Retiring early? Consider these 5 health insurance options
Key Takeaways
If you decide to retire early, before age 65, you won't yet be eligible for Medicare, so you'll have to purchase your own health insurance.
Most early retirees buy health insurance on the federal marketplace, taking advantage of a subsidy granted by the Affordable Care Act. Others activate COBRA to retain their prior employer-sponsored plan, opt for one of the bare-bones plans passed by the Trump Administration, or get a part-time job that offers coverage.
Other options, like foregoing coverage altogether, securing health insurance internationally, paying cash for medical needs overseas, or opting for health share ministries, tend to be inadequate for most people (and potentially devastating to their finances).
Many people assume that they will become eligible for Medicare when they retire, but this isn’t always the case, especially for those who retire early. Increasing numbers of physicians are choosing to retire early—primarily due to burnout and related effects.
If you are one of these physicians, and you plan to stop working before age 65, you will need to secure health insurance on your own.
Types of coverage
Before you go shopping for health insurance, think about the type of coverage you want. Plans with the most comprehensive coverage and low deductibles often have much higher premiums than plans with less comprehensive coverage and higher deductibles. You’ll have to decide what is right for you.
Your current health situation and whether or not you have ongoing medical issues or chronic conditions may sway you toward one type over another.
Once you decide the type of coverage you want, you’ll have to do the work to figure out how to purchase it. Here are some options for where to look.
Buy it on the marketplace
You can go to the federal healthcare marketplace or your state health insurance exchange, input your information, and browse through the different plans online.
"If you’ve never done this before, prepare yourself for some sticker shock—the plans aren’t cheap."
— Lisha Taylor, MD, MPH
When I transitioned from fellowship to attending, I took a few months off work and purchased health insurance on my own during that time. As a 32-year-old female who was healthy with no medical conditions, I still had to pay around $350 per month. Studies show the average monthly premium is approximately $470/month for someone who is age 40, $640/month for someone who is 50, and around $970/month for someone who is age 60.[]
Thankfully, with the Affordable Care Act, aka Obamacare, many people are eligible for a subsidy when buying health insurance on the marketplace, which is based on your taxable income (not your net worth).
In fact, many physicians who retire early with millions in retirement accounts or other investments can qualify for a subsidy, so you may be eligible, too.
If you stop working, your taxable income will be much lower than when you were actively practicing. As long as you don’t withdraw too much from your work retirement accounts each year, and you have an annual taxable income under 4x the federal poverty line, then you should qualify. As of 2024, the Federal Poverty Level (FPL) is $58,320 for a single person, $78,880 for a family of two, and $120,000 for a family four.[]
If your taxable income is higher than your relevant FPL, or if you withdraw more than that amount each year from your investment accounts, then you shouldn’t expect a subsidy, and will most likely have to pay full cost. Most people pay around $500 per month (for a single person) and up to $1,500 for a family in health insurance premiums each month.
Elect COBRA coverage
COBRA allows you to continue the health insurance plan you had at your most recent job for up to 18 months after you leave (with a few exceptions). This is a convenient option, as it allows you to maintain your current health insurance and have access to all your current doctors, but there is a downside: It’s pricey.
During employment, your employer paid the majority of your health insurance premium and you paid only a fraction of the total cost. If you opt for COBRA coverage, your employer won’t be paying part of the premium anymore, so you will be on the line to cover the full cost. Many people don’t realize how much their jobs subsidized their health insurance and find that paying the full cost of monthly health insurance premiums themselves is prohibitively expensive.
Costs vary based on the type of insurance, but the average annual cost for employer-sponsored insurance is $659 per month for a single person, or $1,872 for a family.[]
Consider 'Trumpcare'
The Trump administration passed legislation that allows people to buy cheap, bare-bones insurance plans with few benefits for a short period of time (up to 12 months). These plans often have high deductibles and exclude coverage for things like prescriptions and costs related to maternal care and mental health.
Given these factors, they are not great plans for those who go to the doctor often, take many medications, or have several chronic health conditions. However, they may be a decent, temporary option for people who are young or don’t use healthcare very often.
Go without health insurance
Given the cost of health insurance, some people opt to forgo it altogether and go uninsured. They are healthy and don’t want to pay hundreds or thousands of dollars per month in premiums.
"While this may be the most cost-effective solution, I would advise against it."
— Lisha Taylor, MD, MPH
All it takes is one illness or expensive hospital visit to rack up tens of thousands of dollars in charges that you may not be able to repay—something you’re sure to have witnessed from past patients. In fact, unpaid medical bills are one of the main reasons people declare bankruptcy.[]
Get a part-time job
This may seem counterintuitive, but you’d be surprised how many people pick up part-time jobs in retirement. It’s a great time to pick up a side job teaching, working part-time at a grocery store, or serving as an advisor or consultant for another business.
Related: 7 great gigs for retired docsRetirees often find that part-time jobs allow for an active social life, feelings of purpose, and access to affordable healthcare with comprehensive coverage largely paid for by someone else (that is—their new employer).
Think twice before pursuing these other options
Maybe none of the options I’ve outlined above seem appealing—while I fully support sometimes being creative with your finances, think twice before considering some of these other coverage options.
Go abroad
Some people travel overseas for months at a time and pay for cheap international health insurance. This may work for a few months but most people don’t plan to spend the majority of their early retirement in another country.
Other people just travel overseas whenever they have a health need and pay cash since the cost of health insurance in other countries is usually much cheaper than it is in the United States. This could save you money on some things but may not be feasible for those with chronic conditions or during times when you are hospitalized, during which travel isn’t possible.
Christian health share ministries
These organizations allow you to forgo health insurance altogether and opt for a health share plan. Instead of paying a monthly premium to a health insurance company, you pay a monthly “share” of the healthcare costs of the people in the organization with you. The advantage is that this share can be much cheaper than standard health insurance.
The downside is that there are many caveats to receiving it, one of them being that you have to share the same faith—usually Christian.
These plans don’t cover health issues caused by those not living out Godly principles (meaning, for example, don’t expect abortion care or maternity care for children that were conceived outside of marriage). They also don’t cover preventative care (annual physicals and immunizations aren’t covered). Plus, there are limits to how much money you can receive if you actually do need to be hospitalized.
What this means for you
If you decide to retire early, before age 65, you will have to purchase your own healthcare coverage, as you won’t yet be eligible for Medicare. You can purchase your own plan on the federal marketplace—you may even be eligible for a subsidy, or you could get a part-time job to continue receiving employer-sponsored insurance. If you just need health insurance for a short time, you can consider COBRA or a bare-bones plan under “Trumpcare.” Don’t forget: You probably wouldn’t advise your patients to forego health coverage altogether, so while this option may seem appealing, your finances would take a major hit should your health take a turn.