Healthcare in Retirement Guide

Pre-65 ACA strategy · COBRA · Medicare Parts A–D · Medigap vs. Advantage · IRMAA · HSA · Long-term care

Healthcare is one of the largest and most unpredictable expenses in retirement. A couple retiring at 62 can expect to spend $300,000–$400,000 on healthcare costs from retirement through end-of-life, not including long-term care. With proper planning — especially around ACA subsidies and income management — you can dramatically reduce that cost.

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Pre-65 options COBRA ACA marketplace & subsidies Medicare at 65 Medicare enrollment Q&A Medigap vs. Advantage IRMAA surcharges HSA strategy Long-term care

Pre-65Your Options Before Medicare

If you retire before 65, you have a gap to fill. Options from cheapest to most expensive:

Option	Best when	Typical monthly cost	Watch out for
Spouse's employer plan	Spouse still working	$0–$400/mo employee share	Spouse must stay employed
ACA marketplace (subsidized)	MAGI under ~400% FPL	$0–$600/mo with subsidy	Income cliffs; repayment risk
COBRA	Short gap; high needs	$600–$1,800/mo	Max 18–36 months only
ACA unsubsidized	Income too high for subsidy	$800–$2,200/mo	Very expensive for older retirees
Part-time job with benefits	Willing to work part-time	Benefit cost varies	Affects SS planning

COBRACOBRA: Short Bridge, High Cost

COBRA lets you continue your employer plan for up to 18 months (sometimes 36 for qualifying events like spouse's death).
You pay the full employer + employee premium plus 2% admin fee — often $1,200–$2,000/month for family coverage.
Best used when: (a) you have a lot of in-flight care and switching networks mid-year would be disruptive, or (b) you plan to return to work within 18 months.
Once COBRA expires, losing it is a Special Enrollment Period (SEP) for ACA marketplace, even outside Open Enrollment.

Don't use COBRA just to “avoid making decisions.” For most early retirees with low income, an ACA silver plan with subsidies will be significantly cheaper.

ACAACA Marketplace & Subsidies

ACA subsidies (Premium Tax Credits) are based on MAGI relative to the Federal Poverty Level (FPL). The temporary enhanced credits from the American Rescue Plan (2021) and Inflation Reduction Act expired at the end of 2025. For 2026 coverage, the pre-2021 rules apply again: eligibility runs from 100% to 400% of FPL, the benchmark-plan contribution scales from roughly 2% to about 10% of household income, and there is a hard cutoff at 400% FPL — the “subsidy cliff.” The figures below use the 2025 HHS poverty guidelines (48 contiguous states), which govern 2026 marketplace coverage:

Household MAGI — 1 person	Household MAGI — 2 people	% FPL	2026 premium tax credit
Under $15,650	Under $21,150	Under 100%	Generally no marketplace PTC (may qualify for Medicaid in expansion states)
$15,650 – $23,475	$21,150 – $31,725	100–150%	Largest PTC; benchmark plan costs ~2–4% of income (plus cost-sharing reductions on Silver plans)
$23,475 – $39,125	$31,725 – $52,875	150–250%	PTC plus cost-sharing reductions; benchmark ~4–6% of income
$39,125 – $62,600	$52,875 – $84,600	250–400%	PTC only; benchmark contribution rises to about 9.96% of income near 400% FPL
Over $62,600	Over $84,600	Over 400%	No premium tax credit — the subsidy cliff (reinstated for 2026)

ACA rules change frequently and Congress could act again; confirm the current year's applicable percentages and poverty guidelines at Healthcare.gov before relying on these bands.

Income management trick: By doing Roth conversions carefully and drawing from Roth first, you may be able to keep MAGI in the 150–250% FPL range — earning substantial ACA subsidies (and Silver-plan cost-sharing reductions) while still building Roth wealth.

Subsidy cliff warning (2026): With the enhanced credits expired, MAGI even $1 over 400% of FPL means zero premium tax credit for the year — not a gradual phase-out. For an older couple, an unsubsidized ACA plan can run $20,000–$30,000+ a year, so project income carefully. Roth withdrawals are ideal precisely because they don't count toward MAGI.

