Many Americans’ health insurance paths follow a pattern. From childhood through young adulthood, coverage is through a parent’s health plan. During their working years, they get insurance through their employer. At age 65, most people are eligible for (and sign up for) Medicare.
But what if you retire before you reach age 65?
The most common source of insurance for people younger than 65 is employer-sponsored health plans, so if you retire early, you’re almost certainly also waving bye-bye to that insurance. While there are several options for people in this situation, many turn to the Affordable Care Act (ACA) Marketplace. And in many cases, people wait until they’re 62—the year they can begin collecting some amount of Social Security—to hit the button on early retirement. Thus, a common question from many early retirees is “what are the average health insurance premiums for ages 62 to 65”?
I’ll answer that question, and discuss other factors that affect your health care premiums, more health care costs to plan for, and the best ways to save for your future health expenses.
How Does Age Affect Health Care Costs?
Generally, when you buy health insurance independently, costs increase as you get older. According to a 2024 Urban Institute study, the total estimated monthly premiums for ACA Marketplace plans at different life stages are as follows:
- Age 30: $422
- Age 40: $473
- Age 50: $656
- Age 60: $986
These are just averages, so your cost might vary, possibly significantly. But the trend is clear: The older your age, the higher your monthly premiums.
Why? The assumption is that older adults are more prone to injury and illness. Federally, health insurance companies are permitted to incorporate age in premium calculations, but there is a limit. Rates can vary based on age within a ratio of up to 3:1 (3x) for adults ages 21 and older. Typically the older the person, the higher the ratio, with the ratio hitting 3:1 for people age 64 and older. That means the rate for a 64-year-old can’t be more than three times the rate for a 21-year-old.
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Average Health Insurance Premiums for People Ages 62-65
Federal rules allow health insurers to charge older adults more than the base premium, starting at age 62, with multiplier limits in place. The federal multipliers are 2.873 for age 62, 2.952 for age 63, and 3.0 for ages 64 and older. Of course, by age 65, most people are eligible for Medicare and therefore not often in the market for private health insurance.
Now that we know the multipliers, let’s take a look at the estimated monthly premiums for people ages 62-65 using the ACA Marketplace:
- Age 62: $1,072.32
- Age 63: $1,101.80
- Age 64-65: $1,119.72
Note: Different states may have adjusted multiplier schemes. Also, these estimates don’t include coverage outside of the marketplace, such as COBRA or group insurance policies.
Other Factors Affecting Premiums
A variety of lifestyle habits can affect your health insurance premiums.
Tobacco use can be a major factor. As you’re likely aware, smoking is linked to a number of diseases and can damage almost every organ in your body. As a result, health insurance companies are allowed to charge tobacco users more—and again, there is a limit. The oldest tobacco-using adult can only be charged up to 4.5 times more than the youngest adult who doesn’t use tobacco.
Another factor in health insurance costs is one’s location. Per the aforementioned Urban Institute study, In 2024, the average premium for a 60-year-old in New York was only $622 per month, as the state doesn’t permit Marketplace premiums to vary by age. Comparatively, people the same age in Alaska, Virginia, and Wyoming had total premiums over $1,700.
Related: Are You Retirement-Ready? 10 Questions to Ask Yourself
What Other Health Care Costs Will I Have?
Premiums aren’t your only health care expenses in early retirement. You’ll need to pay for deductibles, coinsurance, and out-of-pocket costs. It’s also highly likely you’ll need to buy over-the-counter (OTC) medicine and supplies.
Often, people do health-related home renovations before retirement or at the beginning of it, such as installing ramps. Some of these renovations can significantly improve one’s quality of life throughout retirement. In true “hope for the best, plan for the worst” fashion, you should also be prepared for the possibility that you may need long-term care.
To see a breakdown of how much you can expect to pay, check out our full guide on health care costs in retirement.
Related: Here’s How You Can Lose Medicare [And How You Won’t]
How Can I Save for Retirement Health Care Expenses?
Perhaps the best way to accumulate savings specifically for medical costs is a health savings account (HSA).
HSA holders can make tax-deductible contributions up to the annual HSA limit, with additional catch-up contributions if you’re age 55 or older. Withdrawals of both contributions and earnings are tax free at any age as long as the funds are used toward qualified medical expenses (QMEs). You can also use it like a second IRA, because once you reach 65, you can make penalty-free withdrawals for any reason (though you’ll still owe taxes if the funds aren’t used on QMEs).
Before you try opening an HSA, make sure you’re eligible. Account owners must be covered by a high-deductible health plan and not any other health insurance, including Medicare. Additionally, you’re ineligible if you can be claimed as a dependent on another person’s tax return. You can find full details on our HSA primer.
If you’re ineligible for an HSA or you’re already maxing yours out, another tax-advantaged way to save more for health care as a retiree is to save more for retirement period—by increasing your retirement account contributions. Max out your 401(k). If you’re already doing that, consider opening an IRA specifically for health care costs.
Just remember that you generally must pay an early withdrawal penalty for taking earnings out of an IRA before age 59½. But one of the exceptions to that rule is withdrawing funds to pay for health insurance premiums while unemployed. Another is withdrawals made to pay for unreimbursed medical expenses beyond 7.5% of your adjusted gross income (AGI).
Want to talk more about your financial goals or concerns? Our services include comprehensive financial planning, investment management, estate planning, taxes, and more! Schedule a call with Riley to discuss what you need, and what we can do for you.
Related: 6 Common HSA Mistakes to Avoid
