Plan for health insurance before you retire

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According to Hewitt Associates, 88% of large employers subsidized health care coverage for early retirees in 1991. Only 45% did so in 2007.

That means most workers who retire before 65, when they become eligible for Medicare, must find another source of health insurance.

Individual insurance policies are often surprisingly costly -- if you can get one at all.

Between 20% and 40% of early retirees who apply for an individual insurance policy are either denied coverage or charged a higher premium than other policyholders because they're considered high-risk, Rick McGill, head of retiree medical consulting for Hewitt Associates, recently told USA Today.

If you've been covered through your employer's health care plan, you may be shocked at how much an individual policy costs. Premiums typically run more than $1,000 a month for a healthy couple in their late 50s or early 60s.

That's an expense you can't afford to ignore, especially with the increased financial risk of retiring when the stock market is down.

A study by T. Rowe Price says low returns or big losses during the first five years of retirement greatly increase the likelihood that you'll outlive your savings.

For example: A retiree with a $500,000 portfolio -- invested 55% in stocks and 45% in bonds -- who withdraws 4% in the first year and increases that amount by 3% annually to adjust for inflation has an 89% chance of having enough money to last for 30 years, according to T. Rowe Price.

But if the portfolio returns less than 5% a year during the first five years of retirement, the chance a retiree will run out of money sharply increases.

With annual returns of 4%, the chance the fund will last 30 years falls to 74%. With returns of 2% to 3% a year, it drops to 64%.

If you're not sure how much you'll need for a secure future, our retirement calculator can help you figure that out.

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