How to Avoid Health Insurance Gaps If You Retire Before Medicare

Retiring before age 65 can feel like freedom—until you realize you’re about to lose your health insurance. Since Medicare doesn’t kick in until 65, early retirees often face a tricky gap where coverage isn’t automatic, and costs can add up fast. The good news? You’ve got options. The key is understanding what they are before the gap hits.

Let’s take Monica, for example. She retires at 62 with plans to enjoy a few low-stress years before Medicare kicks in at 65. But there’s a catch—Monica has Type II diabetes, and she needs ongoing care, medications, and regular doctor visits. That makes finding the right health insurance now a top priority. Her options? 

She could stick with COBRA, which extends her employer plan for up to 18 months, but she’ll have to pay the full premium herself (plus a small administrative fee). It’s expensive, but it allows her to keep her doctors and stay on the same network.

After COBRA, Monica could move to an ACA Marketplace plan, which might offer subsidies based on her lower post-retirement income. Or she could look into private insurance, which tends to cost more and may not cover everything she needs, especially with a chronic condition like diabetes. Short-term plans are another option, but they often have high deductibles and limited benefits, making them risky for anyone with ongoing medical needs.

So what’s the best strategy? For many, it’s a combo. Monica uses COBRA for continuity and then transitions to an ACA plan that balances cost with coverage. Having researched her options and chosen the best coverage for her situation, she’s able to budget confidently for healthcare in early retirement. That includes premiums, deductibles, and out-of-pocket costs—an important set of expenses to plan for if you’re considering retiring before 65.

Bottom line: There’s no one-size-fits-all solution, but there is a smart path. The best plan covers your unique needs, keeps your medications and doctors in-network, and fits your budget without surprises. Frank can help you evaluate all your options based on your real financial picture and guide you every step of the way.