Welcome to another episode of the Stay Wealthy Retirement Show. I’m your host, Taylor Schulte, and every week I tackle the most important financial topics to help you stay wealthy in retirement.

And now onto the episode.

Why Healthcare Before Medicare Shouldn’t Stop You From Retiring Early

Taylor Schulte: One in five adults between the ages of 50 and 64 say they’re staying in a job they would otherwise leave for one reason. Health insurance. Not because they love the work, not because they aren’t ready to retire, but because they feel trapped by the coverage. Economists even have a name for it. They call it Joblock. In fact, worries about Job Lock helped drive laws like Cobra and HIPAA, which were designed to make it easier for workers to keep their health insurance when they leave a job or switch to a new one. And when you look at the numbers, it’s easy to see why job locks still persist today.

According to Kiplinger’s 2026 estimates, the average monthly cost of health insurance climbs from about $571 at age 20 to nearly $1,700 per month by age 64, right before Medicare kicks in. So if you’re someone in your 50s or early 60s with a healthy nest egg, but still hesitant to pull the trigger on retirement, there’s a good chance this question is somewhere in the background. What do I do about health insurance before Medicare begins at 65? When you dig into the data, the anxiety around this question is impossible to miss.

According to the Nationwide Retirement Institute, 71% of pre-retirees say they’re quote terrified about what healthcare costs could do to their retirement nest egg. And despite that fear, six out of 10 people indicated they don’t actually have a plan to cover healthcare expenses in retirement. Even more surprising is how far off most expectations are.

Over 40% of people believe they’ll spend $100,000 or less on healthcare throughout retirement when the latest estimate from Fidelity puts the number closer to $172,000 after taxes, and that doesn’t even include the potential cost of long-term care. While that might sound high, Milliman’s 2025 index produces significantly higher estimates, suggesting the actual cost may be closer to $275,000 for men and $313,000 for women.

Now, those long-term healthcare cost estimates do include the year’s win covered by Medicare, but for people who want to retire before 65, the more pressing question is how to handle healthcare in those gap years before Medicare begins. And in 2026, that decision just got a little more complicated. If you listen to episode 265 back in January, you know the details.

In short, the Enhanced Affordable Care Act subsidies expired, which means we’re going back to the original rules, including a hard income cliff at 400% of the federal poverty line.

If you’re even $1 over that threshold, your subsidy drops to zero. And I mean zero, not reduced, it’s gone. To put some numbers to this, ignoring any state specific assistance, 400% of the federal poverty line is about $63,000 for a single person household and $84,600 for a two-person household.

So for example, if you and your spouse have modified adjusted gross income of $84,601, you could lose $20,000 or more in subsidies. One extra dollar of income could cost you five figures. And here’s an interesting stat that I found through my research that I keep coming back to. According to Mercer’s national survey of employer-sponsored health plans, at companies that offer retiree health coverage, the average retirement age is 63.

At companies that do not, the average retirement age is 65. A two-year difference driven almost entirely by whether a health insurance bridge exists. Similar to pension plans, that bridge is quickly disappearing.

In fact, today, only about 17% of large employers still offer retiree health coverage to new hires. Now, two years may not sound like much, but we are talking about your early 60s here. When you’re still healthy, when you still have energy, when travel is easier, when the things you’ve been postponing for decades are finally within reach. And while it’s not feasible for everyone, there are viable solutions to the healthcare piece of the puzzle.

Sometimes it’s Cobra as a short-term bridge. Sometimes it’s ACA coverage with careful income planning. Sometimes it’s a spouse’s employer plan. Sometimes it’s part-time work at a company that does offer benefits. And sometimes the answer is simply paying a higher premium for a few years because when you run the numbers, the math still works and the trade-off is worth it.

The good news is that roughly three quarters of healthcare costs in retirement come from predictable monthly premiums, which means they can usually be modeled and planned for.

But the worst thing you can do is to never explore your options. Just like the 60% of pre-retirees who said they don’t have a plan for covering healthcare expenses. That’s exactly what led to a recent conversation I had with friend and fellow financial planner, Roger Whitney, where we talk through these challenges, understanding your options, analyzing the trade-offs, and getting comfortable with the mindset shift required to make this decision without letting it paralyze you.

How do you stress test your retirement plan with a worst case healthcare scenario? And how do you come out the other side feeling confident that you’re not letting fear keep you working longer than you need to? If you want to better understand your options for healthcare before Medicare and how to approach this decision with more clarity and confidence, I think you’ll enjoy this recent conversation that I was grateful to be a part of on the Retirement Answer Man podcast.

