Health Insurance for Early Retirees: What to Do Before Medicare Kicks In
👉 Want to learn how to retire without the worry of running out of money in retirement? Click here to watch this video
What You’ll Learn: If you're thinking about retiring before age 65, one of the biggest, most overlooked retirement planning puzzles is this: What do I do about health insurance until Medicare starts? In this article, you'll learn how to evaluate your options, avoid common pitfalls, and design a health insurance plan that supports — not sabotages — your early retirement goals.
Why Listen to Me? Over the past decade, I’ve worked alongside hundreds of families and individuals transitioning into early retirement. My experience isn’t theoretical — it’s built from sitting across the table from real people with real concerns. Investors appreciate that I don’t just throw information at them — I help them build an actual strategy, one that protects both their health and their wealth. If you’re thinking about retiring before age 65, what you do next could make or break your retirement dreams.
Key Point / Summary
Here are your major health insurance options if you’re retiring before 65:
ACA-Compliant Marketplace Plans (with tax credits)
Faith-Based Sharing Ministries
Short-Term Health Insurance
COBRA Continuation Coverage
Professional Guidance from Teams Like Move Health
Each has pros, cons, and ideal use cases. Your best choice depends on your income, health, values, and retirement timeline.
How Can I Get Health Insurance If I Retire Before 65?
When you’re no longer covered by an employer and not yet eligible for Medicare, you’ve got to bridge the gap. That bridge has a few different lanes — and not all of them lead to safety. Let’s break them down.
1. ACA Marketplace Plans: The Best All-Around Option (For Most)
If you’re in decent health and planning ahead, ACA plans are often the most comprehensive and financially advantageous choice. These are full-featured health insurance plans available on healthcare.gov or your state’s exchange.
Why I like them:
In my experience, investors who proactively plan income levels in retirement can strategically qualify for substantial premium tax credits — even six-figure retirees. You read that right.
For 2025, ACA plans offer:
Guaranteed coverage (no pre-existing condition exclusions)
Essential health benefits (hospitalization, prescriptions, preventive care)
Income-based subsidies (Premium Tax Credits for those earning up to ~400%+ of the Federal Poverty Level — about $62,400 for individuals, $133,000 for families of four)
Pros:
Comprehensive coverage
Can be affordable with tax credits
Widely accepted by providers
Cons:
Premiums can be high without subsidies
Deductibles may be higher than employer plans
👉 Pro Tip: Use Roth conversions strategically to lower your taxable income while managing ACA thresholds.
2. Faith-Based Health Sharing Ministries: Lower Cost, But Know the Risks
These aren’t insurance — they’re membership-based programs where members share one another’s medical bills. Popular examples include Medi-Share, Christian Healthcare Ministries, and Samaritan Ministries.
Investors I’ve worked with sometimes explore these when they're healthy, values-aligned with the organization, and trying to minimize monthly costs. But buyer beware — these programs have very different rules.
Pros:
Lower monthly contributions
Often aligned with religious values
Simpler enrollment process
Cons:
Not legally obligated to pay claims
Limited or no coverage for pre-existing conditions
Often exclude maternity, mental health, or preventative care
Call to Action: If you're leaning toward one of these, speak with a healthcare advisor like those at Move Health to fully understand the exclusions.
3. Short-Term Health Insurance: For Stop-Gaps, Not Long-Term Strategy
Short-term plans are often marketed as “budget” solutions, but they’re more like duct tape than an actual bridge. These are ideal only for temporary transitions — such as the months between retirement and ACA open enrollment.
In my experience, these can be useful for a retiree who’s relocating, waiting on COBRA to kick in, or has a short timeline before another form of coverage begins.
Pros:
Fast enrollment
Lower premiums
Flexible durations
Cons:
No coverage for pre-existing conditions
Limited benefits (often no prescription, maternity, or mental health)
May not meet minimum coverage standards
👉 Use cautiously — and never assume “cheap” equals “safe.”
4. COBRA Coverage: Familiar, but Expensive
COBRA lets you stay on your former employer’s group health plan for up to 18 months after leaving your job. The catch? You pay the entire premium — usually plus a 2% admin fee.
I've found COBRA to be a double-edged sword. It’s ideal if you’re in the middle of a treatment plan, or if your former employer’s insurance is excellent. But the cost can be a deal-breaker.
