I’m 60 and want to retire before 65 — I need health insurance for 2-3 years until Medicare kicks in. COBRA is expensive, I don’t have a spouse’s plan. What are my options to bridge the gap?

First, once you turn 59 ½, you’re eligible to tap your individual retirement account (IRA) or 401(k) plan without risking a costly early withdrawal penalty. In addition, Social Security eligibility begins at 62, so you’ll have the option to claim your monthly benefits (albeit at a reduced rate, since your full retirement age won’t arrive until 67).

But if you’re looking at retiring a few years before turning 65, you’ll need to solve the problem of health insurance.

Most people can’t get Medicare until they turn 65. And if you don’t have a spouse’s workplace plan to join, you may be looking at pretty expensive coverage if you stick with your current employer’s plan.

Options for health coverage for early retirees

Going without health insurance for a few years can be a risky prospect, so it’s important to make sure you have coverage in place if you’ll be retiring before you’re eligible for Medicare enrollment.

The Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA) allows workers to retain their employer health insurance after leaving a job, but only for a limited period of time. Generally, that period is 18 months. So if you're retiring at 63 and can't get Medicare until age 65, you might still have a gap.

However, certain qualifying events allow COBRA participants to retain their employer coverage for up to 36 months. These include the death of the covered employee, divorce or legal separation, or the covered employee becoming eligible for Medicare.

These exceptions don't apply to early retirement, though, which means COBRA may be limited to 18 months.

And that aside, because you’re paying the nonsubsidized rate for insurance through COBRA, it may be cost prohibitive. While you can use funds in a health savings account (HSA) to pay for COBRA premiums, you might deplete that money very quickly, depending on your balance.

For this reason, you may want to look at buying health coverage through the Health Insurance Marketplace. If you go this route, review your plan choices carefully and compare the cost of premiums and deductibles. You may also qualify for a subsidy in the form of a premium tax credit, depending on your income.

Another option may be to purchase private health insurance. But, you may find that the cost with those is too high since there aren't subsidies available like there are for Marketplace plans.

Planning for retirement beyond health insurance

Health insurance is an important expense to budget for in retirement. And your costs may be a little tricky to estimate in the years leading up to your 65th birthday.

Once you turn 65 and enroll in Medicare, you can expect to pay a monthly premium for Part B, which covers outpatient care. Most enrollees get Part A, which covers inpatient care.

The standard monthly Part B premium in 2025 is $185, but that could rise over time. And higher earners commonly pay more for Part B because they're assessed surcharges, known as income-related monthly adjustment amounts.

But these aren’t the only costs you’ll face in the context of getting health coverage. You’ll typically either need a Part D drug plan to go along with Parts A and B, or a Medicare Advantage Plan for all-in-one coverage. You may or may not pay a separate premium for these plans.

If you don’t get Medicare Advantage, you may need to purchase a Medigap plan, which is supplemental insurance, to offset some of the out-of-pockets you might face under Medicare. Those costs could run the gamut from copays to deductibles to coinsurance.

Fidelity estimates that the average 65-year-old retiring in 2024 will spend $165,000 on health care expenses in retirement. So, it’s vital to plan on health care being a significant expense.

One important thing to do ahead of retirement is come up with a budget that details what your ongoing expenses will look like. You’ll want to make sure you can cover those costs between withdrawals from your savings and Social Security benefits.