MedicareMedicare at 65: Parts A, B, C & D

Part	Covers	2,026 Premium	Key deductible/out-of-pocket
Part A	Hospital inpatient, skilled nursing	$0 (if 40+ quarters worked)	$1,736/benefit period deductible
Part B	Doctors, outpatient, preventive	$$202.90/mo base (IRMAA may add more)	$283 annual deductible, then 20% coinsurance
Part C (Advantage)	Bundled A+B+D via private insurer	$0–$100/mo (varies widely)	Annual OOP cap (varies, max $9,250 in-network)
Part D	Prescription drugs	$0–$60/mo (plan dependent)	$2,100 OOP cap (Inflation Reduction Act)

Enrollment windows: You have a 7-month Initial Enrollment Period (IEP) centered on your 65th birthday month. Missing it without creditable coverage means a permanent 10% per year late penalty on Part B.

Medicare Q&AMedicare Enrollment: Common Questions

⚠ Three widespread Medicare myths — and the real answers

Myth 1: “Medicare Part A is mandatory when you turn 65.”

Reality: Part A is not mandatory. There is no law requiring you to enroll in Part A at 65. You can delay it. The only scenario where you have no choice is if you are already collecting Social Security benefits — in that case Part A starts automatically because the two programs are linked and you cannot receive SS while refusing Part A. If you have not yet claimed SS, you decide when and whether to enroll in Part A.

Myth 2: “Part B is also required at 65.”

Reality: Part B is completely voluntary. It has a monthly premium (~$$202.90/month in 2,026) and you can skip it at 65 without any penalty as long as you have qualifying employer coverage through active employment at a company with 20 or more employees. Many people working past 65 with good employer benefits delay Part B and save $$202.90+ per month. The penalty only applies if you delay without that qualifying coverage.

Myth 3: “Medicare Advantage (Part C) is free — I don't pay anything.”

Reality: You always pay the Part B premium, no matter which Medicare plan you choose. The “$0 premium” on many Advantage plans means the plan itself charges no additional monthly fee — but the ~$$202.90/month Part B premium continues regardless. That is not the only cost to consider: Advantage plans have provider networks (you may not be able to see your current doctor), require prior authorizations for many procedures, and can expose you to out-of-pocket costs up to $9,250 per year in-network if you have a serious illness. The $0 label refers to one line item, not total cost of care.

Q: What are Part A and Part B, and when do I enroll?

Initial Enrollment Period (IEP): A 7-month window — the 3 months before your 65th birthday month, your birthday month, and the 3 months after. This is your primary enrollment window for both Part A and Part B.
Automatic enrollment: If you are already receiving Social Security benefits when you turn 65, you are enrolled in both Part A and Part B automatically. You will receive your Medicare card in the mail about 3 months before your 65th birthday.
Part A (hospital inpatient, skilled nursing): Premium is $0 if you have 40+ quarters of Medicare-covered work. Almost everyone takes Part A immediately.
Part B (doctors, outpatient, preventive): Costs ~$$202.90/month (2,026 base). It is voluntary — you must actively enroll or opt out.
Late enrollment penalties: Missing Part B without qualifying creditable coverage adds a permanent 10% surcharge per full 12-month period you delayed. A 2-year delay means +20% on your Part B premium for life. Late Part A penalty (when it applies): +10% for twice the number of years you delayed.

Q: When can I delay Part B enrollment?

You may delay Part B only if you have active employer-sponsored group health coverage through a current job at an employer with 20 or more employees (you or your spouse).
Qualifying coverage types: Active employer group health plan as a current employee or current employee's dependent. That's it.
Coverage that does NOT qualify for delay: COBRA, retiree health plans, marketplace (ACA) plans, VA coverage, or a spouse's retiree coverage. Enrolling in these plans without also taking Part B starts the late penalty clock.
Special Enrollment Period (SEP): When your qualifying employer coverage ends (or you stop working), you have an 8-month SEP to enroll in Part B penalty-free. Do not wait for Open Enrollment — the SEP starts when employment or coverage ends, whichever is first.
Small employer exception: If your employer has fewer than 20 employees, Medicare becomes the primary payer at 65 even if you have employer coverage. You should enroll in Part B on time to avoid gaps in coverage and penalties.

Strategy: If you're still working at 65 with qualifying employer coverage and good benefits, delaying Part B can save $$202.90+/month. Just set a reminder to enroll within 8 months of leaving your job or losing the coverage.

Q: When can I delay Part A enrollment?

Since Part A is free for most people, nearly everyone enrolls at 65 regardless. The main reason to delay is to preserve HSA contribution eligibility (see next question).
The same SEP rules as Part B apply: active employer coverage through an employer with 20+ employees.
Social Security lock-in: If you file for Social Security retirement benefits at any age, Part A enrollment is automatic and retroactive. You cannot receive SS benefits while refusing Part A — they are linked. If you want to delay Part A, you must also delay claiming Social Security.
Retroactive enrollment: When you do apply for Part A, coverage can be backdated up to 6 months from your application date. This is a critical HSA planning detail (see below).

