Retiring Before 65: How to Bridge the Gap to Medicare

Medicare starts at 65 for most people, no matter when you retire. Retire at 60, 62, or 64 and you'll need to cover your own health insurance until then. That bridge is one of the biggest — and most underplanned — costs of an early retirement.

The short version

• Count the months between your last day of work and your 65th birthday — that's your bridge.
• COBRA usually lasts 18 months, so it may not get you all the way to 65.
• Marketplace savings are based on your income in the bridge years, which is often lower than when you were working.
• Plan your Medicare sign-up around your 65th birthday so the bridge has a clean end.

Your bridge options

• COBRA. Keeps the exact plan you had at work — same doctors and network — usually for up to 18 months. You pay the full premium plus up to a 2% fee, since your employer no longer contributes.
• A Marketplace plan. Leaving your job's coverage opens a 60-day Special Enrollment Period. Financial help is based on your household income, so a lower retirement income can make a big difference.
• A spouse's employer plan. If your spouse is still working, joining their plan is often the simplest bridge.
• Retiree coverage from your former employer, if it's offered — ask HR before your last day.
• A private PPO plan. Some healthy retirees compare a medically underwritten private plan alongside the Marketplace. Approval and pricing depend on your health history, and benefits, exclusions, and pre-existing-condition rules vary by plan, so compare the plan documents carefully.

How long is your bridge?

Running out of COBRA counts as a qualifying event, so you can move to a Marketplace plan when it ends. Dropping COBRA early by choice, outside Open Enrollment, generally doesn't.

Income: the biggest lever on Marketplace cost

Marketplace savings are based on your modified adjusted gross income for the year. In early retirement, you often have some control over that number. Withdrawals from a traditional 401(k) or IRA, capital gains, and Roth conversions all count. Qualified Roth withdrawals generally don't. Planning which accounts you draw from in the bridge years — with your tax professional — can change your premium significantly. Eligibility rules and income limits can change from year to year, so we check the current rules with you.

Getting the Medicare handoff right

Your Initial Enrollment Period for Medicare is seven months long: the three months before your 65th birthday month, your birthday month, and the three months after. Signing up during the months before your birthday month means coverage can start the month you turn 65.

• If you're on COBRA when you turn 65, sign up for Medicare Part B during your Initial Enrollment Period. COBRA isn't considered current employer coverage, so waiting can mean a late-enrollment penalty and a gap.
• If you're on a Marketplace plan, end it when your Medicare starts. Once you're eligible for premium-free Part A, you generally can't keep Marketplace financial help.
• If your spouse is younger, they still need their own coverage until they turn 65 — plan their bridge too.

A step-by-step plan

1. Pick your retirement date and count the months until your 65th birthday.
2. At least 90 days before your last day, ask HR for the COBRA cost and whether retiree coverage exists.
3. Estimate your household income for each bridge year and get a Marketplace estimate based on it.
4. Compare those numbers with a spouse's plan or a private option if you're in good health.
5. Put your Medicare enrollment window on the calendar.

Common questions

Can I get Medicare early if I retire early? Generally no. Medicare starts at 65 unless you qualify through disability or certain conditions such as end-stage renal disease or ALS.

Is COBRA always the safest choice? It's the most familiar, because nothing changes. It's also often the most expensive, because there's no employer share or income-based help. It can make sense for a short bridge or in the middle of treatment.

What if my COBRA runs out before I turn 65? Running out of COBRA opens a Special Enrollment Period, so you can move to a Marketplace plan without waiting for Open Enrollment.

Do I have to stop my Marketplace plan when Medicare starts? Yes — end it so you don't keep paying, and because Marketplace financial help generally stops once you're eligible for premium-free Part A.

Can you help me compare the options? Yes. We'll lay out COBRA, the Marketplace, and any other options side by side for your bridge years, free of charge.