If you were a participant in your former employer’s health insurance plan, a federal law (known as COBRA) requires that you be allowed to extend your group health coverage after leaving the company, generally for up to 18 months. However, you have to pay the entire premium in addition to any administrative costs, and premiums can be as steep as $300 per month for a single person and $500 per month for a family. After that, you will have to transition into Blue Cross/Blue Shield coverage or join an HMO. Remember, it can take months to find the best plan, so don’t wait until the last minute.
FILLING THE HOURS
Of course, every early retiree will not be able to build up a sufficient fund. Therefore, Fulbright advises you to consider semiretirement or retiring in stages. “It’s not just the money,” she says. “You need to ask yourself ‘What will I do?’ for all those years. You can’t play golf all the time.”
Okay, some will try. However, those who are incapable of being links addicts or who don’t want to watch every sunset, every night may want to consider working part-time. For example, find a job in which you can work from nine to two, or three days per week. If the tight labor market holds, there will be a demand for workers with a wide range of skills and experiences. And the fact that an employer will not have to kick in full benefits if he hires you may make you an appealing prospect.
Fulbright says she knows of early retirees who voluntarily work as travel agents or corporate board members. In fact, one client, she says, “sold his tailor shop and went back to work for the new owner part-time. He really loved the work, and was happy not to have the responsibilities of running a business.”
ONE WOMAN’S PLAN FOR EARLY RETIREMENT
Debra Taiwo is in the next stage of her 16-year plan to retire by age 50. Her strategy may offer you some clues to how you can pursue your own retirement.
Taiwo, who has been guided by a financial advisor, estimates that she invests as much as 25% of her total income. This sum includes her annual bonuses, which she uses to buy equities. “That [percentage] includes monthly contributions to a college fund for our children that I keep separate [from my retirement fund],” she says. “If you have to tap your retirement plan to pay for your children’s education, your own plan will suffer, and you’ll have to keep working longer to rebuild your own fund.”
She makes the maximum contribution to her company’s 401(k) plan, which allows her to invest pretax dollars. “My company matches my contributions, putting in 50 cents for every dollar that I contribute, up to 6% of my salary,” says Taiwo. “If you don’t get the full company match, you’re passing up free money.”
She is concerned, however, that her future is tied up in the stock of her employer. “That’s where I’m putting my