Pros:
Same coverage as you had while working
Great for those with ongoing treatment needs
No new deductibles or provider changes
Cons:
Can cost $700–$2,000/month per person
No tax credits or subsidies
Time-limited (18 months for most retirees)
Alternative Tip: Combine COBRA for 6 months with ACA enrollment at the end of the year to balance continuity and cost.
5. Partnering with Professionals Like Move Health: Custom-Tailored Advice That Saves Time and Money
Sometimes the smartest investment is in expertise. Companies like Move Health specialize in navigating this exact scenario: health insurance planning for early retirees. They work alongside financial advisors (like us) to ensure health decisions don’t wreck your retirement cash flow.
Why I recommend them: They’re not trying to sell you a product — they’re guiding you to a strategy. And that matters when the stakes are your health and your financial future.
Pros:
Expert advice from licensed professionals
Coordination with your retirement income plan
Saves you hours of research
Cons:
No much really!
💡 Example in Action: Meet Carol – Retiring at 62 Without Losing Her Shirt on Health Insurance
Carol was a 62-year-old marketing executive from Colorado, eager to retire early and spend more time hiking, volunteering, and traveling with her grandkids. She had $1.2M saved between her 401(k), Roth IRA, and brokerage accounts. No debt. And she was ready — financially and emotionally — to clock out for good.
But then came the question:
“What am I going to do for health insurance for the next three years before Medicare?”
She looked at COBRA first. Her HR department told her she could keep her existing coverage — but the premiums? A shocking $1,650/month just for her. Over $59,000 if she kept it for three years. And remember: no tax credit, no subsidies.
Next, Carol checked Healthcare.gov. A silver-level ACA plan in her area was listed at $925/month before subsidies.
But here’s where smart planning made all the difference:
đź“Š The Strategy We Used
Carol’s taxable income from dividends and interest was projected at $68,000/year — which disqualified her from any ACA subsidies.
So together, we restructured her withdrawal strategy:
We reduced taxable withdrawals from her IRA.
We increased Roth withdrawals (which don’t count toward ACA income).
We used her brokerage account’s cost basis to generate income with minimal tax exposure.
Her new projected MAGI? $36,000/year.
🎯 The Result
By lowering her income strategically (not drastically), Carol now qualified for over $7,500/year in ACA premium tax credits.
Her final monthly premium for a comprehensive ACA plan? $215/month. That’s a savings of $51,000 over 3 years compared to COBRA — for nearly identical coverage.
🚨 What Would Have Happened Without Planning?
Carol might’ve:
Paid COBRA blindly and drained $59,000 from her retirement savings
Taken large IRA withdrawals (triggering higher taxes and losing subsidies)
Missed out on premium tax credits due to not understanding MAGI limits
Why Investors Love This Strategy
In my experience, stories like Carol’s are why people hire advisors — not just for returns, but for optimization. It’s not about just picking a health plan. It’s about integrating that choice with:
Income tax planning
Withdrawal sequencing
Cash flow management
Risk management
This is where professional guidance shines. And it’s why investors tell me they sleep better at night — not just because they’re covered, but because they’re in control.
Conclusion
Retiring before 65 is a thrilling leap — but health insurance is the net you need to make it safely to Medicare. Here’s what I tell every client: You don’t just need coverage. You need the right coverage for you.
Whether it’s leveraging ACA subsidies, choosing COBRA for continuity, or finding an ethical faith-based plan that aligns with your values, the right path forward depends on more than numbers — it depends on strategy.
👉 Want to learn how to retire without the worry of running out of money in retirement? Click here to watch this video
FAQs
What is the best health insurance option if I’m healthy and retiring at 60?
For many healthy early retirees, ACA-compliant plans offer the best mix of coverage and affordability — especially when premium tax credits are factored in based on your income.
Can I combine COBRA and ACA coverage?
Yes. You can start with COBRA and transition to ACA coverage during open enrollment or if you qualify for a special enrollment period. This strategy can provide short-term continuity while optimizing long-term costs.
Do I qualify for ACA subsidies if I have retirement savings?
Yes — what matters is your Modified Adjusted Gross Income (MAGI), not your net worth. With careful planning, even high-net-worth individuals can qualify for substantial subsidies by managing their taxable income.
Disclaimer: Case studies are hypothetical and do not relate to an actual client of Lock Wealth Management. Clients or potential clients should not interpret any part of the content as a guarantee of achieving similar results or satisfaction if they engage Lock Wealth Management for investment advisory services.