I have 9 months worth of an emergency fund based on my current spending. What I realized, however, is that I would need to pay for COBRA insurance if I am to lose my job.
My current plan according to W2 is $23000 for the year which is $1900 a month, much more than the $300 a month I’m paying from my paystub now. It seems pretty common for COBRA to be much more expensive.
Based on this, I need an extra $15k in my emergency fund to actually support 9 months of expenses. Anything I’m missing?
How do you plan for (COBRA) health insurance for your emergency fund in the case of unemployment?
byu/Meeesh- inpersonalfinance
Posted by Meeesh-
9 Comments
COBRA is absolutely brutal, you’re right to factor that in. One thing though – check if you’d qualify for ACA marketplace subsidies based on unemployment income, might be way cheaper than COBRA depending on your state. Also some people just go bare for a few months and pray but that’s obviously risky as hell
Your 9-month emergency fund should cover 9 months worth of expenses. If COBRA will be an expense, then it should be included in the emergency fund.
Of course, you only pay COBRA if you choose to do so. You could find a plan on the market instead. It might be cheaper.
(IMHO, in today’s job market, I recommend 12 months of expenses in your emergency fund)
Be married to a spouse w health insurance. Seriously though, I’ve thought about this and how it sucks for single ppl.
Are you HSA eligible at your current job?
HSA’s are just great anyway, since they are triple tax advantaged, and you can use them for COBRA premiums. So having a nice HSA is also a good emergency fund for anything health related.
You presumably already did the math, but price out ACA plans before deciding on COBRA. I quit my job and COBRA was going to be $1100, while an ACA plan is $200. But my income is low in retirement.
Depending on how much money you make, how far into the year you lose employer insurance, and how far your are into the existing deductible, it can favor one or the other.
If you don’t have chronic health stuff, you can choose to defer starting cobra until you need it. It has an extended enrollment period.
Note that you will have to back pay it as well. So if this is your strategy then only use it in an emergency.
You could fill up your HSA. It might be cheaper to go to the market place in some situations.
Cobra is not mandatory, in almost all circumstances ACA plan with or without subsidies will likely be cheaper
I budgeted including COBRA but was lucky to get on my partner’s insurance so my EF stretched further
COBRA has a 2% premium over the amount that the company pays for insurance.
Look into the details, there may be a window where you can buy COBRA after the medical expense is incurred.