Planning for One of the Largest—and Most Complex—Retirement Expenses

Health care is one of the highest costs retirees will face, and for many individuals it can be as large—or even larger—than a mortgage payment. While most people focus on paying off debt, saving for retirement, and selecting Social Security filing strategies, preparing for health care costs is equally critical. Medical expenses tend to rise over time, and the inflation rate for health care has outpaced general inflation in recent years.

When planning for health care in retirement, the strategies differ dramatically depending on whether someone retires before age 65 (before Medicare eligibility) or at age 65 and later. Those retiring early must evaluate options such as COBRA or ACA marketplace coverage, while those 65 and older can enroll in Medicare and select from multiple coverage paths.

At Greenbush Financial Group, we help clients evaluate all available options, understand coverage rules, enrollment deadlines, and plan proactively so health care expenses do not become an unexpected burden in retirement.

Key Components of Health Care Planning in Retirement

We help clients evaluate four major forms of retirement health care coverage:

• Medicare

• Exchange Coverage (ACA Marketplace Plans)

• COBRA Coverage

• Retiree Health Benefits from a Former Employer

Each option has different costs, coverage levels, enrollment timelines, and long-term planning implications.

Health Care Planning for Those Retiring Before Age 65

Individuals who retire prior to age 65 must bridge the gap before Medicare eligibility begins. This period often requires detailed planning because costs can be high and coverage varies.

Common pre-Medicare options include:

COBRA Coverage

Allows retirees to remain on their employer’s health plan for 18–36 months, typically at full cost plus a small administrative fee. This option is often more expensive but provides comprehensive, familiar coverage.

ACA Marketplace (Exchange) Plans

A wide range of coverage levels and premiums based on income. Retirees sometimes qualify for premium tax credits if income is low enough, which requires intentional planning around withdrawals and distributions.

Retiree Health Benefits (Employer-Sponsored)

Some employers offer retiree medical benefits. Coverage, premiums, and duration vary by plan, and these benefits can significantly reduce early-retirement health care expenses.

We assist clients in modeling their options, comparing the total cost of each plan, and integrating these decisions into their broader financial projections.

Health Care Planning for Individuals Retiring at Age 65 and Later

Once retirees reach age 65, they become eligible for Medicare, which has its own rules, enrollment deadlines, coverage tiers, and cost structure. Also, select Medicare Supplemental (Medigap) or Medicare Advantage coverage is one of the most important decisions retirees make and requires a clear understanding of their health care needs and financial goals.

A Brief Overview of Medicare Coverage

Medicare includes several components:

• Part A (Hospital Insurance)

• Part B (Medical Insurance)

• Part D (Prescription Drug Coverage)

• Medigap (Medicare Supplement Insurance)

• Medicare Advantage (Part C)

For most retirees, the biggest decision is choosing between:

1. Medicare Supplement (Medigap) Plans

Private insurance that supplements Original Medicare (A & B).
Medigap plans:

• Allow you to see any provider that accepts Medicare

• Offer predictable out-of-pocket costs

• Tend to have higher premiums

• Do not include prescription coverage (requires a separate Part D plan)

2. Medicare Advantage Plans (Part C)

All-in-one plans that often include prescription drug coverage.
Medicare Advantage plans:

• Operate through provider networks (HMO/PPO)

• Often have lower premiums

• Include drug coverage within the plan

• May require referrals or network restrictions

Choosing between Medigap and Advantage is a highly individualized decision based on health, provider preferences, travel plans, prescription needs, and budget.

IRMAA: How Income Affects Medicare Premiums

Medicare Part B and Part D premiums increase based on retirement income levels through a system known as the Income-Related Monthly Adjustment Amount (IRMAA). Higher income results in higher Medicare premiums.

This is a critical planning consideration because income levels can fluctuate due to:

• Required Minimum Distributions (RMDs)

• Roth conversions

• Capital gains

• Social Security taxation

• Pension income

Advanced planning helps retirees avoid unnecessary IRMAA surcharges and better manage long-term health care costs.

Special Considerations for Married Couples

Health care planning becomes even more complex when spouses retire at different times. Key questions include:

• Should the spouse turning 65 enroll in Medicare immediately?

• Is the working spouse’s employer plan better or more cost-effective?

• Can the retiree remain on the working spouse’s group coverage?

• How do income levels affect IRMAA for the couple?

• How do their different ages impact Social Security timing, HSA eligibility, and withdrawal strategies?

Each spouse’s coverage decision has financial implications for the household.
We help couples navigate these decisions to ensure seamless, cost-effective coverage.

How We Help Clients Plan for Health Care in Retirement

At Greenbush Financial Group, we help clients:

• Understand the Medicare enrollment process

• Evaluate Medigap vs. Medicare Advantage plans

• Analyze early-retirement coverage options (COBRA, ACA exchange, employer retiree plans)

• Project long-term health care and insurance costs

• Plan for IRMAA surcharges and income thresholds

• Integrate health care costs into retirement projections

• Work through coverage decisions for couples retiring at different times

Our goal is to eliminate surprises and ensure health care costs are properly accounted for long before retirement begins.

Health care is one of the largest—and most unpredictable—expenses in retirement. Working with a planner knowledgeable in Medicare and retirement health care helps ensure you’re protected.

Contact Us . . . .

All of our services start with a complimentary consult. No high pressure sales tactics. We are financial planners, not salesmen. Schedule Yours Today.

About Our Firm:  Greenbush Financial Group is an independent registered investment advisory firm based in Albany, New York, that provides four main services to clients: fee-based financial planning services, investment management, employer-sponsored retirement plans, and retirement planning services.  The firm serves clients locally in the Albany region and virtually across the United States.

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