What is COBRA?

When you do retire, you will probably have the option of continuing on your employer's health plan for at least 18 months, thanks to a federal law called the Consolidated Omnibus Budget Reconciliation Act (COBRA). It says that when you leave your job, your employer must let you keep your coverage for up to 18 months. Generally, this law applies to firms with at least 20 employees.

However, if you do continue the company plan under COBRA, you are on the hook for the entire premium (including what your employer paid when you were working). Moreover, the insurance company can tack on an extra 2% to cover administrative fees. That can add up to hundreds of dollars a month. Still, it will almost certainly be cheaper than buying coverage on your own.

To find out what your monthly COBRA premium would be if you retired today, ask your benefits department.

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