Healthcare is bound to be one of your biggest expenses in retirement. As your needs increase with age, so do your costs, and if you’re not prepared, you could be left trying to figure out how to pay for it all.

Luckily, there are some government-sponsored programs that are designed to help you out, and Medicare will undoubtedly be a crucial part of your retirement financial plan. But Medicare enrollment doesn’t open until you turn 65, and even then, it won’t pay for all the medical expenses you’re sure to incur.

But what if you’re planning to retire before age 65? What if you’re forced to retire sooner than you anticipated? Or, what if you have medical needs in retirement that aren’t covered by Medicare? Paying for healthcare on your own can get very expensive very fast, so you’ll need to come up with a plan. Consider the following options:

1. Health Savings Account

If you’re enrolled in a high-deductible health plan (HDHP) through your employer or spouse’s employer, you have the ability to sign up for a health savings account (HSA). An HSA is a type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses—even many that aren’t covered by health insurance.

HSAs combine the most powerful elements of both Traditional and Roth IRAs, meaning you get an immediate tax deduction on contributions, while any earnings and distributions are tax-free—provided they’re used to pay for qualified medical expenses.

Because of this tax treatment, it’s recommended that if you can, you should wait to dig into your HSA until retirement. That way, you allow the funds to grow through compounding interest, which, after 20 or more years, could add tens of thousands of dollars to your account.

2. Group Retiree Coverage

Some employers continue to offer healthcare coverage to employees even after they retire. Typically, it’s the same plan you had pre-retirement, and many employers continue to cover premiums at the same (or close to the same) level. If you’re lucky enough to have access to group retiree coverage, it’s usually the easiest and most cost-effective way to go.

However, it’s important to note that while you may feel like this is the best option for you, it may not be an option at all. Not all employers offer group retiree coverage, so you’ll need to check to make sure this is available to you.

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3. COBRA Insurance

The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a law that gives workers and their families the right to keep their employer’s group health plan after that insurance would end due to job loss or changes in the immediate family. This temporary medical insurance can be an option for those who were maybe forced into an early retirement.

The downside is that you’ll likely see a significant spike in your premiums, as most employers will no longer chip in. This is likely only worth considering if you really like your current plan and want to keep your in-network providers. However, keep in mind COBRA insurance is only guaranteed for 18 months, so you may still need to fill another gap when COBRA runs out.

4. Individual Coverage via Health Insurance Exchange

Under the Affordable Care Act, anyone can purchase a policy from the state or federal health insurance exchange (marketplace for comparison-shopping health insurance), regardless of preexisting conditions.

The options available and premiums will depend on where you live and which level of coverage you choose. Your income will also determine how much you pay for healthcare coverage. Those with low income may qualify for reduced premiums and copays, as well as tax credits, which can drastically lower costs.

If you’re considering this route, it’s well worth it to plan ahead. If you have the flexibility, consider aiming for a reduced income during the gap years to lower your health insurance costs.

Bonus: Medigap

Medicare Supplement Insurance, or Medigap, is additional coverage sold by private companies to fill any “gaps” in your Medicare coverage. While Medigap can’t pay for medical expenses before you enroll in Medicare, it can at least help make sure you’re totally covered once you’re enrolled. However, there are some rules and restrictions, so it pays to be well-versed in everything Medigap offers.

What’s Next?

Whichever option(s) you choose to bridge the gap, know that it will almost certainly lead to higher annual expenses than while you were still working and covered under an employer’s health plan. If you’re looking to retire before age 65, consider your options carefully, and don’t forget to budget for the higher cost of healthcare in early retirement. And be sure to consult a Wealth Enhancement Group advisor, as our retirement specialists can help you plan accordingly for an effective, well-rounded financial plan.