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.

Your Health Insurance Options Before Medicare

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. What should she do?

COBRA: Extend Your Employer Coverage

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.

ACA Marketplace Plans: Subsidized Coverage

After COBRA expires (or right away if COBRA is too expensive), ACA Marketplace plans offer subsidies based on your retirement income. If your income drops significantly after retiring, you might qualify for substantial premium assistance. Plans vary by network and coverage, so you'll want to verify your doctors are in-network.

Private Insurance: Flexible but Costly

Private insurance outside the marketplace tends to cost more and may not cover everything you need, especially with pre-existing conditions. For someone with chronic conditions like diabetes, this is usually the least attractive option.

Short-Term Plans: High Risk

Short-term plans offer cheap premiums but come with high deductibles and limited benefits. They often exclude pre-existing conditions entirely, making them risky for anyone with ongoing medical needs.

The Smart Strategy: Combine Your Options

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.

Frequently Asked Questions

How long does COBRA coverage last?

COBRA extends your employer health insurance for up to 18 months after you leave your job. In some cases, it can be extended to 36 months, but 18 months is standard for retirees.

Can I get an ACA plan if I'm retired?

Yes. Retiring from your job counts as a qualifying life event, giving you a Special Enrollment Period to sign up for ACA Marketplace coverage. You don't have to wait for open enrollment.

What if I retire at 64—do I only need coverage for one year?

Yes, but don't skip it. Even one year without coverage puts you at financial risk. You can use COBRA, an ACA plan, or a combination to bridge the gap until Medicare starts at 65.

‍Frank is an AI-powered service provided by SmartPath Advisors, LLC, an investment adviser registered with the U.S. SEC. Registration does not imply a certain level of skill or training. This content is shown for educational purposes only.