Retiring Early? Don’t Forget Health Insurance

If you’re planning to retire early, remember to include the cost of health insurance in your financial plan.

Medicare eligibility begins at age 65, but until that time you’ll need to enroll in a private insurance plan.  Be sure to check your eligibility with COBRA from your prior employer as well.  COBRA premiums can be expensive; however, the coverage is sometimes more extensive than what you can purchase on the Affordable Care Act (ACA) exchange.  COBRA coverage is limited to 18- 36 months, so many younger retirees will eventually need to apply for ACA coverage as a bridge to Medicare.

You can choose from three ACA insurance plan types — bronze, silver, and gold — which offer varying premiums, fees, and deductibles.  If you are fully insured on either an employer healthcare plan or by way of COBRA at the time you apply for ACA, your acceptance is guaranteed regardless of pre-existing health conditions.  Your rates will depend on your age, where you live, your income, the number of people in your household, and whether or not you smoke. The average ACA plan costs $544 for a 40-year old in 2025.[1]

When you shop for a health plan, be sure to compare not just the premiums, but the deductibles, coverage, and copays, which will vary across different plan providers and plan tiers. For people who need regular medical care and prescriptions, a gold plan may be the best option, while a silver or bronze plan might be more appropriate for less frequent consumers of health services. Bronze plans often require significantly higher out-of-pocket spending, which should be weighed against the lower monthly premiums. Most plans require that you visit in-network providers for full coverage.

Under federal law, all plans must cover ten primary health benefits[2]:

1. Outpatient care
2. Emergency room visits
3. Inpatient care
4. Maternity and newborn care
5. Mental health and substance use treatment
6. Prescriptions
7. Rehabilitative and habilitative services
8. Lab work
9. Preventive care and wellness services
10. Pediatric services

Additionally, insurance providers cannot deny coverage based on pre-existing conditions, and parents can keep adult children on their plan until they reach age 26.  The Affordable Care Act also prohibits annual and lifetime caps on benefits payments.

Vision and dental coverage are optional, though dental and vision is mandatory and included in all plans for children under age 19.

Subsidies

In some cases, young retires who have a very tax-efficient investment portfolio and are not yet withdrawing from retirement accounts can have surprisingly low taxable income. People with household incomes below 400% of the federal poverty level qualify for premium tax credits[3], which reduce the cost of ACA health plan premiums.

How to Purchase Coverage

Start at https://www.healthcare.gov/; once you apply, you’ll be directed to browse plans available in your state.

You may also enroll in a health plan through an insurance broker, who can help simplify the process and determine the best plan option for you.  Working with an insurance broker will not increase your rates – the insurance carrier pays the broker’s commission.

Open enrollment for individuals runs from November 1 to January 15. Unless you qualify for a Special Enrollment Period due to a life event or based on income, individuals cannot enroll in or change plans outside this period.

Cost Inflation

Health insurers raised rates by an average of about 7% in 2025[4], an increase that is not unusual relative to past years. Your premiums are also likely to rise with your age, as will your overall need for health care.  It’s important to budget for those increasing costs and to incorporate health spending into your financial plan.

Your Coldstream Wealth Manager can help you understand your options and how to manage the costs of health care going forward.  We can also connect you with a health insurance professional who can help compare the policy options available and determine the best fit for your situation.

[1] “How Much Does Obamacare Cost in 2025?” by Les Masterson and Michelle Megna; Forbes; Jan. 2, 2025; https://www.forbes.com/advisor/health-insurance/how-much-is-obamacare/

[2] “What Marketplace health insurance plans cover” HealthCare.gov; https://www.healthcare.gov/coverage/what-marketplace-plans-cover/

[3] “Eligibility for the Premium Tax Credit” IRS.gov; November 5, 2024; https://www.irs.gov/affordable-care-act/individuals-and-families/eligibility-for-the-premium-tax-credit

[4] “How Much and Why ACA Marketplace Premiums Are Going Up in 2025” by Jared Ortaliza, Matt McGough, Anna Cord, and Cynthia Cox; KFF; August 5, 2024; https://www.kff.org/health-costs/issue-brief/how-much-and-why-2024-premiums-are-expected-to-grow-in-affordable-care-act-marketplaces/

Disclaimer:  This article has been provided for informational purposes only and should not be considered as investment advice or as a recommendation.  This material provides general information only, Coldstream does not offer medical, legal, or tax advice.  Only private health insurance brokers may recommend the application of this general information to any particular situation or prepare an instrument chosen to implement the options discussed herein.