Most of the women I work with assume the hard part of planning for healthcare in retirement starts the day they leave their job. It’s usually the opposite. By the time you hand in your notice, many of the most important healthcare decisions have already been made, or already been missed.
Healthcare is often the single largest, most variable, and most emotionally weighty expense in retirement. It’s also one of the few categories where the cost is shaped almost entirely by decisions made in the couple of years before you retire, not after. That framing changes what the planning work actually looks like.
The Number Everyone Quotes (and Why It Doesn’t Help)
You may have seen the headlines: a couple retiring today will spend $300,000 on healthcare in retirement. Numbers like that are technically true and practically useless. They give you a lump-sum figure for a cost that arrives as monthly cash flow, varies enormously by personal health and how you use the system, and changes year to year as policies, premiums, and your own circumstances shift.
A better way to think about healthcare in retirement: a recurring expense with four moving parts.
- Insurance premiums (whether that’s COBRA, an ACA plan, or Medicare)
- Out-of-pocket costs (deductibles, copays, coinsurance)
- The things insurance doesn’t pay well for (dental, vision, hearing)
- Long-term care, which is its own category and its own conversation
When you plan around those four buckets instead of a single lump sum, the picture gets clearer. You also start to see why decisions made before you retire often matter more than decisions made after.
The Pre-Retirement Decisions That Quietly Shape Everything
Here are the choices that tend to drive the biggest difference in long-term healthcare costs and stress. None of them feel urgent until they are.
1. Take care of the expensive stuff while you still have group coverage.
Employer health, dental, and vision plans are almost always better than what you can buy as an individual. If you know you’ll need a knee replacement, a crown, new glasses, or a hearing aid, do it before your separation date, not after. Individual dental and vision plans are notoriously thin, and traditional Medicare largely doesn’t cover them. You’ve been paying for the better coverage for years; use it before it goes away.
2. Get every appointment and prescription filled before your last day.
There is a real lag between the day you stop working and the day COBRA or your new plan kicks in. For COBRA, your employer has 30 days to notify the plan, the plan has 14 days to send your election notice, and you then have 60 days to decide. In that window, you may technically be uninsured to providers, even ones who have known you for years.
Dr. Carolyn McClanahan, a physician and CFP® who specializes in healthcare planning, tells a story about a client with ongoing health needs who quit his job without refilling his prescriptions or seeing his doctors first. In the COBRA gap, the pharmacy wouldn’t process his refills, and his longtime doctor wouldn’t write a new prescription without active coverage. He ended up paying cash at a clinic, and none of it counted toward a deductible. An avoidable mess. Get your appointments done, refill your medications, and don’t assume your relationship with your doctor will carry you through the gap.
3. If you’re retiring before 65, plan for the ACA tax credit window now.
If you retire at 62, you have three years to bridge before Medicare. The Affordable Care Act offers tax credits that can dramatically reduce premiums, but they’re based on the income reported on your tax return, and as of this writing, the credits end abruptly once household income crosses 400% of the federal poverty level, which works out to about $84,600 for a couple in 2026. Congress revisits these rules periodically, so treat the exact thresholds as a snapshot to verify in the year you plan. The principle underneath them doesn’t change: in the bridge years, where your income comes from determines what you pay for coverage.
Picture a couple retiring at 62 with $4 million across IRAs and a taxable brokerage. They need $120,000 a year to live on. If they pull all of it from the IRA, their reported income exceeds the credit cliff, and they pay the full cost of ACA premiums, somewhere in the range of $10,000 to $25,000 a year for the two of them, depending on the plan and where they live. If instead they take a large IRA withdrawal the year they retire (or even the December before), bank the cash, and then live primarily from the taxable account for the next three years, their reported income can stay low enough to keep them in tax-credit territory. The savings over those three bridge years can easily run into the tens of thousands, and the IRA withdrawal they took up front fills the same tax bracket they would have used anyway.
It only works if you plan it in advance, with the tax brackets, the IRMAA brackets, and the ACA thresholds all in view at once.
