Healthcare & Long-Term Care

The gap before Medicare

If you stop working before 65, you’re buying your own health insurance until Medicare begins, and it’s often the single largest line item in an early-retirement plan. Options generally include continuing employer coverage temporarily through COBRA, a spouse’s plan, or the individual marketplace.

The marketplace deserves special attention, because premium subsidies there are based on your income, and in early retirement, your income is substantially chosen rather than given. How much you draw from a traditional IRA, how much you realize in capital gains, whether you do Roth conversions: each raises the income figure that determines your health insurance cost. This is where two good ideas collide: converting aggressively in your low-income years can be smart for taxes and expensive for premiums. Running both calculations together, rather than separately, is the entire skill.

What Medicare does and doesn’t cover

At 65, Medicare begins, and with it a set of decisions that arrive all at once: Part A (hospital), Part B (medical), Part D (prescriptions), and then the choice between adding a Medigap supplement or going with an all-in-one Medicare Advantage plan. That last decision has long-term consequences: moving into Medigap later can require medical underwriting depending on your state and timing, so the “we’ll switch if we don’t like it” assumption doesn’t always hold.

Two things surprise people most. First, Medicare isn’t free: Part B carries a monthly premium, and higher-income retirees pay surcharges (IRMAA) determined by their income from two years prior, which is exactly why a large Roth conversion at 63 can raise your Medicare bill at 65. Second, and more consequentially: Medicare does not pay for long-term custodial care. It covers limited skilled nursing after a qualifying hospital stay, not the years of help with daily living that most people picture when they think of a nursing home.

That single gap is the reason this guide exists.

The long-term care conversation

Roughly speaking, a majority of people reaching 65 will need some form of long-term care during their lives, and a meaningful minority will need it for years. Costs vary enormously by geography and type: in-home aides, assisted living, and skilled nursing sit at very different price points, and all of them have been rising faster than general inflation.

There are essentially four ways to meet that cost:

• Self-fund: earmark assets to cover it. Realistic for larger portfolios; the risk is a long care event for one spouse draining what was meant to support the other.
• Traditional long-term care insurance: purpose-built coverage, generally cheapest when bought in your fifties or early sixties, with the well-known drawback that premiums on older policies have sometimes risen sharply.
• Hybrid life/LTC policies: a life insurance policy with a long-term care benefit attached, so the money does something whether or not care is needed. Costlier per dollar of care benefit, but it answers the “what if I pay for years and never use it” objection that stops many people.
• Medicaid: the fallback once assets are largely spent down. It’s a genuine safety net, with real limits on where and how care is delivered, and it comes with lookback rules that make last-minute planning ineffective.

There’s no universally right answer. There’s a right answer for a specific family with specific assets, specific health, and specific feelings about being a burden.

Why doing this early is the whole point

Every option above gets worse with time. Insurance underwriting depends on health you may still have today. Medicaid planning has lookback periods measured in years. And the alternative (deciding under pressure, in a hospital corridor, while a family argues) is how people end up with expensive choices nobody wanted.

The most valuable version of this conversation happens when everyone is healthy and it’s purely hypothetical: what would we want, who would provide it, where would the money come from, and does everyone in the family know? Writing that down is a gift to the people who’d otherwise be guessing.

We’re glad to walk through the real numbers for your situation: what care actually costs where you live, what your plan could absorb, and whether insuring some of the risk makes sense. No cost, no obligation, and no pressure toward any product.