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What Are My Options for Health Insurance During Retirement?

Published November 11, 2025 Raman Singh, CFP®
Insurance Planning
What Are My Options for Health Insurance During Retirement?

So I was recently asked this question again for the hundredth time, “Raman, what do people do for health insurance before Medicare?”

It’s one of the most common and most stressful questions I get from clients who are preparing to retire in their late 50s or early 60s. After decades of hard work and disciplined saving, they’re finally ready to step away from their careers, only to realize they’re about to lose the one major benefit they have always relied on…their employer-sponsored health insurance.

The Reality of Health Insurance Costs Before Medicare

Someone recently shared a quote they received for a $2,300 per month bronze policy through the Affordable Care Act (ACA) marketplace. That’s nearly $28,000 a year for two healthy 60-year-olds without subsidies or discounts, before even considering deductibles or co-pays.

When I share those numbers with people still working, they’re often in disbelief. But this is the reality for early retirees who don’t qualify for ACA subsidies. Those five gap years before Medicare can be among the most expensive years in retirement if not properly planned. This phase is called the “gap years”, the time between employer health coverage and Medicare eligibility. You see, during your working years, your employer pays a significant portion of your health insurance premium, but once you retire, that contribution disappears, and now you pay the full price tag of coverage. Unfortunately, It’s a wake-up call for a lot of people, and it underscores the importance of having a plan before you leave the workforce.

So what are my options then, Raman? 

Option 1: COBRA Coverage

Start by checking with your employer. Many companies offer COBRA continuation coverage, which allows you to stay on your current health plan for up to 18 months after leaving your job. And some can even extend this period under special circumstances. However, COBRA isn’t cheap because you pay both your share and your employer’s share, but it provides consistency and helps bridge coverage until the next open enrollment period.

Option 2: The ACA Marketplace

Once COBRA expires, most retirees turn to the ACA Marketplace. Premium costs vary significantly based on your income. For example, if your Modified Adjusted Gross Income (MAGI) is low enough, you may qualify for subsidies under the Affordable Care Act. And here’s the thing, with careful income management, I’ve seen clients pay as little as $300–$400 per month for comprehensive coverage. BUT, if your income is too high, those subsidies WILL disappear and you’ll end up paying full price. That’s why retirement income planning and tax strategy are directly linked to health insurance affordability. 

So if you start pulling large amounts from your IRAs, start realizing capital gains, or start doing Roth conversions, it can unintentionally raise your MAGI and push you above subsidy thresholds. And unfortunately, even a few thousand dollars can make a big difference. This is why coordinating with your financial planner or CPA before making withdrawals is essential.

Option 3: Health Care Sharing Plans

Some retirees can also consider looking into health care sharing ministries or medical cost-sharing programs. These can be far cheaper, but they are not regulated insurance. They will exclude pre-existing conditions, impose restrictions based on religious affiliation, and sometimes they don’t guarantee reimbursements which can turn into a financial disaster. However, they can be useful for limited periods, but note that they carry significant risk and uncertainty.

Option 4: Part-Time Work with Benefits

A lot of retirees choose part-time employment for this exact reason because that plan includes health insurance benefits. Companies like Costco, Home Depot, and universities often provide group health coverage for part-time staff which can be an effective way to maintain coverage while easing into retirement.

Option 5: Spousal Coverage or Retiree Health Plans

And luckily, if your spouse is still employed, you can join their employer’s plan which is often the simplest and most cost-effective solution. Some retirees, particularly those from government or large corporations, also have access to retiree health benefits until Medicare eligibility. And remember, it’s worth verifying whether your previous employer provides benefits after you retire. 

So What Should I Do Next, Raman? 

One of the smartest things you can do in your late 50s is to build a five-year health insurance strategy before you retire.

  1. Review COBRA details with HR before leaving your job.
  2. Get actual marketplace quotes for your location and age.
  3. Coordinate with your financial planner to manage MAGI for subsidy eligibility.
  4. Evaluate the impact of Roth conversions, RMDs, and capital gains on ACA credits.

Because planning ahead can significantly reduce your total premiums and minimize surprises.

Here’s An Example 

Let’s suppose, a couple in their early 50s planning to retire at 60 in Phoenix, AZ found out that their ACA Silver plan would cost $1,600/month. However, if they can  manage their income, let’s say under $80,000, they can qualify for a subsidy that can lower their premium by 60% which comes out to over $12,000 in annual savings, or $60,000+ over five years.

The Changing Policy Landscape

Also to keep in mind are the policy changes because they can rapidly reshape healthcare affordability. For instance:

  • The Kaiser Family Foundation (2025) reported that if enhanced ACA tax credits expire in 2025, marketplace premiums could more than double in 2026.
  • Health System Tracker (Peterson-KFF, 2025) projected a median 18% national increase in ACA premiums due to subsidy expirations and rising healthcare costs.
  • Fidelity Investments (2025) estimates that a 65-year-old retiring this year will spend about $172,500 on health care throughout retirement, excluding long-term care.
  • A Johns Hopkins Bloomberg School of Public Health (2025) report highlighted that medical inflation and administrative expenses remain key drivers of rising costs.

What we need to understand is that these figures underscore how unpredictable healthcare costs can be and why building flexibility into your retirement plan is crucial. Your strategy should evolve with changing laws and health needs. Congress regularly revisits ACA subsidy rules and premium calculations. Assume that costs will rise, subsidies may shift, and your income could fluctuate. The goal isn’t perfect prediction; it’s optionality. The biggest risk isn’t just a $2,300 monthly premium; it’s being stuck with no alternatives. 

Health insurance before Medicare remains the single largest wild card in early retirement planning. It’s expensive, unpredictable, and complex, but it’s manageable with proper planning. However, before retiring, consider speaking with your HR department, gather marketplace quotes, and review income projections with your planner. Because with proper planning and preparation, you can bridge those gap years confidently until Medicare begins at age 65.

There’s no one perfect answer, but there’s always a smarter one.

At Singh PWM, I help pre-retirees and retirees navigate the financial and tax implications of early retirement, including health insurance planning before Medicare by designing customized income strategies to help you stay eligible for ACA subsidies, minimize taxes on withdrawals, and manage healthcare costs without derailing your retirement goals.

Because, if you’re thinking about retiring soon and want clarity on how to afford health insurance during those gap years, let’s talk. Schedule your complimentary strategy session today to get personalized guidance from a flat-fee fiduciary advisor.

Raman Singh, CFP®

Your Personalized CFO

References and Further Reading

Important Disclosures

The information provided herein was obtained from sources believed to be reliable and is believed to be accurate as of the time presented, but it is provided “as is” without any express or implied warranties of any kind.

This material is intended for informational and educational purposes only and should not be construed as individualized investment, tax, or legal advice. You should consult with your own qualified investment, tax, or legal advisor before making any decisions based on this material.

Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results. Withdrawal strategies and tax outcomes will vary depending on individual circumstances, account types, tax brackets, and market conditions. No strategy can guarantee success or prevent losses.

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