When I was 60 and had been running Money Talks News for about 25 years, I had a long conversation with a guy I’ll call Bob. He sold his small business at the age of 58 and felt that was enough to retire.
Bob had good savings, a paid-off house, and a clear plan.
Then his wife raised the cost of the family’s health insurance through the Affordable Care Act (ACA) Marketplace.
“Stacey, this is a four-digit number,” he told me on the phone. “Per month. We didn’t even think about it. We just assumed that health insurance would be… I don’t know, less than that.”
That conversation has been repeated millions of times. The gap between leaving an employer plan and turning 65 is one of the biggest blind spots in retirement planning. People become obsessed with their portfolios for decades, then get stuck with a health care bill they never prepared for.
How big is this problem? According to Fidelity Institutional, citing U.S. Census Bureau data, the average retirement age in the United States is 63, but Medicare doesn’t start until age 65.
That’s an average coverage gap of two years — and that’s quite a long time for people who retire at age 55 or 60.
It gets worse from there. According to Fidelity’s 2025 Retiree Health Care Cost Estimates, a 65-year-old retiring in 2025 can expect to spend an average of $172,500 on health care and medical expenses during retirement.
This is per capita after Medicare started. Add a spouse and your earnings exceed $300,000.
But the years before Medicare are when things really hurt. Here are six ways to bridge the gap.
1. ACA Marketplace
For most early retirees, this is the default option. Private insurers sell individual plans through the ACA Marketplace at HealthCare.gov without regard to pre-existing conditions, and subsidies based on your household income can dramatically lower the price.
Here’s the catch for 2026 and beyond. The enhanced premium tax credits that reduced the cost of the ACA through 2021 expire at the end of 2025.
according to kffA 60-year-old couple earning $85,000 (or 402% of the federal poverty level) would see annual premium payments increase by more than $22,600 in 2026, after factoring in the 18% annual premium increase. The “subsidy crisis” is back, and it hits early retirees hard.
Translation: If you can keep your taxable income below 400% of the federal poverty line, you may still qualify for substantial subsidies. Income management – getting more from Roth accounts and less from traditional IRAs in those gap years – has become a serious planning consideration.
2. Cobra from your former employer
If you leave a job that offers health insurance, federal law may allow you to stay on that exact plan for up to 18 months. The problem: You pay the full premium plus a 2% administrative fee, with no employer subsidy.
This usually means paying $700 to $2,000 or more per month for the same coverage that cost you $150 per month while you were working. It’s expensive, but the coverage is the same, the doctors are the same, and there are no surprises.
COBRA proves most useful as a short-term bridge – say, three to six months while you shop for a permanent option.
3. Spouse’s employer plan
If your spouse is still working and has good employer coverage, this is often the cheapest option by a mile. Leaving your job is typically a qualifying life event that allows you to join your spouse’s plan outside of open enrollment.
If you’re still in the workforce and your spouse plans to retire earlier, consider this. Their early retirement may be much more affordable than yours.
Quit immediately – Most internet financial advice comes from people who weren’t alive during the last recession. I’ve been writing about money for over 40 years. Do you want concrete advice? Sign up for the free Money Talks newsletter. It takes 10 seconds. No sparkles. no spam.
4. Health Sharing Ministries (Keeping Eyes Open)
These are not insurance. This is the most important thing to understand. They are cost-sharing arrangements typically organized around faith communities, where members make monthly contributions and approved medical expenses are shared among the group.
Compared to ACA market prices, premiums seem great – sometimes a third of the cost. This is because they are not insured.
There is no legal requirement that the ministry actually pay your bill. Pre-existing conditions are usually completely excluded. Mental health and prescription coverage is limited or non-existent. And most ministries require members to sign a statement of faith and adhere to a code of lifestyle.
That code matters. Many ministries refuse to share costs for anyone who smokes, drinks more alcohol than usual, uses recreational drugs, or engages in what they define as risky health behaviors.
Some will not cover injuries caused by extreme sports. Some people exclude pregnancy outside marriage. Others restrict coverage if your weight or other health metrics are outside their guidelines.
Read the terms and conditions before signing up – not after. Some retirees have used these arrangements successfully for years. Others have been left with catastrophic bills that they thought were covered. If you need a stable, predictable safety net, this is not it.
5. Part-time job with benefits
A handful of employers – Starbucks, Costco, REI, UPS and a few others – offer health insurance to part-time workers. For some early retirees, working 20 to 30 hours a week at a job they really enjoy provides both health coverage and money to live on.
This is not glamorous. But benefits equivalent to $2,000 a month, plus a paycheck, could change the retirement math in a hurry.
6. Plan your HSA bridge in advance
If you have a Health Savings Account (HSA) from your working years, you have tax-free money you can spend on qualified medical expenses — including, in many cases, your ACA premium if you receive unemployment compensation, as well as your Medicare premium starting at age 65.
If you’re not making the most of an HSA, and you have several years before retirement, fix that. The triple tax advantages – deductible entry, tax-free growth, tax-free withdrawals for Medicare – make the HSA arguably the most powerful retirement account in the tax code for those who can use it.
We covered the matter in detail in “6 Reasons This Is the Best Type of Retirement Account.”
Some things to include in your plan. Once you turn 65, the standard 2026 Medicare Part B premium will be $202.90 a month, an increase of $17.90 from $185.00 in 2025, according to Centers for Medicare and Medicaid Services.
Higher earners pay more under income-related monthly adjustment amount, or IRMAA, rules. Add Part D, possibly a Medigap plan, and your monthly premiums run $300 to $500 per month, even after Medicare kicks in.
The takeaway from Bob’s story: Don’t model your early retirement budget without a realistic, current-year quote on health coverage.
Go to HealthCare.gov, run a quote at the income level you realistically expect, and add it to your spreadsheet. If the numbers change your timeline, it’s better to know now.
To learn more about what Medicare actually covers — and the gaps that surprise people — check out the retirement planning rules you probably want to bust, including the myth that Medicare handles everything.