Medicare starts at 65. If you plan to stop working earlier, health insurance is often the biggest unknown in your retirement budget. The good news: with a little planning, you can bridge the gap — and sometimes pay far less than you’d expect.
Key takeaways
- Main options: retiree coverage, a spouse’s plan, COBRA, or a Marketplace plan.
- Marketplace subsidies are based on income, not savings — so how you draw retirement money matters.
- Since the enhanced subsidies ended after 2025, income above 400% of the poverty level usually means no premium tax credit.
- ACA plans can charge older adults up to 3 times what they charge younger adults, so budget accordingly.
Option 1: Retiree health coverage
Some employers — more often government, union and large companies — offer health coverage to early retirees. Ask HR what’s available, how much you’d pay, and whether it can change. It’s often the simplest bridge if you have it.
Option 2: A working spouse’s plan
If your spouse is still working, joining their employer plan is usually affordable. Your retirement counts as a loss of coverage, so you can usually join mid-year within 30 days.
Option 3: COBRA
COBRA lets you keep your employer plan for generally up to 18 months, at up to 102% of the full premium. It’s useful as a short bridge — for example, if you retire at 63½ — or if you’re mid-treatment. It’s rarely the cheapest long-term option. See COBRA vs. Marketplace.
Option 4: A Marketplace plan
For many early retirees, a Marketplace plan is the main bridge to Medicare. Plans can’t turn you down for pre-existing conditions, and premium tax credits can lower the cost dramatically if your income qualifies.
Why your retirement income strategy matters
Premium tax credits are based on your modified adjusted gross income (MAGI), not your net worth. That creates a planning opportunity:
- Money that usually counts as income: traditional IRA and 401(k) withdrawals, Roth conversions, pension payments, taxable interest and dividends, capital gains, and Social Security benefits (including the non-taxable portion).
- Money that usually doesn’t: withdrawals of your own contributions from a Roth IRA, cash savings you already paid tax on, and the cost basis portion of investments you sell.
By choosing which accounts you draw from each year, some retirees keep MAGI below 400% of the poverty level and qualify for substantial help. Because crossing that line can mean losing the entire credit, a large Roth conversion or capital gain in the wrong year can be expensive. Work with a tax or financial professional to plan your withdrawals.
Reconcile carefully: if your actual income ends up higher than your estimate, you may have to repay excess premium tax credits when you file taxes. Update your Marketplace application whenever your income changes.
Option 5: Part-time work with benefits
Some employers offer health benefits to part-time workers. A “bridge job” a few years before 65 can cover your health insurance and keep you active.
Use an HSA while you can
If you have an HSA-eligible plan, you can contribute up to $4,500 (self-only) or $9,000 (family) in 2027, plus a $1,000 catch-up at 55+. HSA money can later pay Medicare premiums and other medical costs tax-free. Just remember: you must stop contributing once you enroll in Medicare. Read HSAs explained.
As 65 approaches
Your Medicare Initial Enrollment Period starts three months before the month you turn 65. Plan to switch from your Marketplace plan to Medicare without a gap — and without missing deadlines that trigger lifetime penalties. Our Medicare at 65 checklist walks you through it.
Sources: HealthCare.gov; KFF; IRS Revenue Procedure 2026-24; Medicare.gov. For education only — not financial, tax or insurance advice. Last reviewed October 2026.