Retiring Before 65? How to Cover the Gap in Colorado
Retiring before Medicare at 65 means finding your own health coverage for the bridge years. Here is how COBRA, a spouse's plan, Connect for Health Colorado and HSAs compare.
Key takeaways
- Medicare usually starts at 65, so an early retiree needs another plan for every month before then.
- COBRA lets you keep your employer plan, usually for 18 months after leaving a job, but you can be charged up to 102% of the plan's full cost.
- You have 60 days before or after losing job-based coverage to pick a marketplace plan on Connect for Health Colorado, even outside open enrollment.
- In retirement, your reported income decides your help. Under 2026 rules, federal tax credits stop above 400% of the poverty level: $84,600 for a couple.
- Bronze marketplace plans count as HSA-compatible starting in 2026, so you may be able to keep saving tax free until Medicare.
If you plan to retire before 65, health insurance is often the biggest open question. Medicare will not start until your 65th birthday month for most people, and your employer plan usually ends when your job does. The months in between are what we call the pre-65, or "U65," years.
The good news is that Coloradans have real options, and the right one depends on a few things you can plan ahead: when your work coverage ends, how many months you need to bridge, your doctors and prescriptions, and how much income you will show on your tax return each year.
Here is how each option works, what it costs, and the timing mistakes that cause gaps. Pre-65 health insurance is a core part of what we do from our Brighton office, and our approach is simple: we ask questions, listen to your answers, and only then recommend coverage.
What are my options before Medicare starts?
Most early retirees in Colorado choose one of four paths: stay on the employer plan through COBRA, join a working spouse's plan, buy an individual plan through Connect for Health Colorado, or, at lower incomes, enroll in Health First Colorado. Some combine them, such as COBRA for a few months followed by a marketplace plan.
| Option | How long | What you pay | Watch out for |
|---|---|---|---|
| COBRA (employer with 20 or more employees) | Usually 18 months after leaving a job | Up to 102% of the plan's full cost | Rarely long enough to reach 65 if you retire at 62 |
| Spouse's employer plan | While your spouse works and the plan allows it | Your share of the spouse plan premium | Ends when your spouse retires |
| Connect for Health Colorado plan | Year to year until Medicare | Premium minus any tax credit | Credit depends on yearly income |
| Health First Colorado | While you qualify | Little or nothing | Adult income limit about 138% of the poverty level |
Is COBRA worth it for an early retiree?
COBRA is worth it when keeping the same doctors and the same deductible matters more than the price, or when you are only a few months from 65. It is often the most expensive path because you pay the whole premium, including the share your employer used to cover.
The Department of Labor's COBRA guide sets the rules: termination of employment for reasons other than gross misconduct brings 18 months of continuation coverage, and the plan can charge up to 102% of its cost. COBRA generally applies to employers with 20 or more employees.
COBRA can make sense if
- You are already past your deductible this year
- You are in the middle of treatment with specific doctors
- Medicare starts within about 18 months
A marketplace plan can make sense if
- Your retirement income qualifies you for a tax credit
- You need coverage for more than 18 months
- Your doctors are in a marketplace plan network
How does retirement income affect my premiums?
Your premium tax credit on Connect for Health Colorado is based on your expected household income for the year compared with the federal poverty level. In retirement you often control that number, because it depends on which accounts you draw from. Under the 2026 rules, federal credits generally run from 100% to 400% of the poverty level, with no federal credit above 400%.
| Household size | Poverty guideline (2025) | 400% ceiling |
|---|---|---|
| 1 | $15,650 | $62,600 |
| 2 | $21,150 | $84,600 |
- Counts as income: traditional IRA and 401(k) withdrawals, pensions, taxable interest and dividends, capital gains, part-time wages and taxable Social Security.
- Usually does not count the same way: money you take from a Roth account or from savings you already paid tax on.
- Plan the year as a whole. A large one-time withdrawal or home sale gain can push a couple over the line for the entire year.
This is a health insurance estimate, not tax advice. If you are deciding which accounts to draw from, bring your tax preparer into the conversation. Our no-cost retirement planning review can help you see the health insurance side of those choices.
Worked example: a Brighton couple retiring at 62
A hypothetical couple, not clients, both 62, retire from the same employer on June 30. Medicare is three years away for each of them. COBRA covers 18 of those months at most, so a marketplace plan has to carry them for at least the other 18. Here is how the numbers work for a planned retirement income of $60,000 a year from a pension and IRA withdrawals.
| 2026 coverage | 2027 coverage | |
|---|---|---|
| Poverty guideline for two | $21,150 | $21,640 |
| Income as % of poverty level | 284% | 277% |
| Share of income expected | 9.46% | 9.51% |
| Most they pay for the benchmark Silver plan | about $473 a month | about $476 a month |
| 400% income line for two | $84,600 | $86,560 |
The tax credit pays whatever the benchmark Silver plan costs above that contribution, so the older and pricier the couple, the larger the credit. The figures come from IRS Rev. Proc. 2025-25 for 2026 and Rev. Proc. 2026-26 for 2027, where the expected share for this income band rises from 8.44% to 9.96% and from 8.66% to 10.22%. Colorado Premium Assistance can then take up to $80 a month off for the first household member and $29 for each additional one, about $109 a month for this couple if they qualify.
