A Guide to Health Insurance for Retirees

After all your hard work, you deserve to enjoy your retirement without worrying about your health insurance expenses. Despite rising healthcare costs, there are several ways to get comprehensive coverage for when you’ll need it most. Here are some health insurance options for early retirees and those who retire later in life, too. A financial advisor can help you compare these options and choose the coverage that best fits your retirement plan.

Medicare

Medicare is a federal program designed to supplement healthcare costs for the elderly in America. To be eligible you must be a U.S. citizen or have been a permanent legal resident for at least five years. You or your spouse would also have to have paid your Social Security taxes for at least 10 years. Uncle Sam has been taking these from your paycheck, so you’re most likely in the clear.

Some people who qualify get enrolled automatically. But if you have to apply for Medicare, make sure you do it during the open-enrollment period. This spans from Jan. 1 to March 31 each year.

Medicare isn’t one stand-alone program, however. It exists as a big alphabet soup of different pieces. Each carries its own set of rules and, yes, costs. Here’s a breakdown of the major areas of Medicare:

• Medicare Part A covers you when you’re hospitalized. Most people don’t pay premiums for this service. However, it carries a deductible. For 2025, it stands at $1,676.
• Medicare Part B covers services like doctor visits, medical equipment and certain tests. This piece carries a premium of $185 a month in 2025. However, you won’t owe a premium if you’re already receiving Social Security, Railroad Retirement or Civil Service benefits.
• On the other hand, there is Medicare Part C or Medicare Advantage. This basically functions as a separate health plan offered through private insurers. That said, each plan has its own costs and benefits. So it’s important to shop around for one that works best for your retirement budget.
• Medicare Part D covers prescription drugs. Premiums for this plan depend largely on your income.

Taking Advantage of a Health Savings Account (HSA)

As you can see, staying healthy in retirement can come at a heavy price. But you can start investing in your health today. If you’re enrolled in an eligible high-deductible health plan (HDHP), you can pair it with a health savings account (HSA).

These are tax-advantaged savings accounts designed to help you pay for future medical expenses. They work similarly to an individual retirement account (IRA). You can make pre-tax contributions toward an interest-bearing account or a portfolio built with stocks, bonds and mutual funds. Your earnings grow tax free. Plus, you can make tax-free withdrawals any time as long as you use the money to cover qualified health expenses.

Your employer may offer an HSA already. Otherwise, you can open one at most banks and financial institutions. And of course, you’re generally eligible for Medicare once you reach age 65.

Health Insurance Marketplace

When you retire, you can sign up for a plan through the federal Health Insurance Marketplace. Anyone can sign up, a marketplace insurance plan can’t reject you or charge you more due to pre-existing conditions. However, the “affordable” part of the Affordable Care Act (ACA) depends on a range of factors including age, existing medical conditions, type of coverage, and location. For example, data from the non-profit Kaiser Family Foundation that tracks average premiums costs in all 50 states found it can range as low as $325 (New Hampshire) to as high as $1,277 (Vermont)¹.

These costs are also projected to increase sharply in 2026, with KFF anticipating an average increase of 18%² for ACA premiums due to factors such as tariffs, an aging population, and changes to Medicare, Medicaid and certain tax credits in the One Big Beautiful Bill Act (OBBA). So make sure you shop around for the best priced plans that can cover the healthcare services you need the most. But if you make below a certain income, you may be eligible for lower costs via federal subsidies.

Still, you can find plans that are more beneficial to you outside the government exchange.

Employer-Sponsored Health Insurance for Retirees

YYour current employer may sponsor specific healthcare benefits designed for its retirees. Depending on how long you’ve worked for your company, you may be able to tap into these even if you retire today. For example, some companies provide group health insurance plans for early retirees. In such cases, your company may supplement your medical expenses by covering part of the premium for these plans even after you’ve left the office.

These benefits are most commonly found at large employers with at least 200 employees. According to a 2024 KFF study³, 21% of large employers offered retiree health coverage in 2023, a significant decline from the 29% that did so in 2020 and a marked decrease from the 1988 peak when 66% of employers did so. You should reach out to your benefits department as part of your retirement planning to learn all about their health insurance plans, as well as how they change when employees retire.

Even if your employer doesn’t provide its employees with specific retiree benefits, a special provision in a government program allows you to keep your employer-sponsored health insurance plan to a certain extent after you leave your job.