4. Decide between COBRA and an ACA plan with eyes open.
COBRA usually wins on networks, drug formularies, and out-of-pocket costs, but you pay the full unsubsidized premium; ACA plans can be dramatically cheaper if you qualify for credits, with narrower networks. A workable rule of thumb: if you’ve already met your deductible for the year, COBRA through December usually wins; if your income will be low and you don’t have ongoing health issues, an ACA plan often wins. The comparison is straightforward once you run the numbers in your state’s exchange.
5. Have the aging conversation before you need to.
This is the one people most want to skip. Where you’ll live if your current home no longer works for you. Who makes financial and healthcare decisions if you can’t? What quality of life means to you, and what it doesn’t. Families who have these conversations while the topic is still hypothetical tend to spend less when the situation becomes real, and they fight less along the way. The decisions are made on purpose rather than in the middle of a crisis.
Not sure where your next dollar should come from? In retirement, the order you pull money from your accounts drives your ACA tax credits, your IRMAA brackets, and how long your savings last. Download the free Where Does Your Next Dollar Go? flowchart — a simple guide to the sequence that keeps more of your money working for you. Get the flowchart by signing up at the bottom of my homepage.
Once You’re on Medicare: The Decisions That Compound
The pre-65 decisions matter most. But Medicare itself has a few choice points that compound over decades.
Traditional Medicare vs. Medicare Advantage. Advantage plans are cheaper while you’re healthy. They become much more expensive and much harder to leave once you’re not. In 2024, Medicare Advantage plans processed nearly 53 million prior authorization requests, while traditional Medicare processed just over 625,000. And if you start on Advantage and later want to switch to traditional Medicare with a Medigap supplement, in most states, including Oregon, you’ll face medical underwriting, which gets harder the older and sicker you are. The time to choose deliberately is at the start, not after a diagnosis.
IRMAA, the income surcharge on Medicare premiums. Higher-income retirees pay more for Part B and Part D. The number that matters is from two years prior, which means a high-income year right before Medicare can lead to a surprise bill. The good news: if your income drops because of a life-changing event, including retirement or the death of a spouse, you can file Form SSA-44 to challenge the surcharge. Most advisors don’t file IRMAA challenges for their clients. It’s worth asking yours about, because coordinating the timing of withdrawals, tax filing status, and Medicare premiums in the same window is where real money gets saved or lost.
Medicare Part D, every single year. Drug plans change formularies and pricing annually, and people who never reshop routinely overpay for coverage that quietly got worse. Reshopping takes about 15 minutes on Medicare’s plan finder during open enrollment. It’s one of the easiest wins in retirement.
What This Looks Like at Thistle Wealth
I won’t pretend the cost of healthcare is predictable; it’s the least predictable major expense in retirement, and anyone who tells you otherwise is selling something. What is predictable is the structure: which decisions need to be made when, which choices compound, and which conversations need to happen before the urgency arrives.
That structure is what a comprehensive financial plan at Thistle Wealth provides. We look at how you actually use healthcare today, model what that translates to in cash flow before and after Medicare, plan for the ACA bridge if you’re retiring before 65, and coordinate the income choices that drive your tax credits and IRMAA brackets. We also have the aging conversation early, while it’s still hypothetical, because it’s easier then.
If you’re 5 to 8 years from retirement and the healthcare piece feels like a gap in your planning, that’s the right time to look at it. A year from your retirement date is pushing it, 2-3 years from it is ideal.
Ready to look at this for your own retirement?
If you’d like to talk through how healthcare planning fits into the rest of your retirement strategy, you can schedule an introductory conversation through the contact page. There’s no cost for the first conversation, and no pressure to move forward if it isn’t a fit.
This article is for general educational purposes only and is not personalized financial, tax, legal, or investment advice. Your situation is unique and may call for different strategies than those described here. Please consult with a qualified professional who can provide guidance tailored to your specific circumstances. All investing involves risk, including potential loss of principal.
