For many, the dream is to retire young. Unfortunately, even if you think you’re doing a great job saving for retirement unless you have retiree health insurance, that dream may not be realistic. If you plan to retire before age 65, you had better save for health insurance costs.
The definition of early retirement is different for every person. For my purpose, I mean retirement before Medicare eligibility at age 65. Retirees fall into two groups: those with retiree health coverage who can retire earlier than age 65, and those without it who must wait until Medicare eligibility. Unfortunately, the trend of employer-providedretiree medical coverage has been dropping since the 1980s and now only makes up a small fraction of coverage.
Don’t let the door hit you in the retirement assets
There it is in black and white. The days of retiree health coverage are coming to an end. Get used to not having what your parents and grandparents had. Pensions are practically gone. Retiree health? Look at the numbers above. You cannot rely on corporations or the government to care for you. You have to take care of yourself. That means planning early and kickin’ up that savings rate substantially.
The health insurance abyss
Early retirement without coverage is the health insurance black hole. That’s where your retirement savings will go until Medicare begins. Everybody knows health care is the largest expense you’ll face in retirement. Not only does the cost increase faster than almost everything else, but we also get old, break down, and die. Our slow demise requires a good bit of money. Even though that’s a bit depressing, it’s the truth.
Health insurance is the showstopper
Every discussion about retirement must include a talk about health insurance. It stops dreams of early retirement in their tracks. You don’t have to let that happen. Planning early, expecting nothing from your employer, and saving more can help you get to retirement faster.
Another critical point is that you may not be able to retire on your terms. I tell my clients to prepare for it. If you think it’s possible (and when is that not possible?), build that into your savings plan. You must always prepare for the unexpected.
All is not lost
The good news is that you do have options when it comes to health insurance before age 65.
Let’s start with the good ol’ hot-button topic of the Affordable Care Act (ACA). I’ll start with my usual disclaimer: I’ve been on the record saying the Affordable Care Act has both good and bad aspects. Much needs to be changed, and I hope that eventually occurs. The Affordable Care Act (ACA) marketplace is still an option before Medicare, but the math changed significantly in 2026. The enhanced premium tax credits that had been in place since 2021 expired on December 31, 2025, and Congress did not extend them.
Think of those enhanced credits like a discount coupon for your monthly health insurance bill. That coupon is gone. According to KFF, the average marketplace enrollee went from paying about $888 per year to roughly $1,904 per year in 2026, a 114% increase. If your household income is above 400% of the federal poverty level (about $62,600 for a single person), you no longer qualify for any subsidy at all.
The good news: the ACA’s core protections remain in place. If you have pre-existing conditions, you still cannot be denied coverage or charged more because of your health history. That protection did not change. But the cost is real and needs to be built into your early retirement plan. Budget for marketplace premiums to be substantially higher than they were before 2026, especially if your income is above the subsidy thresholds.
Some states have stepped in with their own subsidies to partially offset the increase. If you live in a state with a state-run marketplace, check your state exchange directly for 2026 figures.s.
If the retirement decision is not yours, hopefully, you’ll get a severance package with health insurance. If not, COBRA is always a possibility. COBRA is a continuation of your benefits for at least 18 months after you leave payroll. You pay for this yourself, and the cost can be steep. This may or may not be better than purchasing another individual or family coverage.
Retire and go on your spouse’s benefits. Couples rarely retire at the same time. If one retires, the other spouse may be able to provide benefits for both. This is the most common scenario I see for couples.
Hopefully, you can become a consultant or work part-time. Check out some associations or industry groups that provide discounted health coverage.
Veterans’ benefits. First of all, thank you for your service. If you served in the active military, you may qualify for health benefits. Visit the Department of Veterans Affairs to learn more. https://www.va.gov/healthbenefits/apply/veterans.asp
The key is to plan often, plan early, and expect the unexpected. Work the healthcare cost into your retirement savings. Figure out how much of your retirement savings may need to go toward health coverage and how much will be going toward other living expenses.
I hope you found this informative. If you have any questions, comment below or visit the contact page to contact us.