Two Colorado details matter here. First, Colorado Option standardized plans, with set benefits designed by the state, are part of the individual market: the Division of Insurance counts 36 for 2026, with 12 sold off the exchange (DOI, 2026 Colorado Option standardized plans). Second, you can buy a plan directly from an insurer instead of through Connect for Health Colorado, but only an exchange plan can carry the federal credit or Colorado Premium Assistance, so an off-exchange plan only makes sense when your income rules out help.
Can I keep using a health savings account before 65?
Yes, if you are on an HSA-compatible plan. Under IRS Notice 2026-5, bronze and catastrophic plans available through an exchange are treated as HSA-compatible starting January 1, 2026, even if they do not meet the usual high-deductible plan definition.
- 2026 HSA limit, self-only coverage
- $4,400
- 2026 HSA limit, family coverage
- $8,750
- extra catch-up contribution at 55 or older
- $1,000
Once Medicare starts, you can no longer contribute to an HSA, but you can keep spending what is in it on qualified medical costs, including Medicare premiums. That makes the pre-65 years a good time to build the balance.
What about short-term medical plans?
Short-term medical plans are not a full replacement for a marketplace plan. They can exclude pre-existing conditions and do not have to cover every essential health benefit, and they do not qualify for premium tax credits.
Colorado sets its own rules for these plans on top of federal law, and what is for sale changes over time. Before counting on one for the bridge to 65, ask us what is currently available in Colorado, or check with the Colorado Division of Insurance. For most early retirees, a Connect for Health Colorado plan is the steadier foundation.
What is a good timeline for retiring before 65?
- Six months before you retire: ask HR the exact date your coverage ends and request the COBRA price.
- Three months before: estimate your first-year retirement income and compare a marketplace plan with COBRA, side by side.
- Within 60 days of losing coverage: enroll on Connect for Health Colorado if that is your choice.
- Every fall: update your income and re-shop during open enrollment. For 2027 coverage it runs November 1, 2026 to January 15, 2027.
- Three months before your 65th birthday month: start your Medicare enrollment, then end your marketplace plan when Medicare begins.
The bottom line
Retiring before 65 in Colorado goes smoothly when you have a plan for every month until Medicare. Compare COBRA (usually 18 months, up to 102% of cost) with a Connect for Health Colorado plan priced on your real retirement income, enroll within 60 days of losing work coverage, and re-shop every fall until your Medicare start date.
Frequently asked questions
How long can I stay on COBRA after I retire?
Usually 18 months when you leave a job for reasons other than gross misconduct, according to the U.S. Department of Labor. The plan can charge up to 102% of its cost.
Can I buy a Connect for Health Colorado plan in the middle of the year when I retire?
Yes. Losing job-based coverage is a qualifying life change event. You have 60 days before or after the coverage ends to select a marketplace plan.
Will I get a tax credit as an early retiree?
It depends on your household income for the year. Under 2026 rules, federal credits generally apply between 100% and 400% of the poverty level, which is up to $62,600 for one person and $84,600 for a couple.
Can I still put money in my HSA before Medicare?
Yes, if you have an HSA-compatible plan. From 2026, bronze and catastrophic plans available on an exchange count. Contributions stop once Medicare starts.
Sources
- An Employee's Guide to Health Benefits Under COBRA U.S. Department of Labor, Employee Benefits Security Administration
- IRS Notice 2026-5 (HSA changes and 2026 limits) Internal Revenue Service
- HHS poverty guidelines (2025) U.S. Department of Health and Human Services
- IRS Rev. Proc. 2025-25 (2026 applicable percentage table) Internal Revenue Service
- IRS Rev. Proc. 2026-26 (2027 applicable percentage table) Internal Revenue Service
- Connect for Health Colorado: Colorado Premium Assistance Connect for Health Colorado
- Colorado Division of Insurance: 2026 Colorado Option Standardized Plans Colorado Division of Insurance
- Connect for Health Colorado: State Solutions to Counter Rising Costs Connect for Health Colorado
- Colorado HCPF: Programs for Adults Colorado Department of Health Care Policy and Financing
Please note: Headwaters Health and Wealth is not affiliated with, endorsed by, or operating on behalf of Connect for Health Colorado, HealthCare.gov, the Health Insurance Marketplace, or any federal or state government agency. Plan availability, premiums and advance premium tax credits are set by the carriers and the Marketplace.Estimates only. Figures on this page use published plan-year values and the details you enter. They are not a quote, an offer of coverage, or a determination of eligibility. Your final premium and any tax credit are confirmed at enrollment with the carrier or Connect for Health Colorado. This article is general information, not medical, tax or legal advice.
