Healthy Finance Guide For Women Who Retire Early

HealthCare Writer

Updated on January 1st, 2021

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Some women may call leaving the workforce permanently “early retirement” when in reality they are pursuing a new career, like providing daycare for grandchildren or taking care of elderly parents full time. Others might have the financial freedom to explore their other interests outside of work. Whatever the reason for leaving the mainstream workforce before the age of 65, it’s important for women to know what they can do to stretch their dollars through to the end of their lifetime once they retire.

Here are a few finance tips to help you get the most out of your well-earned retirement dollars.

Buy New Health Insurance Like a Short Term Health Plan or No Deductible Insurance

Many are shocked at the price of health insurance when they have to purchase it on their own for the first time. If you’ve had health insurance through an employer the majority of your life, your company most likely subsidized the cost for you by paying a portion of the total premium. Today major medical health insurance costs on average are about 50% more than short term health insurance or a no-deductible health plan. The savings over a five year period can be substantial.

Let’s look at an example. In the city of Chicago, a 60-year old woman can obtain a short term medical plan for nearly $500 per month less than a major medical health plan with the same deductible, coinsurance and doctor copays. That equates to almost $6,000 in savings per year and $36,000 in savings over five years.* Monthly premium depends on age and state of residence.

Short term health insurance plan details can be read similarly to a major medical insurance certificate. Medical expenses are your responsibility until you meet your deductible. Once you’ve met your deductible, you share the cost of any additional medical bills with your insurance company. This is called “coinsurance”. Typically the plan’s coinsurance is 80/20 or 70/30, meaning, your insurance company pays the majority of the bill – 70% or 80%, and you are responsible for the rest. There are also coinsurance maximums which put a cap on how much you have to pay out of pocket while your policy is enforce.

If the output of cash is the main concern, a retiring woman can purchase a no deductible health plan, which pays a fixed cash amount for accidents or illness. There is no deductible or coinsurance to pay.

For about $100 more per month than a short term health plan, a benefit-rich no deductible plan can provide hundreds of dollars in cash for doctor office visits due to qualifying sickness or injury, and thousands of dollars to pay for hospital or surgical benefits. Plans can be skinny or robust, so it’s important to review coverage details of no deductible plans before purchasing to make sure they are right for you.

Both short term health plans and no deductible plans generally require applicants to answer a series of medical questions before acceptance. But for those in overall good health, these types of new alternatives to individual health insurance can be financial winners for early retirees.

Think About The Right Time to Take Social Security

Women on average live longer than men, and while taking Social Security at 62 might sound financially intriguing, the reduced income for early withdrawal might not be worth it if you could live 20-30 years longer. Many times early withdrawal of Social Security can reduce your total payout by up to 30%, and that figure doesn’t change. The penalty lasts for the rest of your lifetime.

The retirement age has changed over the years due to legislation passed by Congress in 1983. The full payout benefit used to be age 65, but today it is 66 years and two months. Soon it will be age 67. You can still withdraw your Social Security benefit at age 62, but as the “full” retirement age increases, the penalty will also increase. The government is also incentivizing seniors who wait until they reach their full age of retirement with increased payouts. If you can live off your savings and wait until age 70 to begin receiving your Social Security benefits, you receive even more. Benefits claimed at age 70 are typically 24 percent more than those who begin receiving benefits at age 67.

Example of Waiting to Take Social Security

In 2018, a 62-year-old female will receive $1,286 a month if she made $70,000 a year when she retires and begins drawing Social Security right away. If that same 62-year-old woman waits until age 70 to begin receiving her Social Security benefits, she will receive $2,919 each month (inflation attributed) – an increase of $1,633 each month or $19,596 per year.**

Moral of the story? If you can wait to begin receiving your Social Security benefits, you can pocket thousands more in the long run to cover expenses.

Consider Long Term Care Insurance

With the advance of technology, we are living longer lives. The life expectancy of Americans has increased by eight years since 1970. Today the average age expectancy for a woman is 81 years old.

While the United States doesn’t have the best life expectancy rate compared to 36 other countries that are part of the Organization for Economic Cooperation and Development, the U.S. is number one for a key factor – health spending. In 2016 the nation’s health care spending reached nearly 18% of the Gross Domestic Product, which is staggering compared to other countries whose health care spending capped at only 9% per capita.

Long term care insurance isn’t for everyone, but it’s worth reviewing. If you are single or would like to protect your estate for future generations, long term care can provide some financial protection should you become ill or disabled.

Example of Long Term Disease

In the United States, diseases like Parkinson’s and Alzheimer’s have disabled millions. More than 5 million Americans suffer from Alzheimer’s, and one in three Americans die from Alzheimer’s or a dementia-related disease each year. In fact, deaths from Alzheimer’s have increased 89% since 2000.

One million men and women have Parkinson’s, and approximately 60,000 are diagnosed with the disease every year. Medication costs on average top $2,500 a year for individuals living with the illness.

Both illnesses over time are debilitating and costly for individuals and families struggling to pay for long term care. In each instance, long term care insurance can help alleviate high medical costs.

Long Term Health Costs to Consider

It’s best to purchase long term insurance at a younger age and while you are in good health. If you wait or have a health condition by the time you apply for long term care, the policy could be unaffordable. It is also not advisable for women living on small incomes who cannot afford a large yearly sum to cover the premium cost. If you are confident you have a family or friend network who will care for you during your advanced years, long term care insurance might not be necessary.

For individuals who can afford long term care, the insurance covers big-ticket items that many seniors find they need at one stage of life or another. Depending on the policy, long term care insurance can help pay for some or most of these expenses. Today the national median costs per month for some long term service are:

  • Nursing home care: $7,148 (semi-private room)
  • Assisted living: $3,750
  • Adult day care: $1,517
  • In-home care: $4,099

Since none of us can predict the future, long term care insurance can be a gamble because the premium is not recoverable. However, for those who believe they may need extensive care in their later years, long term care coverage can help protect retirement savings.

Get Your Estate in Order

Who will take care of you if you become ill, and how will the medical bills be paid? While not a pleasant or favorite consideration, naming your health care advocate in advance of declining illness is a recommended step to keep your health care costs in check.

Think about who you want to have control over your health and property should you lose mental clarity. The individual you assign as your “power of attorney” gains access to pay bills, manage property and make financial decisions when you are unable to do so. There is a separate “health care power of attorney” that can grant your named advocate the ability to make decisions and negotiate on your behalf when medical arrangements need to be made about care.

At the same time you are deciding who to assign power of attorney, create a living will, also known as an advance medical directive. This gives you the power to state what kind of life-saving measures you want should you become terminally ill or unable to communicate. Having a living will can preserve your estate if you don’t want to be resuscitated or have your life prolonged, saving your hard earned retirement dollars instead for the next generation or your charities of choice.

Making smart money decisions as you ease into early retirement can help eliminate worry, stress and save you money to enjoy all that retirement has to offer. Research, talk to professionals and make the best choices for your senior years sooner rather than later.

*Estimate based on quotes from Pivot Health for short term medical and for individual major medical for 60-year old female living in Chicago.
** Social Security calculator:

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