Q: How does Part A enrollment affect my HSA contributions?

Enrolling in any part of Medicare (Part A, Part B, or Part D) makes you immediately ineligible to make new contributions to a Health Savings Account (HSA). The prohibition applies to both employer and personal contributions.
Existing HSA funds are unaffected — you can continue to spend your accumulated HSA balance tax-free on qualified medical expenses at any time, including after Medicare enrollment.
Medicare premiums as HSA expenses: After age 65, you can use HSA funds to pay Medicare Parts B, D, and Advantage premiums tax-free — a valuable source of tax-free retirement spending.

Backdating trap: When you apply for Part A, Medicare can backdate your coverage up to 6 months. This means your HSA ineligibility also backdates — any HSA contributions made during that 6-month window become excess contributions subject to a 6% excise tax.

Rule of thumb: Stop making HSA contributions at least 6 months before you plan to apply for Part A or Social Security benefits. If you turn 65 in June and plan to claim SS in October, stop HSA contributions in April (6 months before the October application).

Delay strategy: If you have qualifying employer coverage and an active HSA, consider delaying both Part A and Social Security beyond 65 to keep contributing to your HSA. Each year of delay on SS also increases your eventual benefit by ~8%. The combination — ongoing HSA contributions plus deferred SS credits — can be particularly powerful for high earners who can afford to wait.

Q: When should I choose Medicare Advantage (Part C) instead of Original Medicare?

Medicare Advantage bundles Parts A, B, and usually D into a single private plan, often at $0 additional premium beyond your Part B cost. Many plans add dental, vision, and hearing benefits Original Medicare doesn't cover.
Best fit for: people who are generally healthy, live in one area year-round, have doctors already in the plan's network, and prefer low predictable monthly costs over low out-of-pocket risk.
Network limitation: Most plans are HMO or PPO — you may need referrals for specialists, and out-of-network care can be expensive or uncovered. Verify your doctors and hospital are in-network before enrolling.
Out-of-pocket exposure: Annual out-of-pocket maximums can reach $9,250 (in-network, 2,026). A bad health year can cost significantly more than Medigap premiums would have.
Prior authorization: Advantage plans frequently require pre-approval for procedures, specialist visits, and drugs — this can delay care in ways Original Medicare does not.
Switching back is harder: After your initial enrollment window, moving from Advantage back to Original Medicare + Medigap typically requires passing medical underwriting in most states. If you develop health issues while on Advantage, you may not qualify for Medigap at standard rates.

Medicare Advantage works well for healthy retirees who stay local and want to minimize monthly premiums. If you travel frequently, have complex medical needs, or value predictability, Original Medicare + Medigap is usually the better long-term choice.

Q: When should I choose Medigap Plan G (gap insurance)?

What Plan G covers: Plan G is the most comprehensive Medigap supplement available to new enrollees. It pays everything Original Medicare doesn't cover — except the Part B deductible ($283 in 2,026). After you meet that one deductible, your out-of-pocket for covered services is effectively $0.
Premiums: Typically $100–$300/month depending on your age, location, and insurer. You also continue paying your Part B premium. Shop multiple insurers — benefits are identical by law, so the only difference is price and company reputation.
Best fit for: people with complex or chronic health conditions, frequent travelers (no network restrictions — any provider accepting Medicare nationwide), or those who strongly value predictable, capped healthcare costs.
No network, no referrals, no prior auth: With Original Medicare + Plan G, you can see any doctor or specialist in the U.S. who accepts Medicare, without a referral or insurance pre-approval.
Enroll during your Medigap Open Enrollment Period: This is a one-time 6-month window that starts the month you turn 65 and are enrolled in Part B. During this window, insurers must sell you any Medigap plan at standard rates regardless of pre-existing conditions. Outside this window, most states allow medical underwriting — you can be denied or charged more based on your health history.

Plan G vs. Plan F: Plan F (which also covers the Part B deductible) is no longer available to people who became eligible for Medicare after January 1, 2020. For most new enrollees, Plan G is the gold standard — the slight extra annual cost to cover the $283 deductible out-of-pocket is almost never worth a Plan F premium difference.

