insurance, but cannot increase it after retirement. Also, once your decrease or cancel your life insurance after retirement, you cannot later increase or reinstate it.

Worldwide Assurance of Employees of Public Agencies (WAEPA) Insurance

The WAEPA is a private company that has provided group term life insurance to current and former federal civilian employees and their families since 1943. WAEPA insurance isn’t dependent on your salary, so coverage limits can be higher than with FEGLI. WAEPA offers coverage up to $1.5 million. Because WAEPA applies to current and former federal employees, you can keep WAEPI insurance if you leave the federal government for any reason. WAEPA also offers financial education, pre-retirement seminars, and scholarships to members and their families.

SAMBA (Federal Employee Benefit Association)

SAMBA is a nonprofit federal employee benefit association established in 1948 that offers term life insurance, as well as health insurance, dental and vision plans, accident insurance, and long-term disability insurance. Life insurance is available to current and retired federal employees under age 70, with accidental death and dismemberment coverage at no additional cost for beneficiaries under age 65. Coverage is available up to $600,000.

Federal Employee Life Insurance (FEGLI Alternative)

FEGLI Alternative is a private life insurance program for federal employees. It covers current and retired federal employees and their families. Coverage ranges from $25,000 to $100,000. Premiums depend on your age and the amount of coverage.

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