Roger Whitney: All right. To get a perspective from a retirement planning expert, we have Taylor Scholte from Define Financial. How you doing, Taylor?

Taylor Schulte: I’m doing well, Roger. Thanks so much for having me.

Roger Whitney: Thanks for coming on to talk about navigating healthcare before Medicare. This is the topic that you’ve talked about a little bit. Where should we start with your thinking on this?

Taylor Schulte: Yeah, well, we talk about it a lot. It’s a really popular and important topic, and I think there’s a lot of misconceptions maybe or maybe wrong assumptions. I think people jump to some quick conclusions when it comes to this topic. Most recently, I was sharing with you that I’d published a video on claiming social security early and some reasons why you might want to consider that. There’s been some new academic research on the topics, and so I shared all of that. And I was flooded in the comments by people talking about healthcare before Medicare, saying, “This sounds great, taking social security early. I understand the reasons, but I can’t retire and do that because I’m not going to have healthcare coverage. I need to wait until age 65.” So I guess I was just surprised to see so many educated viewers jumping to this conclusion that they can’t do this.

They can’t retire early. They can’t take social security early because they have to wait until age 65 to get on Medicare. I realize that it can be more costly than when you were employed, but you’re not out of options. There are options, there are a lot of options out there, and some of them are staring you right in the face and you’re just not realizing it. So it’s a very real problem. It’s a very real challenge. And I think the starting point for anybody in this situation who’s considering retiring early or retiring before Medicare is to just have the open conversation, take inventory of your current situation, start to talk about what the options look like, and then kind of go through the process from there and we can talk through what some of those potential solutions might look like.

Roger Whitney: And we’ll have a link to this video in our noodle email. They could check out Taylor’s channel. It’s one of the smoothest YouTube channels. He has the voice and face for AI for sure. He’s a beautiful man. And I think you hit on a really good point is it’s an intimidating subject of healthcare before Medicare. And a lot of times it’s an unknown unknown and we read these articles about this significant cost to it and we just don’t even go down the rabbit hole or even observe what it might actually be. So some of it is just making it a known unknown and starting to understand the costs involved rather than just say, “I have to wait without even examining it.”

Taylor Schulte: Right. Or you hear that a friend or a colleague says, “I’m spending $30,000 a year on healthcare. You don’t want to do that.” And so they assume that that’s what’s going to cost them. But if they haven’t gone through the exercise and explored all the options, again, there might be a really great solution staring them right in the face that they’re not even realizing.

Roger Whitney: And isn’t another factor of that is, let’s assume it’s 25,000 a year. Let’s say you do the math and you figure out, oh, it’s going to be $25,000 a year and I’m 60 years old, so I need to wait till 65.

Well, yeah, that’s a challenge, but if that is feasible, how much is five years of your life worth from 60 to 65 if it still is feasible within the context of your plan? Is five years of your life during early retirement worth the cost is something you might want to examine rather than just edit out quickly?

Taylor Schulte: Right. I think more than anything, and you know this, that no matter how much money somebody has, nobody likes to be caught off guard or surprised by an expense or surprised by a tax bill. So again, I think just understanding what it costs, what it means to you and your plan, allowing you to make that educated and informed decision is really important because you don’t know what you’re saying no to necessarily. You’re making some blind assumptions. So again, I just want to acknowledge it is a real challenge. There are a lot of nuances in this conversation, especially most recently in 2026 with some big changes to the ACA subsidies that’s caused it to be even more challenging for people. But I just want to acknowledge that there are solutions out there that it’s possible that you can work this into your plan.

Roger Whitney: You make a good point about getting over the shock. It’s like with taxes and things like this, nobody wants a negative surprise, but maybe part of that process is getting shocked and then getting over it, right? So it’s not so shocking and unexpected. We talked this series about where a lot of people go, the Affordable Care Act and navigating the marketplace, but there are other options and we hit on them a little bit. What are some of the options that you’re seeing people explore other than just simply going to the Affordable Care Act?

Taylor Schulte: Yeah, there are some conventional options, and we’ll talk through those because they might apply and maybe somebody’s not realizing that they exist or some of the nuances. There are some unconventional options too. One, I just want to make sure we mention is some companies offer health insurance as a retirement benefit. So you may talk to your current employer and you may have some benefit in there. Maybe they don’t cover the full premium for you, but they do help. So it’s increasingly rare these days, but it does still exist. Your spouse’s employer plan, your spouse still works, you might be able to get covered by them. Again, easy, simple solution.

