Retiring before age 65 is a goal many Americans share. But one of the biggest challenges early retirees face has nothing to do with savings rates or Social Security timing — it is figuring out health insurance. Medicare eligibility generally begins at 65, which means anyone who retires at 55, 60, or even 62 must find a way to cover potentially years of medical expenses on their own.
This gap is more than an inconvenience. Research from KFF shows that uninsured adults under 65 are twice as likely as insured adults to report worsened health due to skipped or postponed care. Without a plan, some early retirees delay necessary treatment, putting both their health and their finances at risk.
Here is an overview of the coverage options available, how to manage costs, and what to watch out for as you approach Medicare eligibility.
COBRA: Continuing Your Employer Coverage
If you had health insurance through your employer, the Consolidated Omnibus Budget Reconciliation Act (COBRA) allows you to continue that same group plan after you leave your job. For most qualifying events like retirement, COBRA coverage lasts up to 18 months. Dependents may qualify for up to 36 months in certain circumstances, such as divorce or loss of dependent status.
What COBRA costs
Under COBRA, you pay the full premium — both the portion your employer previously covered and your own share — plus a 2% administrative fee. For many people, this means monthly premiums of $600 to $800 or more for individual coverage, and potentially over $1,500 for family coverage. That can be a significant expense on a retirement budget.
When COBRA makes sense
COBRA can be a reasonable short-term bridge if you are close to 65 and only need coverage for a year or less. It may also make sense if you are mid-treatment with a specialist and want to maintain your existing provider network. However, for longer coverage gaps, other options may be more affordable.
Important note
COBRA is designed to be secondary to Medicare. Once you become Medicare-eligible, you are expected to enroll in Medicare, and COBRA coverage may end. Do not rely on COBRA as a reason to delay Medicare enrollment.
ACA Marketplace Plans
The Affordable Care Act (ACA) Health Insurance Marketplace at HealthCare.gov is the most common coverage option for early retirees. Marketplace plans provide comprehensive coverage that meets federal standards, including essential health benefits such as hospitalization, prescription drugs, mental health services, and preventive care.
Premium tax credits
Depending on your household income, you may qualify for premium tax credits (subsidies) that reduce your monthly premium. For 2026, subsidy eligibility is generally based on income between 100% and 400% of the federal poverty level (FPL). For a single individual, 400% of FPL is approximately $62,600. For a married couple, it is approximately $84,600.
The subsidy cliff returns in 2026
This is a critical planning consideration. The enhanced ACA subsidies that had been in place since 2021 under the American Rescue Plan Act have expired. Starting in 2026, the 400% FPL income cap is once again a hard cutoff. If your income exceeds the limit by even a small amount, you lose your subsidy entirely — a situation often called the "subsidy cliff."
The financial impact can be dramatic. For example, a 60-year-old couple earning $84,600 might pay a few hundred dollars per month in premiums with subsidies. At $84,601, unsubsidized premiums could jump to $2,000 or more per month depending on location and plan type.
Managing income to stay under the cliff
Early retirees have some control over their income because much of it may come from retirement account withdrawals. Strategies include:
- Limiting Roth conversions and traditional IRA/401(k) withdrawals in years you need subsidies
- Drawing from Roth accounts or taxable savings, which may not count as income for subsidy purposes
- Making pre-tax contributions to a Health Savings Account (HSA) if eligible, which reduces your modified adjusted gross income
Work with a tax professional to model different withdrawal scenarios before the plan year begins. An unexpected capital gain or required minimum distribution could push you over the cliff.
Enrollment windows
You can enroll in a Marketplace plan during the annual Open Enrollment Period (typically November through mid-January) or during a Special Enrollment Period triggered by a qualifying life event, such as losing employer coverage due to retirement.
Spouse's Employer Plan
If your spouse is still working and has access to employer-sponsored health insurance, joining their plan is often one of the most straightforward and affordable options. Most employer plans allow you to enroll as a dependent, though the additional cost varies by employer.
Losing your own employer coverage due to retirement is typically a qualifying event that triggers a Special Enrollment Period on your spouse's plan, even outside the plan's normal open enrollment window. Contact your spouse's HR department promptly, as enrollment deadlines after a qualifying event are usually 30 to 60 days.
Health Care Sharing Ministries
Health care sharing ministries (HCSMs) are faith-based organizations where members contribute monthly amounts that are used to pay other members' medical bills. Monthly contributions are often lower than traditional health insurance premiums, which makes them appealing at first glance.
Critical limitations
HCSMs are not health insurance and are not regulated by state insurance departments or the Centers for Medicare & Medicaid Services. Key limitations include:
- No guarantee of payment. Unlike insurance, HCSMs are not legally obligated to pay your medical bills.
- Pre-existing condition restrictions. Many ministries impose waiting periods or exclude pre-existing conditions entirely.
- Limited coverage. Mental health services, substance abuse treatment, and prescription drugs are frequently excluded.
- No provider networks. Without negotiated rates, you may pay full price for medical services.
- Religious requirements. Most HCSMs require members to adhere to specific faith-based lifestyle standards.
- Minimal legal recourse. If a claim is denied, you have fewer protections than with a regulated insurance product.
HCSMs may work for some people, but they carry meaningful risk, particularly for anyone with ongoing health needs or who wants comprehensive coverage.
