Is health insurance a bigger factor than you thought? How to evaluate the true cost of health insurance when planning for retirement and your long-term financial health

Health insurance options in retirement — and what they might cost

Many people lose their health insurance when they retire since it's often tied to their jobs. This is something to consider carefully if you're retiring before age 65 since Medicare won't be available to you yet.

If a spouse is still working, consider getting onto their health insurance plan. But if that's not an option, you may need private health insurance or a Health Insurance Marketplace plan if you’re not yet 65.

You may also have the option to get coverage through COBRA. COBRA allows you to retain your employer health coverage for up to 18 months after leaving a job (in some cases, up to 36 months). This can be a reasonable solution if you have a relatively short gap between losing your employer's health coverage and turning 65.

However, with COBRA, you're paying the full cost of your employer's health insurance – not the subsidized cost you may have enjoyed as an employee. So you may find this option to be prohibitively expensive.

You should also know that once you enroll in Medicare, you’ll face premium costs for that coverage, too. Part A, which covers hospital care, hospice care and some home health care, is generally free for enrollees. But Part B covers medical services like doctors' services and outpatient care and will cost $185 a month in 2025 if you’re eligible for the program’s standard monthly premium. If you’re a higher earner, surcharges may drive up the cost of Part B.

As a Medicare enrollee, you’ll also be able to choose a Part D drug plan or a Medicare Advantage plan. There’s no standard Part D or Medicare Advantage premium. Instead, costs are plan-specific. Some Part D and Advantage plans charge no premium at all.

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Planning for your healthcare needs in retirement

In addition to health insurance premiums, you may incur other healthcare costs in retirement, from coinsurance to deductibles to copays. If unprepared for these, your budget could be thrown out of whack.

Medicare Part B enrollees are subject to an annual deductible of $257 in 2025. But under Part A, you'll face a $1,676 inpatient deductible this year per hospital stay. And that only covers your first 60 days, after which expensive daily coinsurance rates can apply.

For this reason, if you’re enrolled in original Medicare (as opposed to Medicare Advantage), buying a Medigap plan is wise. Medigap is supplemental insurance, and it can pick up the tab for coinsurance, deductibles and other potentially significant out-of-pocket costs associated with Medicare.

Most retirees are advised to have enough cash to pay for one to two years of living costs in an emergency fund, but you may also want to maintain a healthcare-specific emergency fund since medical expenses can be substantial in retirement.

If you have access to a Health Savings Account (HSA) during your working years, it's a good idea to reserve that money (or as much of it as possible) for retirement, too. That gives you access to tax-free income you can use for healthcare purposes.

You should also know that once you turn 65, an HSA can double as a traditional retirement savings plan — meaning you can take non-medical withdrawals without a penalty starting at that age. Non-medical withdrawals from an HSA are taxable, though. It’s only medical expense withdrawals that enjoy tax-free treatment.

Finally, do your best to take care of your health since getting ahead of medical issues can often make them less costly to address. Medicare enrollees are entitled to a number of free preventive health services each year, such as wellness visits and certain vaccines and screenings. It's important to read up on what your coverage entails so you can make the most of it, all the while protecting both your health and your money.