Retiring at 62 sounds wonderful until you realize Medicare doesn’t kick in until 65. For most of us, the age to qualify for Medicare is 65, with a few exceptions: people with certain disabilities, end-stage renal disease (ESRD), or amyotrophic lateral sclerosis (ALS) may qualify at a younger age. That leaves three years where most people need to figure out health coverage on their own.

The average marketplace health insurance plan without Medicare costs about $946 per month for a Bronze plan for 60-year-olds, though costs vary widely by location and coverage level. When you’ve been used to employer coverage picking up most of the tab, suddenly paying $800-$1,200 monthly can shock your retirement budget.

Your Health Coverage Options

COBRA: Extending Your Current Plan

If you had health insurance through your employer, a retired employee can get up to 18 months of health insurance coverage with COBRA. The catch? COBRA insurance typically costs 102% of the total health plan premium. This means you’ll pay both your portion and what your employer was covering, plus a 2% administrative fee.

That employer-subsidized $200 monthly premium you were paying might suddenly become $800 or more. However, COBRA keeps you with the same doctors and prescription coverage you’re used to, which can be valuable if you have ongoing health needs.

What makes COBRA worthwhile:

• Same doctors and coverage you already know
• No waiting periods for pre-existing conditions
• Prescription coverage continues seamlessly
• Buys you time to research other options

When COBRA doesn’t make sense:

• Premiums exceed 15-20% of your retirement income
• You’re healthy with minimal medical needs
• Better marketplace options exist in your area

ACA Marketplace Plans: More Choices, Potential Savings

The Affordable Care Act marketplace offers comprehensive coverage and may cost less than COBRA, especially if you qualify for subsidies. From 2021 through 2025, the ARP and IRA have increased the size of premium tax credits and eliminated the upper income limit for subsidy eligibility.

Here’s where early retirement can actually work in your favor. Nobody purchasing coverage through the Marketplace has to pay more than 8.5% of their household income for the benchmark silver plan through 2025. Since your retirement income is likely lower than your working salary, you might qualify for substantial subsidies even if your savings account looks healthy.

For a 62-year-old couple with $60,000 retirement income, marketplace subsidies could reduce premiums significantly. Without subsidies, they might pay $1,800-$2,200 monthly for coverage. With subsidies, that could drop to $400-$600.

Special enrollment periods

Losing health coverage qualifies you for a Special Enrollment Period. This means you can enroll in a health plan even if it’s outside the annual Open Enrollment Period. You have 60 days after losing your employer coverage to sign up.

If Your Spouse Is Still Working

If your spouse is still working and doesn’t intend to retire soon, joining their employer-sponsored plan may be the most cost-effective option. Many employer plans allow you to add a spouse, though expect the monthly premiums to increase.

This strategy works particularly well if your spouse has good coverage through a larger employer. The group rates are typically much better than individual marketplace premiums, even with the additional cost of adding you to the plan.

Short-term and Alternative Options

Short-term medical insurance can provide temporary coverage, but these plans don’t meet ACA standards. They can exclude pre-existing conditions and may not cover prescription drugs adequately. Short-Term Medical Plans: Combining telehealth services and prescription discounts can provide temporary coverage.

Medicaid is the most affordable health insurance for retirees under 65. However, eligibility is dependent on your household’s income.

What to Watch Out For

The 2026 Subsidy Changes

These subsidy enhancements will remain in effect at least through the end of 2025, although Congress would have to take action to extend them into 2026 or beyond. If Congress doesn’t extend the current enhanced subsidies, your marketplace premiums could jump significantly in 2026. Plan accordingly and stay informed about potential changes.

Medicare Enrollment Timing

Don’t miss your Medicare enrollment window. Your Initial Enrollment Period (IEP) is a 7-month period that begins 3 months before the month you turn 65, includes your birthday month, and ends 3 months after you turn 65. Missing this window could result in late enrollment penalties.

COBRA and Medicare Overlap

If you have COBRA before signing up for Medicare, your COBRA will probably end once you sign up. Plan the transition carefully to avoid coverage gaps.

Making Your Decision

Start planning at least six months before you retire. Compare COBRA costs to marketplace options using the KFF Health Insurance Marketplace Calculator or the healthcare.gov subsidy calculator. Factor in your expected medical needs, preferred doctors, and prescription costs.

Consider working with a licensed insurance agent who can walk you through marketplace options. Many offer free consultations and can help you understand subsidy eligibility and plan differences.

The 62-65 gap might seem daunting, but with careful planning, you can find coverage that fits both your health needs and retirement budget. The key is understanding your options and starting the research process early, before you’re scrambling to find coverage after your last day of work.