You may be ready to leave work before you are eligible for Medicare. But before choosing your retirement date, there is an important question to answer: How will you replace your employer’s health insurance?

For most people, Medicare eligibility begins at age 65. Retiring earlier means arranging coverage for the months or years in between. That cost belongs in your retirement budget alongside housing, travel, and everyday expenses.

The right approach depends on your household, medical needs, and income. These five steps can help you evaluate your options before your last paycheck arrives.

1. Confirm When Your Current Coverage Ends

Start with your benefits department. Ask for the exact date your health insurance will end, whether any retiree benefits are available, and what continuing your current coverage would cost. Your last day of work and your last day of coverage may be different.

Losing employer health coverage generally allows you to enroll in a marketplace plan outside annual open enrollment. Do not wait until your coverage has ended to investigate the deadlines, required documents, and effective date of a replacement plan.

If you plan to join a spouse’s employer plan, contact that benefits department promptly. The enrollment window is usually just 30 days after losing other coverage. Confirm the plan’s rules before you retire.

Sources: HealthCare.gov — Coverage for Retirees; U.S. Department of Labor — A Worker’s Guide to Health Benefits Under COBRA

2. Compare Your Coverage Options

A Spouse’s Employer Plan

If your spouse is still working, joining their plan may be a practical option. Compare the additional premium, deductible, prescription coverage, and provider network. Also ask whether a spouse surcharge applies and what happens when your spouse retires.

COBRA Continuation Coverage

COBRA can temporarily preserve your existing employer coverage, usually for up to 18 months. You generally pay the full premium, including the share your employer previously covered, and an administrative charge may apply. Ask for the actual monthly price rather than estimating it from your payroll deduction.

Keeping a familiar plan can be helpful during ongoing treatment. But someone retiring at 60 needs a longer-term solution than an 18-month extension. Check the specific continuation rights and duration available under your plan.

Source: U.S. Department of Labor — COBRA Continuation Coverage

An ACA Marketplace Plan

Connecticut residents can explore coverage through Access Health CT, the state’s health insurance marketplace. You may qualify for financial assistance based on household income and other eligibility requirements. Access to other coverage can affect eligibility, so compare your actual options before assuming a subsidy is available.

Obtain a current quote for the year you need coverage. Premiums, available plans, and assistance rules can change, making an older estimate unreliable for a new retirement date.

Employer Retiree Coverage

Some employers offer retiree health benefits. If yours does, review the premium, dependent coverage, and how benefits change at Medicare eligibility. Being enrolled in retiree coverage generally prevents you from receiving marketplace premium tax credits, even if your income would otherwise qualify.

Source: HealthCare.gov — Coverage for Retirees

Be Careful When Switching From COBRA

Voluntarily dropping COBRA generally does not create a new marketplace special enrollment opportunity. Exhausting COBRA coverage is different. Before canceling, confirm that you can enroll in another plan and know when that coverage will begin.

Source: HealthCare.gov — Switching From COBRA to Marketplace Coverage

3. Build a Budget Beyond the Premium

A lower monthly premium does not necessarily mean lower overall costs. Review the deductible, copays, coinsurance, and annual out-of-pocket maximum alongside the premium. Check your medications, preferred doctors, hospitals, and any care you expect to receive while traveling.

Create two estimates: a typical year based on your usual care, and a more expensive year involving substantial treatment. For the second estimate, annual premiums plus the plan’s in-network out-of-pocket maximum can be a useful starting point. Allow separately for services the plan excludes and potential out-of-network costs.

Also ask what happens to your deductible if you change plans midyear. Amounts already paid under one plan may not transfer to the next. Dental and vision expenses may require their own budget.

4. Coordinate Coverage With Retirement Income

Marketplace assistance is based on expected household income for the coverage year. Leaving work does not automatically mean your income is low enough to qualify. Wages earned before retirement still count toward the annual estimate.

Taxable retirement withdrawals, pension income, investment gains, interest, and dividends can affect eligibility. Marketplace income also includes tax-exempt interest and nontaxable Social Security benefits. Qualified Roth distributions generally do not count. Report income changes during the year; an inaccurate estimate can result in repaying assistance at tax time.

Source: HealthCare.gov — What to Include as Income

This makes the way you fund retirement spending important. A withdrawal strategy should account for insurance costs as well as income taxes. Before completing a large Roth conversion or realizing a substantial investment gain, ask your tax professional and financial advisor to assess the effect on marketplace assistance.

For example, someone retiring halfway through the year may have wages, a final bonus, and retirement withdrawals in the same tax year. Their first full year of retirement could look very different. Prepare separate income and coverage estimates for each year instead of assuming the same assistance will continue.

5. Plan the Transition to Medicare

Begin reviewing Medicare several months before turning 65. The initial enrollment period generally lasts seven months: the three months before your birthday month, your birthday month, and the three months afterward. Enrollment timing affects when coverage starts.

Do not assume COBRA, retiree insurance, or a marketplace plan lets you delay Medicare Part B without consequences. Coverage through your or your spouse’s current employment follows different rules. Confirm which rules apply to you and coordinate the end of your existing policy with Medicare’s start date.

If your spouse is younger, plan for their coverage separately. Medicare covers individuals, so your enrollment does not automatically cover your spouse. Review the remaining household policy and update the marketplace application as appropriate.

Source: Medicare.gov — When Can I Sign Up for Medicare?

Make Health Coverage Part of Your Retirement Decision

Before setting a retirement date, identify the plan you expect to use, confirm its enrollment requirements, and estimate both its premiums and potential medical expenses. Then test those costs against the income you expect to draw from your savings and other sources.

Revisit the decision each year until Medicare begins. Your income, healthcare needs, and available plans may change, and the best option for your first year of retirement may not be the best option for the next.

At Towerto Private Wealth, we help clients evaluate how healthcare expenses fit into their broader retirement plan. If you are considering retirement before 65, contact us to discuss how your retirement timeline, income strategy, and healthcare budget fit together.

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through TOP Private Wealth, a registered investment advisor and separate entity from LPL Financial

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