The Medicare Transition Roadmap: Health Care Planning from a Wealth Management Perspective

Securing your health coverage from early retirement to age 65 and beyond

Navigating the transition to retirement involves many financial decisions, but few are as critical — or as complex — as managing health care coverage. For many, a “gap year” exists between leaving an employer’s plan and becoming eligible for Medicare at age 65.

At Avidian Wealth Solutions, we view health care planning as an essential pillar of your overall retirement strategy. Understanding your options and the key deadlines can help you protect your nest egg from unexpected costs and ensure you transition seamlessly into Medicare.

Part I: Bridging the Gap — What insurance can I get if I retire before 65?

If you retire before your 65th birthday, you must have a plan to cover your medical needs until Medicare eligibility kicks in. Exploring these four primary options is the first step in protecting your financial plan.

1. What is COBRA continuation coverage?

The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows you to temporarily continue your current employer-sponsored health coverage for a limited period (typically 18 to 36 months).

What to know

The catch: You will be responsible for paying the entire premium — both your portion and the amount your former employer subsidized — plus a small administrative fee (up to 2%). This can be significantly expensive, but it offers continuity of coverage.

2. Can I stay on my spouse or partner’s insurance after I turn 65?

If your spouse or domestic partner is still actively employed and has coverage, adding yourself to their employer-sponsored plan is often the most cost-effective and straightforward option. This should always be explored first.

3. “What is the ACA Health Insurance Marketplace?

The Marketplace, established by the Affordable Care Act (ACA), provides plan options for individuals who are not yet eligible for Medicare.

Critical Planning Alert: Enhanced ACA Subsidies

Potential subsidies: Many individuals qualify for premium tax credits (subsidies) that can significantly reduce the monthly cost of coverage, depending on your household income.

2026 risk: The enhanced premium tax credits, which helped eliminate the “subsidy cliff” and limit premium costs for many, are scheduled to expire at the end of 2025. If Congress does not renew them, early retirees who use the Marketplace may face significantly higher premiums in 2026. Plan for this possibility when projecting retirement cash flow.

4. What’s the difference between public and private insurance?

You can purchase coverage directly from a health insurance company, agent, or broker. These “off-exchange” plans may offer a wider range of options, but they do not qualify for government-funded premium tax credits (subsidies) available through the Public Marketplace.

Part II: What do I need to do before turning 65 for Medicare?

Turning 65 marks the age of eligibility for Medicare for most Americans. Understanding the enrollment rules and deadlines is vital to avoid permanent penalties.

6 Common Medicare Questions

Question	Answer from a Planning Perspective
1. When is my first chance to sign up?	This is the Initial Enrollment Period (IEP): a 7-month window that begins 3 months before your 65th birthday month, includes your birth month, and ends 3 months after.
2. Am I automatically enrolled?	If you are already receiving Social Security benefits, you are typically automatically enrolled in Medicare Parts A and B, and your coverage begins the month you turn 65. If you are not receiving Social Security, you must take action.
3. What is the Part B Late Enrollment Penalty?	If you delay signing up for Part B without having “creditable coverage” (usually via an employer), your monthly premium will increase by 10% for every 12-month period you delay. This penalty is for life.
4. What if I am still working past age 65?	If you have employer-sponsored group health coverage based on your current employment, you qualify for an 8-month Special Enrollment Period (SEP) to enroll in Part B without penalty after your employment or coverage ends.
5. What is the annual enrollment period?	The Annual Enrollment Period (AEP) runs annually from October 15 through December 7. This is your chance to change Part C (Medicare Advantage) or Part D (Prescription Drug) plans for coverage starting January 1st.
6. Does Medicare cover me outside the U.S.?	In most cases, no. Medicare generally does not pay for medical services received outside the U.S. and its territories. This requires separate travel or international health insurance planning.

Part III: What is the main benefit of Medicare Part D? (Prescription Drugs)

Medicare Part D provides prescription drug coverage. Even if you don’t take medications today, enrolling when first eligible is critical to avoid permanent penalties.
The Part D Penalty Trap:

If you go 63 days or more without Part D or creditable coverage (prescription drug coverage that is as good as or better than Part D), you will be subject to a permanent late-enrollment penalty. The penalty is calculated as 1% of the national base premium for every month you delayed and is added to your Part D premium for the rest of your life.

How does the Inflation Reduction Act affect prescription drug prices?

The Inflation Reduction Act (IRA) provides increased protection against high prescription costs:

• 2025 Cap: The annual maximum out-of-pocket threshold for all Part D plans is $2,000.
• 2026 Cap: The cap is set to increase to $2,100 for the 2026 plan year. Once you reach this limit, you will pay $0 for covered Part D drugs for the rest of the year.

Your Next Steps with Avidian Wealth Solutions

Health care costs represent one of the largest expenses for retirees. As your wealth and health care planning partner, Avidian Wealth Solutions can help integrate your health coverage decisions with your broader financial strategy.

• Review your cash flow plan to account for known costs (premiums, deductibles) and potential increases (e.g., ACA premium hikes for 2026).
• Determine the most tax-efficient strategy for funding the health care gap between early retirement and age 65.
• Coordinate your Social Security claiming strategy with your Medicare enrollment timeline.

To work toward a seamless and financially sound transition to Medicare, schedule a consultation with your Avidian Wealth Advisor today.

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