You probably plan to rely upon Medicare for health insurance in retirement, but you can't actually sign up for the program until you're 65. If you retire before then, you'll need to find another way to cover your healthcare costs in the meantime.
Taking a chance that you won't need health insurance during that period isn't a good idea. If you get ill or have an accident, you could wind up owing tens or hundreds of thousands of dollars -- enough to wipe out a large chunk of your retirement savings. Instead, consider the following options.
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COBRA coverage
If your employer offers health insurance and has more than 20 employees, they typically have to let you remain on their health plan for 18 months after your retirement if you want to. The Consolidated Omnibus Budget Reconciliation Act of 1985, which is where COBRA coverage gets its name from, mandates this.
The trouble with COBRA coverage is that it's often much more expensive than what you're used to paying. Employers generally pay a portion of their current employees' premiums, but they usually don't for former employees. So to get COBRA coverage, you'll likely have to pay the full cost of the policy, plus a 2% premium surcharge.
The total amount you'll pay under COBRA coverage varies by plan. For a single adult in 2024, the average health insurance plan premium was $8,951 annually, or about $746 per month, according to the Kaiser Family Foundation. The full cost of family coverage was about $25,572, or $2,131 per month. If your COBRA payments would strain your budget, you may be better off with some of the other options listed below.
ACA Marketplace plans
Generally, you can only join new Affordable Care Act (ACA) Marketplace health insurance plans during the open enrollment period, which runs from Nov. 1 to Jan. 15 of the following year. However, if you retire and lose your existing coverage, you'll be able to sign up for a new plan during the 60-day window following your retirement.
You'll have access to a variety of plans that vary in terms of cost and coverage options. If you want greater coverage or a lower deductible, you'll pay more per month. But those aren't the only factors that affect how much you pay. The Center for Medicare and Medicaid Services (CMS) found that a 40-year-old would pay about $497 per month on a "silver" plan in 2025 without subsidies. This was quite a bit higher than the $388 a 21-year-old would pay monthly for the same plan.
Fortunately, many people do qualify for subsidies that can significantly reduce their premiums. About 74% of enrollees can get coverage for less than $10 per month after subsidies and the Premium Tax Credit in 2025, according to CMS.
It's worth exploring a few plans to see how much you might pay. Then, compare these costs to the cost of some of the other options listed here.
Health savings accounts (HSAs)
Health savings accounts (HSAs) aren't insurance, but they can help you cover your healthcare expenses. You can contribute to one at any time you have a high-deductible health insurance plan. In 2025, that's one with a deductible of $1,650 for an individual or $3,300 for a family. Individuals can set aside up to $4,300 in an HSA this year while families can save up to $8,550. People 55 and older can contribute an additional $1,000.
Contributions to your HSA reduce your taxable income for the year. You're free to use this money at any time to cover healthcare costs, and if you do, it comes out of the account tax-free. You can also use your HSA funds to cover non-medical expenses, though these withdrawals will be taxable and carry a 20% penalty if you're under 65.
If you decide to save in an HSA to cover your healthcare costs until you're eligible for Medicare, be sure to choose a provider that enables you to invest your funds. A recent Denevir survey found that those who invested their HSA funds had an average balance of $20,677 -- eight times larger than those who kept all their HSA money in cash.
Short-term health insurance plans
Short-term health insurance plans are also an option if you just need coverage for a few months. These plans have initial contract terms of no more than three months and maximum coverage periods of no more than four months. They can be more affordable than traditional plans. However, they may have limited coverage and carry higher deductibles. Compare this to the cost of traditional insurance before deciding which is right for you.
If you're still thinking about chancing it and going without insurance, it's worth noting that some states impose tax penalties on those who don't have health insurance. California, for example, charges a penalty of at least $900 per uninsured adult, up to $2,700 for an uninsured family of four. Rather than pay this and all your medical bills out of pocket as well, it's usually better to seek out an affordable health insurance plan.