Roger Whitney: So keep your spouse working is whatever.

Taylor Schulte: Yeah, exactly. I’m going to retire. You keep working. One of the more underrated options or maybe overlooked options, because as you and I both know, not everybody wants to just retire and do nothing. Most people want to do something. They want to contribute to this world somehow, or they want to stay busy, they want to have community around them. So one kind of overlooked option I see is part-time work. There are some phenomenal companies out there that we all know by name that provide health insurance options for part-time workers. I know Costco is one of them.

Roger Whitney: I was just having this conversation today with Costco. She’s going to work at Costco for her healthcare.

Taylor Schulte: Yeah. And they all have different- Levels of it. Scenarios. Yeah, there’s different coverage options and work a certain number of hours. But Costco, I know Starbucks, IKEA is another big one. Lowe’s, the hardware store. So there’s a bunch of them, but part-time work, keep you busy, have community around you, people and get healthcare coverage at the same time could be a potential solution. Now, I don’t want someone to retire and feel like they have to go back to work to work part-time just to pay for healthcare. So again, the stars need to align here and match up with your needs and goals as well.

So those are some of the more just unconventional or maybe potentially easy, more cost-efficient solutions. If those don’t apply, the one we’ll jump to next is COBRA. And everybody knows that I think most people know that COBRA exists. Although COBRA can be fairly expensive because your employer’s not going to be helping you out anymore, you’re going to pay the full premium.

We have to remind ourselves that retirement is a major life transition. And so there is some benefit to just keeping some continuity in your healthcare plan. You’re already making a major life decision. Let’s not disrupt this other really important part of your financial plan. So maybe you can be okay with for six months or 12 months paying a more expensive premium as you go through this transition so that you don’t disrupt this really important piece of your life.

Roger Whitney: Because you don’t want to have to change doctors and pharmacies and continuity of care. And yeah, good point.

Taylor Schulte: Yeah. We talk about surprises and you can go through this due diligence process and pick a private plan or ACA and think you’re covered, but all of a sudden get surprised by it because it doesn’t cover what you thought it covered. So at least you know with your existing plan using Cobra, there’s that continuity. And so I find some value in that, and I think that should be factored into the decision, even if it is a little bit more expensive.

So that can be kind of just like an initial bridge as you go through this process. Of course, ACA is another option if COBRA isn’t or it’s too expensive. And I’m not sure how much you’ve got into this yet in the series about some of the changes in 2026, so we can dissect some of those, but the subsidies aren’t the same anymore. And so there’s some things to navigate around there with ACA.

Roger Whitney: And they basically went back to what they were originally. They just did away with the COVID extra that put into…

Taylor Schulte: Yeah. Exactly. And I think what makes this challenging is we talk about all the great tax planning that you can do in your gap years before RMDs kick in. And this kind of throws a wrench in some of that because if you start doing Roth conversions in your early 60s, it’s going to push you above this cliff. And if you’re just $1 over the cliff, you’re out. So you could lose out on five figures of ACA subsidies if you’re just $1 over. So it’s this kind of battle between, I want to do some aggressive tax planning in my gap years, but I also want to manage my modified adjusted gross income so that I can get these subsidies for ACA. So again, it’s like this cost benefit analysis to determine what is better for me and my plan.

Roger Whitney: It’s really complicated. And I know it is for you and for us, it’s more complicated than you think it would be to try to get … Best you can do is get directionally right. But let me ask you this question. When you’re thinking about ACA subsidies and you’re looking at the client’s retirement trajectory and what they have in pre-tax assets and what their required minimum distributions might be, and you’re looking at Roth conversions, how do you navigate which one is worth the most? ACA subsidies versus doing Roth conversions to lower RMDs. How do you figure out which one … Is it the burden the hand, the subsidies versus what might be a burden in the hand later in life?

Taylor Schulte: It’s a really good question and we’re making a lot of assumptions and these are long-term projections. So we’re going to end up making just our best educated and informed decision. And on top of all that, there’s personal preference that goes to this as well. There could be a very, very clear opportunity for Roth conversions, but someone might just say,”I just don’t want to do that. I just don’t want to front load my tax bill.”

