The silent retirement savings killer: Bridging the Medicare gap

For many workers, age 62 may seem like the green light for retirement. That’s the age when those who are eligible for Social Security can begin claiming benefits. However, what many fail to realize is that Social Security eligibility isn’t the only indicator of full retirement readiness.

To help offset health care costs later in life, the federal government created Medicare. In order to enroll in coverage, though, you must be at least 65 years of age. This can create an issue for those who rely on their employer for health insurance and were hoping to leave the workforce before 65. In order to bridge this gap, it’s important for your clients to understand all their options to ensure they remain insured in their post-employment years.

Check employer’s retiree benefits

Some companies offer health care coverage to retirees, but just like pensions, this practice is becoming less common — especially given that employers aren’t required to provide continued coverage once a worker retires. To see if your clients’ employers provide retiree health coverage, have them start by reviewing their summary plan description. If their employer does provide health coverage to retirees, check to see under what terms and for how long. For peace of mind, clients should consider having a conversation with their employer about retiree benefits three to six months before they plan to retire. This will ensure a smooth transition.

Explore COBRA/marketplace plans

If your clients’ employers don’t provide coverage in retirement, they may be able to temporarily extend their group coverage via COBRA. Coverage is typically extended up to 18 months. The downside is that they will be responsible for covering 100% of the premium and any additional fees. This can become very expensive — potentially draining their savings if they didn’t plan accordingly. Although COBRA is expensive, it does allow your clients to maintain their current coverage for a little while — meaning they’ll most likely get to work with their established medical team as they work to find more permanent coverage.

Aside from COBRA, your clients can also explore Affordable Care Act marketplace plans. Typically, this is the most flexible option because it allows them to tailor coverage to their location, specific health care needs and budget. Depending on their income level, they may qualify for the premium tax credit, lowering their monthly premium. It is important to note that enhanced ACA subsidies expired at the end of 2025. Therefore, additional out-of-pocket savings on deductibles, copayments and coinsurance have been largely reduced, resulting in higher premiums for beneficiaries in 2026. 

Coordinate spousal coverage

If your clients are married and their spouse is still working and has access to group health coverage through their employer, joining their plan may be the easiest and most cost-effective solution. Timing and coordination, however, are key here. In most cases, retiring is considered a major life event, which means your clients could have the option to do a special enrollment if their specific timeline falls outside open enrollment. 

Delay retirement age

While virtually no one wants to face this option, it may be the most financially prudent choice, especially if none of the above options are practical. Delaying retirement age by even just a year or two ensures current health coverage continues, gives your clients extra time to build savings, and can reduce or eliminate the gap between retirement and Medicare eligibility. 

For many of us, retirement is the end goal. But making that dream a reality can be a journey. While factors such as level of savings, age and plans in retirement may largely influence when someone chooses to retire, failing to account for health care costs and coverage can annihilate those plans in a matter of months. Thus, proper retirement planning is crucial to ensuring retirement becomes a reality.