Short-Term Health Insurance
Short-term health insurance plans provide temporary coverage, typically lasting anywhere from 30 days to 364 days depending on the state and insurer. They can fill a brief gap — for example, the months between retiring and the start of a Marketplace plan.
Significant drawbacks
Short-term plans are not required to comply with ACA standards, which means:
- Pre-existing conditions are typically excluded. Insurers can deny coverage for any condition diagnosed or treated in the past two to five years.
- Essential benefits may not be covered. Maternity care, mental health services, preventive care, and prescription drugs are commonly excluded.
- Post-claims underwriting. The insurer may review your medical history after you file a claim and deny it based on previously undisclosed conditions — or rescind the policy altogether.
- Annual and lifetime dollar limits may apply, leaving you exposed to catastrophic costs.
Short-term plans can serve as a temporary stopgap, but they should not be treated as a substitute for comprehensive health coverage during a multi-year gap before Medicare.
HSA Strategies Before Medicare
If you are enrolled in a high-deductible health plan (HDHP) — whether through COBRA, the Marketplace, or a spouse's employer — you may be eligible to contribute to a Health Savings Account (HSA). HSAs offer a triple tax advantage: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free.
2026 contribution limits
- Individual coverage: $4,400 per year
- Family coverage: $8,750 per year
- Catch-up contribution (age 55+): an additional $1,000 per person
If both you and your spouse are 55 or older and eligible, you can each contribute the $1,000 catch-up amount, but it must go into separate HSA accounts.
The Medicare transition
Once you enroll in any part of Medicare — including Part A — you are no longer eligible to contribute to an HSA. This is a firm rule. Contributions made after your Medicare coverage begins are treated as excess contributions and subject to a 6% excise tax.
An important detail: if you enroll in Medicare Part A after age 65, Part A coverage can be applied retroactively up to six months. This means HSA contributions made during that retroactive period could also be considered excess contributions. Plan your enrollment timing carefully to avoid this penalty.
Even though you cannot contribute to an HSA after enrolling in Medicare, you can continue to use existing HSA funds tax-free for qualified medical expenses, including Medicare premiums (except Medigap premiums), copays, deductibles, and dental or vision care.
Planning the Transition to Medicare at 65
As you approach 65, understanding the Medicare enrollment timeline is essential.
Initial Enrollment Period
Your Initial Enrollment Period (IEP) is a seven-month window that begins three months before the month you turn 65, includes your birthday month, and extends three months after. During this period, you can enroll in Medicare Part A and Part B.
If you have been on a Marketplace plan, you will want to coordinate the transition so there is no gap or overlap in coverage. Once your Medicare coverage begins, you should cancel your Marketplace plan to avoid paying two premiums.
Special Enrollment Period for those with employer coverage
If you or your spouse are still working and covered by an employer group health plan at 65, you generally do not need to enroll in Part B right away. You qualify for a Special Enrollment Period (SEP) that gives you eight months after the employment or group coverage ends to sign up without penalty.
However, COBRA coverage and Marketplace plans do not qualify for this SEP. Only active employer group health plans based on current employment count.
Contact Medicare directly
For personalized guidance on your enrollment timeline and coverage options, visit Medicare.gov or call 1-800-MEDICARE (1-800-633-4227), available 24 hours a day, 7 days a week.
What Not to Do
Navigating the pre-Medicare years can be confusing, but some mistakes are particularly costly.
Do not go uninsured
Going without health coverage — even for a few months — exposes you to potentially devastating financial risk. A single hospital stay can cost tens of thousands of dollars. KFF research shows that roughly three in four uninsured adults forgo needed care due to cost, and nearly one in five adults report that their health worsened because they skipped or delayed treatment.
Do not miss your Part B enrollment window
If you are not covered by an active employer group health plan and you fail to sign up for Part B during your Initial Enrollment Period, you will face a late enrollment penalty. The penalty is 10% of the standard premium for each full 12-month period you could have been enrolled but were not. With the 2026 standard Part B premium at $203.90 per month, a two-year delay would add roughly $40.78 per month to your premium — and this penalty applies for as long as you have Part B.
You would also have to wait for the General Enrollment Period (January 1 through March 31 each year), with coverage not starting until July 1. That means a potential gap of several months without Part B coverage.
Do not assume COBRA or a Marketplace plan protects you from the penalty
A common and costly misunderstanding: having COBRA coverage or a Marketplace plan does not count as qualifying coverage that lets you delay Medicare Part B enrollment without penalty. Only group health plan coverage based on current active employment (yours or your spouse's) provides that protection.
Do not ignore your income in subsidy calculations
If you are on a Marketplace plan with premium tax credits, an unexpected income spike — from a Roth conversion, pension lump-sum distribution, or investment gains — can push you past the subsidy threshold. You may be required to repay some or all of your premium tax credits when you file your tax return. Monitor your income throughout the year.
Building Your Bridge
The years between early retirement and Medicare eligibility require careful planning, but the coverage gap is manageable with the right approach. Start by assessing your options well before your last day of work. Compare the costs of COBRA, Marketplace plans, and any available spouse coverage. Model your expected income to understand your subsidy eligibility. If you are eligible, maximize HSA contributions while you can.
Most importantly, mark your Medicare enrollment dates on the calendar and do not miss them. The decisions you make in your late 50s and early 60s will shape your healthcare costs for decades to come.
For more information on Medicare enrollment and coverage options, visit Medicare.gov or call 1-800-MEDICARE (1-800-633-4227).