1. Health insurance
You’ll have Medicare in retirement, so you don’t need to worry about health insurance, right? Not exactly.
First, if you retire early, you’ll need to buy your own health care coverage for a few years. Unless you qualify because of a disability, you won’t be eligible for Medicare — the federal health insurance program primarily reserved for seniors — until you’re 65.
Next, Medicare doesn’t mean totally free health care, as we’ve detailed in stories like “5 Health Care Costs That Medicare Does Not Cover.”
In fact, for many Medicare recipients, recurring costs like premiums and deductibles tend to rise each year.
Some seniors have the option to buy a supplemental Medicare health insurance plan, also known as a Medigap policy, to cover some out-of-pocket costs. But even if it saves you more money than it costs you, a Medigap policy is still an expense in itself.
How much this retirement expense costs: U.S. households led by someone who is age 65 or older spent $6,802 on health care in 2018, on average, according to the Bureau of Labor Statistics.