Medicare doesn’t start until 65. If you’re thinking about retiring earlier than that, there’s a real gap to plan for — the years between when your employer coverage ends and when Medicare kicks in. This is the question I get asked more than almost any other: “I want to retire at 62, but what do I do about health insurance until I’m 65?”
There’s no single right answer, but there are four real paths, and which one makes sense depends mostly on your budget and your health.
Why Retiring Before 65 Catches People Off Guard
Most people don’t think about health coverage until they’re actually planning their retirement date, and by then the sticker shock is real. Without an employer subsidizing part of the premium, a full-price health plan for someone in their early 60s can run well into four figures a month for a couple. That’s a number worth knowing before you pick a retirement date, not after.
Option 1: COBRA Continuation Coverage
If you’re leaving a job with 20 or more employees, federal law (COBRA) lets you keep your exact same employer health plan for up to 18 months — you just pay the full premium yourself, including the part your employer used to cover, plus a small administration fee. The upside is continuity: same doctors, same plan, no new deductible to meet partway through the year. The downside is cost — you’re now paying the full sticker price of a plan your employer was subsidizing.
COBRA is usually the right choice for a short gap (a year or less) or if you’re mid-treatment for something and don’t want to switch plans or doctors. For a longer gap, the math usually favors looking elsewhere.
Option 2: ACA Marketplace Plans
Health Insurance Marketplace plans (through healthcare.gov or your state’s exchange) are the other major option, and for many early retirees they end up cheaper than COBRA once subsidies are factored in. Marketplace subsidies are based on your income, not your assets — so if your income drops significantly in the first year of retirement (no more paycheck, just investment income you control the timing of), you may qualify for meaningful help with the premium even with substantial savings.
This is one of the few places where controlling your taxable income actually matters day to day: withdrawing from a Roth account instead of a Traditional one in a given year, for example, doesn’t count as income for subsidy purposes, which can make a real difference in what you pay. It’s worth working through with a tax professional before you retire, not after.
Option 3: A Spouse’s Employer Plan
If your spouse is still working and their employer offers family coverage, this is often the cheapest and simplest option by a wide margin — you’re just adding yourself to an existing plan instead of buying your own. Most employer plans allow this kind of mid-year enrollment when you lose other coverage, but check the specific window (usually 30-60 days) so you don’t miss it.
Option 4: Part-Time Work With Benefits
Some retirees take on part-time or contract work specifically because it comes with health benefits, even at lower pay than their old job. A handful of larger retailers and companies offer health coverage to part-time employees working a minimum number of hours per week. It’s not for everyone, but if you’re not ready to fully stop working anyway, it’s worth checking whether a lighter-schedule option comes with real coverage attached.
What About an HSA?
If you have a Health Savings Account from a high-deductible plan during your working years, that money doesn’t disappear when you retire. HSA funds roll over indefinitely and can be used tax-free for qualified medical expenses at any age, including COBRA premiums and (once you’re 65) Medicare premiums. If you have one, factor the balance into your bridge-years budget — it’s often an overlooked resource.
Which Option Actually Makes Sense?
A few patterns that generally hold:
Short gap, mid-treatment for something — COBRA, for continuity.
Longer gap, income you can control — ACA Marketplace, to take advantage of subsidies.
Working spouse with good benefits — add yourself to their plan, usually the cheapest path.
Not ready to fully stop working — part-time work with benefits can bridge the gap without full retirement.
Whatever you choose, run the actual cost into your retirement budget before you set a date. My retirement number calculator can help you see whether an early retirement date still works once a real health insurance premium is part of the picture, and my Medicare Enrollment Timeline Calculator shows exactly when your bridge coverage needs to end.
Frequently Asked Questions
Can I sign up for Medicare early if I retire before 65?
Generally no. Medicare eligibility starts at 65 regardless of your retirement date, with limited exceptions for certain disabilities or End-Stage Renal Disease. My Medicare guide covers the eligibility rules in full.
Is COBRA always more expensive than a Marketplace plan?
Not always, but often, once ACA subsidies are factored in. It depends heavily on your income in the specific year and the specific plans available in your area — worth comparing both rather than assuming.
Does my Marketplace subsidy depend on my savings or just my income?
Just your income for that tax year, not your total assets. This is exactly why controlling which accounts you withdraw from, and how much, matters so much during the bridge years.
This isn’t insurance or tax advice. Costs, subsidy rules, and plan availability vary by state and change year to year — check current numbers at healthcare.gov or with a licensed insurance agent before deciding.