Don't miss your Medigap open enrollment window. If you delay Part B using an employer SEP, your Medigap window opens when you enroll in Part B — not when you turn 65. If you enroll in Medicare Advantage first and later want to switch to Medigap Plan G, you will likely face medical underwriting in most states and could be denied or charged higher rates.

CoverageMedigap vs. Medicare Advantage

Feature	Medigap (Supplement)	Medicare Advantage (Part C)
Network	Any doctor accepting Medicare nationwide	Usually HMO/PPO network (regional)
Premiums	$100–$300/month + Part B premium	Often $0/month + Part B premium
Out-of-pocket	Very predictable; Plan G: $0 after deductible	Unpredictable; max OOP up to $9,250/yr
Prescription drugs	Requires separate Part D plan	Usually bundled
Prior authorization	Rarely required	Common for procedures
Best for	Those wanting predictability, traveling	Those wanting low premiums, healthy

Medigap Plan G (covers everything except the Part B deductible) is the most comprehensive and predictable option. If you can afford the premiums at 65, locking in during the Open Enrollment Period avoids medical underwriting.

IRMAAMedicare IRMAA Surcharges

Medicare premiums increase on a sliding scale based on your MAGI from 2 years prior. In 2,026 (based on 2024 MAGI):

MAGI (Single)	MAGI (MFJ)	Part B Monthly Add	Part D Monthly Add
≤ $109,000	≤ $218,000	+$0	+$0
$109,000+–$137,000	$218,000+–$274,000	+$$81.20	+$$14.50
$137,000+–$171,000	$274,000+–$342,000	+$$202.90	+$$37.50
$171,000+–$205,000	$342,000+–$410,000	+$$324.60	+$$60.40
Above $205,000	Above $410,000	+$$446.30	+$$83.30

In the top row shown above, a couple pays roughly $12,700/year more in Medicare premiums than the base amount (and more still above $750,000 MAGI). This is why Roth conversion planning must account for IRMAA look-back years.

HSAHealth Savings Account (HSA) Strategy

An HSA is the only triple-tax-advantaged account: contributions are pre-tax, growth is tax-free, and withdrawals for qualified medical expenses are tax-free.

Contribution limits (2,026): $4,400 (self-only); $8,750 (family); +$1,000 catch-up if 55+. Must have an HDHP.
Stop contributing at 65: Enrolling in Medicare makes you ineligible for new HSA contributions (even Part A alone). Plan your Medicare enrollment date carefully.
Best strategy: Contribute the maximum every year while employed. Invest in index funds inside the HSA. Pay medical expenses out-of-pocket and keep receipts forever. Withdraw tax-free later against years of accumulated receipts.
After 65: You can use HSA funds for any purpose (including Medicare premiums), though non-medical withdrawals are taxed as ordinary income — like a traditional IRA. Medical withdrawals remain 100% tax-free.

Medicare premiums (Parts B, D, Advantage) and COBRA premiums can be paid with HSA funds tax-free after 65. This is a powerful source of tax-free spending in retirement.

LTCLong-Term Care Planning

Medicare covers short-term skilled nursing but does NOT cover custodial care (help with daily activities). Long-term care is one of the largest uncovered risks in retirement.

Care type	Median annual cost (2024)
Home health aide (44 hrs/week)	~$62,000/year
Assisted living (private room)	~$64,000/year
Memory care	~$78,000–$95,000/year
Nursing home (semi-private)	~$94,000/year
Nursing home (private room)	~$108,000/year

Traditional LTC insurance: Buy between ages 55–60 to lock in lower premiums. Premiums are not guaranteed and can rise significantly.
Hybrid policies (life/LTC): Linked benefit policies with a death benefit if LTC is unused. More predictable cost.
Self-insure: Viable if combined portfolio exceeds ~$2M. Keep a dedicated LTC reserve bucket.
Medicaid: Covers nursing home care for those with very limited assets — requires spend-down of most savings first.

Related guides & scenarios

🏛️ Official Government Resources

Medicare.gov: Medicare Costs ↗ — Official premiums, deductibles, and out-of-pocket costs for Medicare Parts A, B, C, and D.
Medicare.gov: When Medicare Coverage Starts ↗ — Enrollment periods, late enrollment penalties, and Special Enrollment Period rules.
Healthcare.gov: ACA Marketplace ↗ — Compare ACA health plans and check subsidy eligibility during the bridge-to-Medicare years.
IRS Publication 969: Health Savings Accounts (HSAs) ↗ — HSA contribution limits, qualified expenses, and rules for using HSA funds in retirement.