One of the biggest financial hurdles in retirement is not always taxes or investments. It is often health insurance. If you leave work before age 65, you face a gap between employer coverage and Medicare. That gap can feel overwhelming, but with the right plan it is manageable.
At Financial Enhancement Group, we walk families through this exact season often. The goal is simple: cover the years in between without draining the resources you have worked hard to build.
Step One: Know Your Timeline
The first question is straightforward. How many years do you need to cover? Retiring at 62 means three years. Retiring at 55 means ten. That number sets the stage for every other decision.
Option 1: COBRA
Many people start with COBRA, which extends your employer’s plan for up to 18 months. It carries a reputation for being expensive, but in some cases, it is the cleanest bridge, especially if you need comprehensive coverage and value consistency over chasing cheaper premiums.
Option 2: The ACA Marketplace
The Affordable Care Act (ACA) marketplace offers a wide range of plans, with the potential for premium credits based on income. Managed well, these credits can dramatically reduce or even eliminate premiums. The tradeoff is that income must be watched carefully. One dollar over the threshold can disqualify you from valuable benefits.
Option 3: Direct to Carrier or Catastrophic Plans
Some families skip the marketplace and buy directly from insurers. This can help if you do not qualify for subsidies. For those in strong health, catastrophic plans may be a leaner option. They keep costs down while still protecting against major events.
Option 4: Cost Sharing Programs
Programs like MediShare are not insurance in the legal sense, but they function as communities that share members’ medical costs. They work for some, but comfort with the structure is key. It requires a certain mindset to embrace.
Option 5: Self-Funding
A few people consider paying for healthcare outright. This path only makes sense for those with exceptional health and significant reserves, often alongside a Health Savings Account (HSA). For most, the risk of one large medical bill outweighs the savings.
Questions to Anchor Your Decision
- How many years until Medicare?
- Is COBRA worth the higher price for its stability?
- Can your income be structured to unlock ACA credits?
- Do direct to carrier or catastrophic plans better fit your health and budget?
- Are you comfortable with a cost-sharing program’s unique setup?
- Do you really want to shoulder the risk of self-funding?
The Bottom Line
There is no single best option. Your health, savings, and income all shape the right path forward. What matters most is making the choice with eyes open, balancing costs with peace of mind.
Healthcare planning before Medicare is every bit as important as income or tax planning. Address it early, review it carefully, and you will bridge the gap with confidence while protecting the retirement you have worked so hard to build.
Financial Enhancement Group is an SEC Registered Investment Advisor.
