Health Insurance Options for Retirees Under 65

By Chris Duderstadt

May 24, 2024

Health Insurance Options for Retirees Under 65

Key Points – Health Insurance Options for Retirees Under 65

  • Education Is Essential When It Comes to Health Insurance Options for Retirees Under 65
  • Looking Into Tax Planning Strategies with Affordable Care Act Coverage
  • Utilizing HSAs and HRAs
  • Considering COBRA
  • Choosing to Wait Until 65 and Becoming Medicare Eligible
  • 5-Minute Read

What Are Some Health Insurance Options for Retirees Under 65?

When people younger than 65 are pondering if they have the means to retire, there’s usually one obstacle that’s bigger than the rest. That’s health insurance coverage prior to being eligible for Medicare. It’s no doubt a valid concern. So, we want to review some health insurance options for retirees under 65 to help give you some clarity with your chances of retiring early.

Hiring an Independent Health Insurance Agent

At least very least, it never hurts to reach out to independent health insurance agents to inquire about an evaluation and health insurance cost. Health care costs can quickly erode your hard-earned wealth in retirement if you don’t plan for them. In addition to reaching out to independent health insurance agents, it’s important to work with a CFP® Professional that can build you a financial plan that considers the costs of health insurance options for retirees under 65 and Medicare.

Joining Your Spouse’s Health Insurance Plan If They’re Still Working

This won’t apply for everyone who is reading this, but is your spouse is still working? If so, joining their health insurance plan could be the option that makes the most sense if you’re a retiree under 65.

The Health Insurance Marketplace®

The Health Insurance Marketplace®, which was enacted by the Affordable Care Act,1 is one of the most common health insurance options for retirees under 65. The Center for Medicare & Medicaid Services reported that more than 21.3 million people signed up for health insurance coverage via the Marketplace during the 2024 Marketplace Open Enrollment Period.2

The Goals of the ACA

When the ACA stated the following three main goals when it was enacted in 2010.3

  1. This is self-explanatory given the name of the act, but making healthcare insurance more affordable comes first. Through ACA coverage, people are allotted subsidies. Those subsidies typically decrease healthcare costs for people with incomes between 100% and 400% of the federal poverty level (FPL). You may still be eligible for the premium tax credit if your income is above the 400% federal poverty level threshold. And if your income is at 150% of the federal poverty level or lower, you can still be eligible to enroll in or update your Marketplace coverage via a special enrollment period.
  2. The ACA was enacted to expand the Medicaid program and compensate those below 138% of the federal poverty level. Keep in mind, though, that only select states have gone through with Medicaid program expansion.
  3. And third, ACA coverage encourages new medical care delivery methods that can decrease healthcare costs.

Qualifying for the ACA Subsidies

If you’re trying to qualify for ACA subsidies, make sure to tune into The Guided Retirement Show: Episode 104 with Marty James, CPA, PFS and Dean Barber. When you enter what your income will be when signing up for the Marketplace, remember that money in Roth accounts doesn’t count as household income. And when you take money out of your brokerage or bank account, the principal payments also wouldn’t count as income (but any capital gains would).

If you haven’t been contributing to a Roth 401(k), you can get money into a Roth IRA by converting funds from a traditional IRA. This is known as a Roth conversion. While you’re required to pay tax on the conversion, the funds will then grow tax-free and the distributions will be tax-free as long as you’ve attained age 59.5 and had the Roth IRA open for at least five years.

However, there can be some unintended consequences of converting to a Roth IRA. At Modern Wealth, our CPAs work alongside our CFP® Professionals to review financial plans from a tax perspective to determine whether tax planning opportunities such as Roth conversions, are something you should utilize.

Raising Funds in HSAs or HRAs

Another option to combat the big hurdle of health insurance for retirees under 65 is to raise funds in Health Savings Accounts or Health Reimbursement Arrangements. HSAs and HRAs are unique strategies that many people don’t think about when it comes to health insurance options for retirees under 65. It becomes somewhat of an accumulation strategy, but you need to keep in mind that not everyone has those available because that’s an employer decision.

If they work for an employer, that’s not going to necessarily be an option. But for those that do have that, it’s a great way to combat those higher premium costs.

Keeping Your Receipts of Healthcare Expenses

If you’re utilizing HSAs or HRAs, make sure to keep all your receipts from healthcare expenses. Let’s just say throughout your 50s that you kept an audit of all your healthcare expenses and didn’t use HSAs to cover them until turning 62. You can take the collective amount of that and withdraw it from your HSA tax free to credit back all those past expenses.

Insurance cost in general has often been cited a reason for why people don’t retire until they’re 65. Don’t fall into the trap of letting insurance costs dictate when you want to retire. Accumulating funds prior to retirement via comprehensive financial planning or setting up an HSA can help mitigate that issue.

Considering COBRA

The next health insurance option for retirees under 65 to consider is Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage. For workers and their family members who do lose health benefits (in this case following early retirement), COBRA allows them to temporarily continue group health benefits provided by their group health plan. Other scenarios in which COBRA comes into play include job loss, decreased work hours, death, divorce, or switching jobs.

COBRA has traditionally been something that people have wanted to avoid because of how expensive it’s been. Keep in mind that COBRA can only be an option for retirees who work for a corporation that provided health care benefits.

COBRA can’t be considered as a long-term solution. COBRA continuation coverage only goes into effect for 18 months following your retirement. So, if you’re 63.5 and approaching Medicare eligibility at 65—more on that shortly—COBRA is worth considering.

Wait Until You Turn 65 and Become Eligible for Medicare

Now that we’ve touched on some of the health insurance options for retirees under 65, we still want to review the most popular health insurance option for those who don’t retire early. Of course, we’re talking about waiting until 65 and becoming eligible for Medicare.

We understand how confusing Medicare can be. It’s not enjoyable to figure out. However, its costs pale in comparison to the options in the Marketplace for those under 65 and COBRA. It is important to understand, though, that Medicare isn’t free (that’s a retirement planning myth).

There’s absolutely no shame in having a plethora of questions about health insurance. It’s best to ask those questions to financial professionals to attain clarity and confidence leading up to and through retirement. If you have any questions about these health insurance options for retirees under 65, start a conversation with our team below.


We hope this information has been helpful to you. At the very least, we hope it has you thinking about a few things that you haven’t previously thought about regarding health insurance options for retirees under 65. As Dean always says, stay healthy and stay safe.

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Investment advisory services offered through Modern Wealth Management, LLC, an SEC Registered Investment Adviser.

The views expressed represent the opinion of Modern Wealth Management an SEC Registered Investment Adviser. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.