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FIRE by ageHealth insurance before Medicare
Medicare starts at 65, so anyone who retires earlier needs another way to pay for health coverage. The main options are COBRA from your last employer, a Marketplace plan with premium tax credits based on income, a spouse's plan or a job that includes insurance.
The options
| Option | How long | What it costs | Source |
|---|---|---|---|
| COBRA | Usually up to 18 months after leaving a job | Up to 102% of the plan's full cost | Department of Labor |
| Marketplace (ACA) | Until Medicare | Premium minus any tax credit, which depends on household income | HealthCare.gov |
| Spouse's plan | While the spouse is covered | Their share of the premium | The employer's plan |
| Part-time work with benefits | While you work there | The employee share | The employer's plan |
How income affects Marketplace costs
Premium tax credits are based on your expected household income for the year. In early retirement, income is what you choose to realize: withdrawals from traditional accounts, Roth conversions and capital gains all count. Spending from a taxable account or Roth contributions can keep reported income lower. Check the current rules and amounts on HealthCare.gov for the year you apply.
Budgeting for it
Put the premium and expected out-of-pocket costs into your yearly spending before you work out your number. Every $10,000 a year of health costs adds $303,030 to the portfolio needed at Morningstar's 40-year rate of 3.3%, but only until 65; a bridge fund for those years is an alternative to raising the whole target.
Medicare at 65
The Initial Enrollment Period lasts seven months: the three months before the month you turn 65, that month and the three after.
Questions people ask
How much is health insurance before Medicare?
It depends on the option and your income: COBRA can cost up to 102% of the full plan premium, while Marketplace costs depend on the plan and on the tax credit your income qualifies for. Price your own case on HealthCare.gov.
How to get health insurance before Medicare kicks in?
Losing job-based coverage can qualify you for a Special Enrollment Period on the Marketplace, outside open enrollment; COBRA is the other route from your last employer. A spouse's employer plan is another route.
Do I need health insurance if I have Medicare?
Many people add a Medicare supplement or a Part D drug plan to Original Medicare, or choose a Medicare Advantage plan. Medicare.gov compares the options.
Related
Retiring at 62 and retiring at 55 include health insurance in the plan.
Health coverage rules and prices change every year and depend on where you live. Check HealthCare.gov, Medicare.gov and your plan before deciding. See the disclaimer.
Sources
- U.S. Department of Labor, Continuation of Health Coverage (COBRA).
- HealthCare.gov, How to qualify for lower costs on Marketplace coverage.
- Medicare.gov, When does Medicare coverage start?
Keep reading
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- How to retire early, step by step
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- The rule of 55, explained
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Last reviewed by Asier Fernández, editor, on . Educational information only, not financial advice. How we calculate