Retiring Before 65? Your Health Insurance Options Until Medicare

Medicare doesn't start until 65. If you retire earlier, or your spouse is younger than you, you'll need health insurance to bridge the gap. Here are the main options and what to watch for with each.

COBRA

COBRA lets you keep your employer's plan after you leave, usually for up to 18 months. Your doctors and coverage stay the same, which is the big advantage.

The catch is the price. You pay the full premium your employer used to help cover, plus up to a 2% fee. For many people that's a shock, especially for family coverage. And 18 months may not get you all the way to 65.

Marketplace plans

Leaving your job counts as a qualifying life event, so you can usually enroll in a Marketplace plan within 60 days, even outside open enrollment.

Marketplace tax credits are based on your income, not your savings. Early retirees living off savings may have a lower taxable income than when they were working, which can mean a bigger tax credit. Under current law, though, credits generally stop at 400% of the federal poverty level, about $86,560 for a household of two for 2027 coverage. Withdrawals from pre-tax retirement accounts usually count as income, so plan your withdrawals with your tax professional.

Private health plans

Private plans are priced on age, location, and health instead of income. For healthy early retirees whose income is over the tax credit line, they're often worth comparing. Many can start on the first of any month, so there's no need to wait for open enrollment.

Private plans may use medical underwriting, so health history can affect whether you qualify and what's covered.

A spouse's plan

If your spouse is still working, joining their employer plan may be the simplest option. Losing your own coverage usually lets you join their plan mid-year. Compare the cost of adding you to their plan against buying your own.

Don't miss the Medicare deadline

Your initial window to sign up for Medicare starts three months before the month you turn 65. Signing up late can mean penalties that last for life, so mark the date well ahead of time.

Plan before your last day

The best time to sort this out is a month or two before you retire, so there's no gap. Send me your situation and I'll lay out COBRA, Marketplace, and private options side by side so you can see what makes sense until 65.