So I guess the short answer to your question is running a deep dive analysis. And for us, especially from the tax planning point of view, it would be starting with that calculating their long-term or lifetime expected tax bill. So if we just do nothing at all, no proactive tax planning, you jump on ACA, claim your social security at full retirement age, accept your RMBs for what they are, what does that total retirement tax bill actually look like at end of life? And I think that’s a good starting point because then you can back into, okay, now what if we do some proactive tax planning? What sort of dent does that make in my tax bill?

If I do that, what does that mean for ACA subsidies? Well, I’m not going to qualify for those anymore, so I’m going to pay more in healthcare premiums. So what does that cost? And let’s compare the two. One thing I want to point out here, because this always comes up when we talk about tax planning and retirement, you pull one lever over here and it ripples through the rest of the plan and affects other things over here.

So with ACA subsidies, they’re looking at your modified adjusted gross income, so your MAGI. And one of the things that’s included in your MAGI is your social security income. So if you claim social security income early, that’s going to be added to your MAGI and that’s going to affect your ACA subsidies. So that has to all be factored in. So I don’t want to overwhelm people here, but there are a number of moving parts that have to be factored in.

You can do a deep dive analysis and make this incredibly informed decision. Or again, there can be some personal preference here. What you choose probably isn’t going to make or break your plan. You could skip Roth conversions and your plan probably isn’t going to break down. You can pay for Cobra for 18 months and then jump on ACA. Your plan’s probably not going to break down just because you paid Cobra for 18 months.

So I think sometimes we put too much pressure on ourselves to choose the absolute best answer, but for a lot of our clients, they want to go through that exercise, see the numbers, and make that informed decision.

Roger Whitney: That’s a really good point too in that if from my vernacular, this is an optimization question. And ideally, optimization, like if we use clothing as an example, if you got your shoes and socks and pants on and shirt on, you’re feasible and resilient to go outside. Optimization is picking what watch to wear or what earrings to put on. It’s important, but you’re still going to be fine without it. And that way we can lower the stakes of feeling like we quote unquote get it wrong because we won’t really know whether it’s wrong or right ever, really.

Taylor Schulte: Right. Well, yeah, because you could win this one game. You see people that are trying to just optimize and manage their Maggie to stay below that ACA subsidy cliff and they’re just focused on just controlling their Maggie to stay below it and then not realizing again, well, they’re sacrificing potential great tax planning that they could do that could save them a million dollars in lifetime taxes. And so you just kind of get stuck looking at things in isolation and getting obsessed over these numbers and it just becomes a big giant puzzle.

So that is one of the questions too that we’ll often ask clients in these situations, how far down the rabbit hole do you really want to go? Do you want to optimize every single part of this plan or do we want to have a higher level conversation, just choose what feels right to you?

Because again, maybe paying a little bit more to just keep it simple, get on Cobra, take your time. Sure. Again, you might be spending some good money, but maybe that’s just the path of least resistance.

Roger Whitney: So you’ve had so many of these conversations like I have. On a whole, where does it usually end up for you?

Taylor Schulte: Where does it usually end up? We are strong advocates of, I don’t want to say pushing people, giving people the confidence, giving our clients the confidence to transition into retirement maybe earlier than they planned earlier than they thought they could. And so that is a large part of the conversations. I don’t want the cost of healthcare, even if they can afford it, I don’t want the cost of healthcare to discourage them from hanging it up early and enjoying these early active years.

And so I think where it typically ends up, unless somebody just wants to work forever, is finding the solution, the healthcare solution that works best for them that allows them to pull the plug and enjoy those early years. And it does typically end up with Cobra in the beginning at least for a short period of time for the reasons I mentioned earlier, maintaining that continuity.

ACA historically before 2026 was way more popular before this new cliff change. So we’ll see what happens in our planning this year with clients. And then private plans are the option that we haven’t talked about either. And that’s something that a lot of our clients do end up exploring as well. You want to get a little bit more creative with your plan structure, you have really specific desires, private plans. I don’t want to say it’s extremely common, but there’s a healthy percentage of our clients that end up-

Roger Whitney: Really?

Taylor Schulte: We’ll use an independent broker to shop those plans and find the private plan that really works best for them.

Roger Whitney: You must have really healthy clients because a lot of times you get excluded from preexisting conditions, et cetera. Well, you’re in San Diego. Everybody’s beautiful there, so they’re all healthy and perfect.

Taylor Schulte: Yeah. Well, again, I don’t want to say it’s common, but I’m thinking of certainly more than clients on one hand that have opted for private plans. There’s more and more clients now opting for concierge coverage as well. And so you can make this as comprehensive and as customized as you want or need. One popular option that comes up a lot in conversations that very, very few people ever end up opting into are health share plans. I don’t know if you’ve dissected this a bit or talked about in the series yet.

