Early retirement – what to do about health care?

In addition to the big piles of money you have to stack up to be able to retire early, hands down the biggest issue is health care. You can’t just not live without healthcare but there are certain issues with keeping your access to health care services.

In many American blogs I see that they have the option to buy health insurance from many different insurance providers even when not working due to the way their health care system works. Estonia, however, like many other European countries has a universal coverage system where the state takes care of you as long as you’re a productive member of society – this is where the problem arises with early retirement – you’re not really technically a productive member of society anymore.

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Conditions to be eligible for health insurance

Essentially in Estonia eligibility for healthcare is linked to whether or not social tax is being paid for you. There are two options for social tax being paid – it can be paid by your employer OR by the state.

The state pays your social tax if you’re unemployed and actively seeking a job (so not an option for early retirement), if you’re a university student (impractical to aim for that) and under a few other conditions that you’re unlikely to hit as a potential early retiree (like raising 7 kids).

Your employer pays your social tax if you’re working for them – not something you’re likely to keep doing as an early retiree. Social is 33% of your gross salary which is being paid by your employer. (13% for healthcare + 20% for retirement). There’s a minimum to be eligible for healthcare, so you can’t just work 1 hour a month and keep your rights to be insured.

How to be insured if you aren’t working?

While it’s possible to keep working part time and most people would (including me) because they want to be useful and they enjoy their work a moment should be taken to consider the option of not working or at least taking a temporary break when you’ve hit your retirement goals.

There are actually two options here. Firstly, you can become your own employer. This means incorporating some of your investments so that you’d have an LLC that you can use to pay your own salary. You could just pay yourself the minimum and take the rest our in dividends. (Depends on how interested you are in Estonian retirement schemes since they depend on your salary). This would likely bring several tax benefits as well because you can discount losses more easily as an LLC as opposed to an individual.

However, if you’re opposed to that idea, I was surprised to find that’s relatively easy to get optional insurance as well. For the year 2014 monthly cost for optional insurance was 123€ (it’s calculated off the average gross salary*0,13). You are eligible for the insurance contract if you’re a permanent resident in Estonia and have been insured by some other party (state or employer) for 12 months in the previous two years. I assume that condition is there to stop people from just migrating into the country to get health insurance.

In the long run the payment will probably go up as the average salary climbs up as well, but that is going to happen with your potential salary as well since that’s going to increase as well. I’d say it’s probably more reasonable to have an LLC and pay yourself a salary to get health insurance since at that point you’re likely to have enough investments that you should start thinking of tax advantages, but it’s good to know that you can get health insurance without much hassle if you decide to take a year off work for example to travel the world!

4 thoughts on “Early retirement – what to do about health care?

    1. From what I know about Estonian unemployment systems, you actually have to have a meeting with an unemployment officer 1x a month or so to give reports about the interviews you’ve been to and what you’ve done in terms of job applications (probably to stop people from doing just that, thinking of fairy tales!). At some point it would probably become suspicious that you’re refusing all job offers from them.

    1. I did not know that private insurers offered it as well! I looked at their page a bit. It seems like their list of partners is a bit limited and I couldn’t find out how much the insurance costs – logically it should be more than the state one because I saw that it covered dental to some extent as well in addition to physiotherapy and some other generally non-covered things.

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