Keeping Your Employer’s Health Insurance Plan Through COBRA

If you’re currently enrolled in an employer-sponsored health insurance plan you like, you may be able to keep it temporarily. This is made possible through the Consolidated Omnibus Budget Reconciliation Act (COBRA). The program typically applies to companies with at least 20 employees, as well as some state and city government entities.

It allows you and your family to keep your employer-sponsored health insurance plan for up to 18 months after you retire or lose your job. However, you’d be responsible for the entire premium. The insurance company can also slap up to 2% on the price tag for administrative costs.

But if the plan is still worth the price, you can trigger COBRA by contacting the health plan within 30 days after leaving your company. The insurance carrier will then contact you and provide you with instructions on how to elect COBRA. Because these plans change frequently, pay close attention to the details. You’d want to make sure your preferred specialists stay in the insurer’s network, for example.

But don’t fret if you come down with sticker shock after you leave your job. You have more options.

Private Health Insurance

You can buy a health insurance plan directly from an insurance company outside the federal marketplace. A health insurance agent can also help. You should seek a health insurance agency in your area that holds contracts with the major local providers.

An agent can help you find the best health plans based on your individual needs and financial situation. You can also turn to the State Health Insurance Assistance Program.

Enroll in Spouse’s Plan

If you retire before your spouse, you may be able to list yourself as a dependent on their employer-sponsored health plan. Some companies even offer retiree health benefits to the spouses of their employees. If so, figure out eligibility requirements as well as premium prices.

In addition, your kids may be eligible to enroll in the state and federal Children’s Health Insurance Program.

Key Enrollment Deadlines to Look Out For

When you retire, health coverage decisions are tied closely to enrollment deadlines. Medicare, in particular, operates on strict timelines. Your initial enrollment period begins three months before the month you turn 65, includes your birthday month and continues for three months afterward. If you miss this window, you may have to wait until the general enrollment period, which runs from January through March each year, with coverage beginning in July. That delay could leave you without insurance for several months. It’s worth noting that 65 is still two years before full retirement age for most Americans. 

Late enrollment can also create lasting financial consequences. Medicare adds a permanent surcharge to your monthly premium, as high as 10%, if you miss the sign-up window without qualifying for a special exception. The penalty lasts for twice as long as your delay, so if you’re two years late to enroll you pay the penalty for four years. Prescription drug coverage through Medicare Part D carries its own rules. Going more than 63 days without approved drug coverage triggers a late penalty that is added to your premium for as long as you remain enrolled. You’ll be charged 1% per month of delay, so if you waited a year, for example, your penalty would be 12%. And unlike the other Medicare penalties this one never expires.

Some retirees delay Medicare because they still receive health insurance through an employer. In those cases, there is a special enrollment period that lasts eight months after employer coverage ends. Retirees who miss that period face the same late penalties and coverage gaps as those who miss the initial enrollment period. For anyone planning to continue working past retirement age, it is important to keep track of when employer coverage will end and how that interacts with Medicare.

COBRA and Marketplace coverage also have their own deadlines. COBRA allows you to extend your employer plan for up to 18 months after retirement, but you must elect coverage within 60 days of leaving your job or losing your group plan. Also, if you are enrolled in COBRA while eligible for Medicare it may only pay for a portion of your healthcare services. 

If you turn to the Health Insurance Marketplace, enrollment typically runs from November through January. However, retirement is considered a qualifying life event, which creates a special enrollment window. Missing these dates may limit your options or force you to wait until the next open enrollment period.

Altogether, keeping track of deadlines is as important as choosing the right health plan. The penalties for late enrollment can last a lifetime, and gaps in coverage can leave you responsible for high out-of-pocket costs. Before retiring, it’s best to map out not just the type of coverage you want but also the timeframes that apply. Doing so can make the transition smoother and help you avoid paying more than necessary for the same benefits.

Bottom Line

There are several ways you can reduce your medical expenses. You may be able to walk away with your current employer plan or find one that meets your needs and budget either on the federal exchange or in the private industry. It can also help to start saving through an HSA. Whatever route you take, make sure you dig into the details and costs of each because they can vary widely based on a number of factors unique to you and your circumstances.

Retirement Healthcare Tips

• The cost of healthcare can vary widely by location. So you may want to retire in a place where it dips the lowest. To help, we’ve developed a study on the best states for healthcare access.
• Retirement planning and saving for healthcare expenses are two of the most important aspects of your financial life. But you don’t have to figure it all out on your own. If you’d like some professional guidance, a financial advisor can help. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

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