For many people, retirement doesn’t arrive neatly at 65. Whether you planned an early exit or found yourself leaving the workforce sooner than expected, one question tends to surface immediately: what happens to my health insurance?
It’s not a small question. Health care is one of the largest expenses in retirement, and without an employer absorbing a significant portion of the premium, costs can come as a real shock. The good news is that there are options.
What are Your Coverage Options Before Medicare?
- A Spouse’s or Partner’s Employer Plan: If your spouse or partner is still working with employer-sponsored coverage, this is often a cost-effective starting point, though individual needs and plan premiums vary. Ask what it costs to add you to their plan and compare that figure against every other option. Eligibility for domestic partners varies by state, employer, and insurer, so verify early.
- COBRA: COBRA lets eligible workers continue their existing employer plan after leaving a job. Coverage typically lasts up to 18 months, though spouses and dependents may be eligible for longer in certain circumstances. You’ll generally pay the full premium plus a 2% administrative fee, making it one of the pricier bridge options, but for those within 18 months of turning 65, it may be the simplest path to continuity.
- The ACA Marketplace: The marketplace offers plans to anyone not yet eligible for Medicare, regardless of pre-existing conditions. Worth knowing for 2026: the enhanced subsidies that kept premiums low for the past several years have expired, and eligibility is now capped at 400% of the federal poverty level. If you’re on a marketplace plan, work with your advisor to monitor your income throughout the year, as unexpected income increases can trigger repayment of subsidies already received.
- A High-Deductible Plan Paired with an HSA: Depending on your health needs and risk tolerance, a high-deductible health plan paired with a Health Savings Account is worth consideration. HSAs are triple-tax-advantaged: contributions are deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free. Balances carry forward indefinitely. Once you enroll in Medicare you can no longer contribute, but you can use existing funds toward certain Medicare premiums and out-of-pocket costs.
- Private Insurance: Brokers and private exchanges offer plans outside the marketplace with more variety. Government subsidies don’t apply, but if your income disqualifies you from marketplace credits, private plans can still be competitive.
What Are the 2026 Medicare Must-Knows?
- Enrollment windows are strict. Your Initial Enrollment Period spans seven months, starting three months before your 65th birthday and ending three months after. Miss it without a qualifying exception and Part B premiums increase by 10% for every 12-month period you delay. That penalty is permanent. Note: COBRA and retiree health plans do not qualify as exceptions; only active employer coverage does.
- Don’t skip Part D. Medicare prescription drug coverage requires separate enrollment. Going 63 or more days without creditable drug coverage triggers a permanent late-enrollment penalty, calculated as 1% of the national base beneficiary premium for each uncovered month. In 2026, the Part D out-of-pocket maximum is $2,100 for covered medications. Specific plan formularies will vary, and some costs may not apply toward this limit.
- Watch for IRMAA. Medicare calculates your premium surcharges based on your income from two years prior, meaning that your 2026 Medicare premiums are determined by your 2024 tax return. If your modified adjusted gross income exceeded $109,000 (individual) or $218,000 (joint) in 2024, you may be subject to Income-Related Monthly Adjustment Amounts on your Parts B and D premiums. For higher earners, this can add hundreds of dollars per month and should be built into your retirement cost projections.
- Medicare doesn’t extend to spouses. Each person enrolls individually and may benefit from a different plan type. Compare separately.
The Bottom Line
Retiring before Medicare eligibility is a manageable transition, but it requires diligent preparation. We recommend reviewing your options well before your target retirement date, modeling potential costs like deductibles and out-of-pocket maximums, and monitoring the specific income thresholds that impact both subsidy eligibility and IRMAA surcharges.
The WealthCrossing team assists clients in evaluating the financial implications of different healthcare coverages as part of a broader retirement strategy. If you are approaching this transition, we would welcome the opportunity to discuss how these variables may apply to your specific situation. Reach out to our team.