Roger Whitney: Just touched on it briefly.

Taylor Schulte: So I’d be curious to hear where you’ve ended up with it or if you’ve had clients that have opted in, but it’s a hot topic. Tell me about these health share ministries. They sound so appealing and then we unpeel the onion and share more and most people don’t end up opting into it. So it is an interesting option.

Roger Whitney: Yeah. We’ve had clients that have done it successfully and had disease and life circumstance hit them and it’s worked, which is good to hear. And Sean and I were on one for a while early when we had to get our own insurance. And where you can have hiccups around Shauna’s on a biologic, which is like a Humira type of thing and that’s very expensive. And there are a lot of exclusions when it comes to drugs. And it’s attractive and I know a lot of success stories, but generally I don’t see that as an option because we’re planners. We’re trying to avoid unforced errors and a lot of times spending for the right thing helps you avoid unforced errors.

Taylor Schulte: Yeah, absolutely.

Roger Whitney: And one thing that you hit on that I thought was important is having the confidence that we can afford this cost and still have a great retirement, which is very different than mathematical. It’s just like knowing that, okay, I’ve absorbed the surprise, it’s not an unknown, it’s unknown now and it sucks, but it’s still okay and feeling confident that you can manage it.

Taylor Schulte: Yeah. I think that clarity is really important. And again, just challenging assumptions that you might have heard from other people and again, knowing what the impact is to your financial plan. And I kind of think about it, I guess, in terms of shocking your plan. It could be a large amount of money that you’re going to end up paying for healthcare premiums for a period of time, and that can be a shock to your plan. So we shock the plan with this. Let’s assume worst case scenario and you’re spending 50 grand a year for healthcare coverage for you and your spouse for five years. What does that do to your plan? What does it actually mean to your plan? And I think just sometimes seeing that on paper, we do the same for long-term care events. Let’s shock the plan with a really major catastrophic long-term care event.

What happens to the plan? What are we going to do in response and how does that feel to you? And sometimes when you just go through that exercise and see it on paper, it does end up giving you that clarity and confidence to make that decision and move forward. But initially, if I’m like, “Hey, Roger, by the way, healthcare is going to cost you $50,000 per year for the next five years,” you’re like,

Roger Whitney: “What? I’m not doing that.”

Taylor Schulte: Before go through that planning exercise of like, here’s what it looks like, here’s what ends up happening to your plan, and here’s what we’re going to do in response to it. And you’re like, “Oh, it seems reasonable. And I really value my early active years and I want to go travel and enjoy myself and I want to make sure that I’m properly covered and you end up feeling more confident.” So this ends up just being, I hate to keep going in circles here, just ends up being a longer conversation and just weighing those different options and kind of that cost benefit analysis.

Because again, do we want to optimize for taxes and lowering that lifetime tax bill and taking advantage of these gap years? Do we want to optimize for the lowest possible healthcare premiums we can? Is it a mix of both? And if it is, how are we going to attack that?

Social security comes into play. We’re also managing IRMAA as well that’s going to creep in in your later 60s. I think it’s a really fun puzzle, but again, more than anything- Well,

Roger Whitney: That’s what you want to delegate the complexity to people like us if you don’t want to deal with it. That’s the whole … Yeah. Right.

Taylor Schulte: Or just make your best decision and move on because…

Roger Whitney: The key is you’re not going to be right or wrong. You don’t know. So just make a decision and know it’s still okay feasible wise and get out with your life.

Taylor Schulte: But more than anything, again, based on the hundred comments I probably got about I can’t do that because healthcare before Medicare, so more than anything, I don’t want this topic to discourage somebody from retiring earlier than maybe they think they can. There are options out there. Go through the exercise, figure out what works best for you. Understanding some people literally can’t do it. Some people, maybe they truly have to wait till Medicare. So I don’t want to dismiss that idea either.

Roger Whitney: And that’s a great point. You don’t want to dismiss it out of hand and just fall back into, “I got to keep working.” And then the other part is you also don’t want to hold it up as this scary thing, not examine it and use it a little bit as an excuse to keep on working.

Taylor Schulte: Okay. I hope you enjoyed this conversation. As always, if you have any follow-up questions that you think I can answer, or if you just want to say hi, you can always shoot me an email at podcast@youstaywealthy.com. And to view the research and resources referenced in this episode, just head over to youstaywealthy.com/273.