Health insurance before Medicare: options for early retirees

The gap you need to cover

Medicare starts at 65. If you leave work at 58, 60 or 62, you need coverage for every month in between.

Premiums also rise with age. On the exchange, a 64-year-old pays about three times what a 21-year-old does before subsidies.

COBRA: familiar, but pricey

COBRA keeps your employer plan for up to 18 months. You pay the full premium plus a 2% fee.

• Good if you're mid-treatment or have met your deductible
• Same doctors and network as before
• Often the most expensive option month to month

The exchange: income is everything

In retirement, you can often control your income. That makes ACA subsidies a planning tool.

Stay under 400% of the poverty level and you may get a subsidy. Go over, even by a little, and it's gone for 2027.

• Roth conversions and large IRA withdrawals count as income.
• Withdrawals from cash savings and Roth contributions don't.
• Capital gains count, so time big sales carefully.

Private PPO plans

Healthy early retirees with higher income often look at private underwritten PPOs. Many use national networks — handy if you travel or split time between states.

Coverage can start any month, so you can line it up with your last day of work.

Retiree coverage and a spouse's plan

Some employers offer retiree health benefits. Check before you give notice.

If your spouse still works, joining their plan is often the simplest bridge.

Build your timeline

• 6 months before retiring: estimate retirement income and run the calculator.
• 3 months before: compare COBRA, exchange and private quotes.
• 1 month before: apply so coverage starts the day after work coverage ends.
• 3 months before 65: start your Medicare enrollment.

Questions to ask before you choose

Early retirement can last years before Medicare, so the bridge plan matters. Ask the same questions of every option you consider.

A plan that's cheap at 60 may rise sharply by 63. Ask how renewals are priced, not just what the first year costs.

• Will my doctors and nearest hospital be in network?
• How are rates set at renewal as I get older?
• What happens if I move or spend winters in another state?
• How are my prescriptions covered?
• Can my spouse stay on the plan after I turn 65?

Couples retiring at different times

Many couples don't retire in the same year. One spouse may still have work coverage, or one may reach 65 first.

Plan each person's coverage separately. The cheapest answer is often a mix, such as Medicare for one spouse and a private or exchange plan for the other.

• Check whether the working spouse's plan covers you, and at what cost
• Plan for the younger spouse's coverage after the older one starts Medicare
• Remember that household income still sets exchange subsidies

Private plans and travel

Many early retirees spend part of the year in another state or travel often. Local exchange networks can make that hard.

Private PPOs with national networks let you see in-network doctors in more places. Ask how the plan handles care in other states before you apply, and check whether you'd need to change plans if you move permanently.