Retirement health insurance before Medicare
A simple guide for health insurance coverage prior to Medicare eligibility
Let’s talk about something that doesn’t get nearly enough attention in retirement planning conversations:
Health insurance
Specifically, what to do about health insurance if you’re thinking about retiring before you turn 65 — the age when you’ll likely qualify for Medicare.
Most women are in their late 50s or early 60s when we begin working together.
They’re smart, financially comfortable, and ready to leave work behind and enjoy the freedom they’ve earned.
But as we begin discussing their retirement planning, they inevitably ask:
“Wait… what do I do about health insurance between now and Medicare?”
An important question.
And the truth is, it depends — on your health, your income, your preferences, and what other options you may have.
Let’s walk through it together.
Option 1: The Marketplace (a.k.a. Obamacare)
You can shop for a health plan through the federal or your state’s insurance exchange.
These plans can be very affordable — especially if you’re retiring early and living off savings or taxable investments (meaning your taxable income is lower).
Marketplace plans:
Cover pre-existing conditions
Include free preventive care
Often include mental health coverage
Offer income-based subsidies (the lower your income, the lower your premiums)
This can be a great option for people who want good coverage and don’t mind switching doctors or providers, if needed.
If we plan your income strategically in the early retirement years, we may be able to qualify you for significant savings here.
The cost of Marketplace health insurance is based on your income — not your assets.
That means once you stop working and your taxable income drops, you might qualify for big savings on your monthly premiums through something called the premium tax credit.
I’ve seen clients in their early 60s cut their monthly health insurance bill by more than half just by planning their income wisely.
For example, let’s say you’re living off savings and only showing $40,000 of income on your tax return.
That could qualify you for thousands of dollars in premium subsidies, even if you’ve got a healthy seven-figure portfolio.
In one case, a couple retiring at 62 went from paying $1,500/month for COBRA to just under $300/month for a Marketplace plan — same level of coverage, completely legal, just smarter tax planning.
The key?
Keeping your MAGI (Modified Adjusted Gross Income) in check during those early retirement years.
This is why I believe retirement planning is tax planning.
In addition to poentially reducing your income taxes, it might also lower your health insurance costs.
It’s a powerful way to stretch your dollars — and make early retirement more affordable than you might think.
Option 2: COBRA
If you’ve been getting health insurance through your job, you might be able to keep the same plan for up to 18 months through COBRA.
COBRA stands for Consolidated Omnibus Budget Reconciliation Act.
This is often the easiest short-term option, especially if:
You’ve already met your deductible this year
You want to keep your same doctors and providers
You’re retiring within 18 months of turning 65
The downside?
It’s often expensive.
You’ll be paying the full premium yourself (plus a small admin fee), without any help from your employer.
Note: After a divorce, you can stay on your ex-spouse’s health insurance plan via COBRA for up to 36 months.
Option 3: Your Spouse’s Plan
If you’re married and your spouse is still working and has access to employer health insurance, you may be able to join (or remain on) their plan.
Sometimes this is the best deal available — but not always.
A few things to watch out for:
Some employers don’t offer spousal coverage
Others charge high premiums for adding a spouse
The provider network might be limited
Still, it’s worth exploring.
I often help couples compare this option to COBRA or Marketplace coverage to see what makes the most sense.
Option 4: Short-Term Plans (a last resort)
Short-term health insurance plans do exist, but they come with big trade-offs.
They don’t have to cover things like prescriptions or pre-existing conditions.
They can also deny you based on your health history.
And you can only get coverage through one of these plans for up to 4 months within a 12-month period.
These can work for healthy people with a very short coverage gap, but they’re not a long-term solution.
Option 5: Health Sharing Ministries
These are not traditional insurance.
They’re faith-based groups where members chip in to cover each other’s medical bills.
Some people like them for the community aspect and lower monthly cost.
But you should know:
They don’t guarantee payment
They’re not required to follow insurance laws
They may not cover certain types of care
I generally think of these as a niche solution — not a first-line choice.
Option 6: Retiree Health Benefits from Your Employer
Some large employers (especially public sector jobs or big corporations) offer retiree health plans for people who leave before 65.
It’s worth asking about — but be aware:
These plans often have different coverage or costs than when you were working
Spouse/dependent coverage may be limited
Many companies have scaled these back in recent years
You may need to contact a third-party benefits administrator to get the info privately if you're not ready to announce your retirement yet.
So, what should you do?
If you’re thinking about retiring before 65, don’t wait to figure this out.
Health insurance is often the single biggest source of stress and uncertainty for early retirees — but it doesn’t have to be.
You’ve got options. And with the right planning, you can retire on your terms, with peace of mind and a solid plan in place.
Need help thinking through it?
Let me know.
I have experts that work as an extension of my team that specialize in nothing but health insurance.
In fact, here’s their 2-page PDF where they cover a similar topic.
I’ve written about and often discuss with clients the impact of the money lessons we learn - often in childhood - and carry with us throughout our lives.
I encourage you to read this article from a colleague, Mary Beth Storjohann, where she tackles this important topic:
Thanks for reading.
Until next Wednesday,
Russ