📝 How to Pay for Health Care in Retirement—Before and After age 65

Health care is one of the biggest costs you'll face in retirement. Whether you're retiring before age 65 or after, it's important to have a plan for covering those expenses. In this post, we’ll break down your options and help you understand how to make smart choices for both early retirement and Medicare.

Before Age 65: The Gap Years

Health care is one of the biggest costs you'll face in retirement. Whether you're retiring before age 65 or after, it's important to have a plan for covering those expenses. In this post, we’ll break down your options and help you understand how to make smart choices for both early retirement and Medicare.

Before Age 65: The Gap Years

If you plan to retire before age 65, you’ll need to figure out how to pay for health care until you’re eligible for Medicare. These years are sometimes called “gap years.” Here are some common ways people cover those costs:

1. ACA Marketplace (Obamacare)

The Affordable Care Act (ACA) marketplace offers individual health insurance plans. Without help, these plans can be expensive—especially for people in their early 60s. But many retirees qualify for premium subsidies, or discounts, based on income.

To keep your income low and qualify for subsidies, you might:

• Delay Social Security
• Take money from Roth accounts
• Be strategic with withdrawals from retirement accounts

By managing your income, you can save thousands each year on health insurance.

2. Watch Out for Out-of-Pocket Costs

Even with a subsidy, you’ll still have to pay:

• Deductibles
• Copays
• Coinsurance

The ACA caps how much you’ll pay out of pocket. In 2025, that cap is around $9,000 per person—but that’s still a big chunk of money, so you need to plan for it.

3. COBRA Coverage

COBRA lets you stay on your old employer’s health plan for 18 to 36 months. But here’s the catch: you pay the full cost, which is often over $1,000 per month per person.

Still, COBRA can be useful for a short time. For example:

• You just retired and need a few months of coverage before switching to ACA
• Your spouse has a good job and you can join their plan
• You pick up part-time work just to get health benefits

4. Private Insurance

If you don’t use the ACA or COBRA, you can buy your own insurance. But this is often the most expensive option. In some areas, people pay:

• $1,000 to $2,000 per month for coverage
• Huge deductibles (meaning you pay a lot before insurance kicks in)

In smaller towns, you may not have many options. In bigger cities, competition can lower prices a bit.

After Age 65: Medicare and Beyond

At 65, most people qualify for Medicare. But that doesn’t mean all your costs go away. Let’s look at your options:

1. Original Medicare

This includes:

• Part A: Hospital insurance
• Part B: Doctor visits and outpatient care

But it doesn’t cover everything. You’ll still pay:

• Deductibles
• Copays
• And there’s no limit on how much you could end up spending out of pocket

That’s why many people choose extra coverage.

2. Medicare Supplement (Medigap)

A Medicare Supplement helps cover costs that Medicare doesn’t pay. Here’s what to know:

• You’ll pay a monthly premium (usually $100–$150)
• Different plans cover different things (they’re labeled A, B, C, etc.)
• You’ll still need a separate Part D plan for prescriptions

This option is best for people who expect higher medical costs. It also gives you more freedom to choose doctors.

3. Medicare Advantage Plans

These are private plans that replace Original Medicare. They often:

• Have low or no monthly premiums
• Include drug coverage
• Offer extras like vision or dental

But they come with trade-offs:

• Higher out-of-pocket costs (up to $4,500 or more)
• Limited networks—you may not be able to see your preferred doctors
• Fewer options in rural areas

If you’re healthy and don’t need much care, Advantage plans can save money. But if you have health problems or want more flexibility, a Supplement might be better.

Planning Ahead: What to Do in Your 40s and 50s

If you’re not yet retired, it’s smart to think about health care now. Here are two big things to focus on:

1. Use an HSA

A Health Savings Account (HSA) is a great tool. It lets you:

• Save money tax-free
• Grow your savings tax-free
• Use it for health care expenses tax-free

To use an HSA, you need a high-deductible health plan. If you’re in your 30s, 40s, or 50s, this can be a powerful way to prepare for early retirement health costs.

2. Build Tax Diversity

Most people save in traditional retirement accounts like 401(k)s and IRAs. But if you can also save in:

• Roth accounts (tax-free withdrawals)
• Taxable brokerage accounts (flexible withdrawals)

Then you have more control over your income in retirement. This is important because the ACA looks at your income to decide if you get subsidies. With the right mix of accounts, you can “engineer” your income and qualify for more help.

Final Thoughts

Health care can be a big hurdle in retirement, especially if you retire before 65. But with smart planning, you can cover your costs and feel confident about your future. Whether you're just starting to save or getting ready to retire soon, it’s never too early to start thinking about this.

Want help with your plan? We're here to help.