#111 - What Happens to Your Health Insurance When One Spouse Retires?

Eric Blake: Welcome to another episode of the Simply Retirement Podcast, where we want to educate and empower women to live your retirement on your terms. I'm your host, Eric Blake, practicing retirement planner for over 25 years, founder of Blake Wealth Management, and I would not be the man I am today without the women in my life.

Joining me again is Wendy McConnell. Wendy, how are you?

Wendy McConnell: I'm great. How are you?

Eric Blake: I'm doing very well, very well. I know, as we're recording this, you're about to take a little bit of time off, so we won't be together for a couple of weeks. I know you're excited.

Wendy McConnell: Well, I'm excited for the time off and going away, not to be away from you, but...

Eric Blake: Yeah, I appreciate you clarifying that. It's probably better that you do than I do, right?

Wendy McConnell: Yeah, especially since I was just telling you how I see all of our past videos, and we're laughing in all of them. So we have a good time together.

Eric Blake: It's a good thing. Good thing. So I want to hop right into our episode because I think I have come up with a topic that you might actually despise more than taxes. What do you think?

Wendy McConnell: If it takes away more money than taxes do, then...

Eric Blake: Yes, it could. Actually, that could be a true statement right there. Today I wanted to spend some time talking about health insurance.

Wendy McConnell: Ugh.

Eric Blake: Specifically, spouse health insurance and how that fits into the bigger picture of retirement planning because this is, again, another one of those topics. I get a lot of my podcast topics from conversations that we have with clients, especially if we've had a similar conversation over a short period of time. That's where this one is coming from, directly from recent conversations we've been having.

Even though the focus of this podcast, and a lot of what we do, is educating women, many of the families we work with are couples. What's very important to me is that both spouses are actively involved in the planning process. In just the last few months, we've had this conversation multiple times where the husband's retiring as the primary earner, and the wife has either already stepped away from work or has been out of the workforce for some period of time for different reasons. In a couple of situations, it was to provide care for her parents.

As the husband retires, one or both of them may not be eligible for Medicare yet. In one case, it's the husband, so he's already eligible. He just recently retired. He was eligible at the time, but his wife wasn't. In the other couple of cases, the husband is going to be eligible in the next year or so for Medicare, but the wife is still going to be a few years away.

Wendy McConnell: Okay.

Eric Blake: That leads us to one of the most common questions we hear, especially when people are retiring before age 65. What do we do about healthcare? That's exactly what I'm going to walk through today. I hope we're going to give you a clear understanding. We're not going to have all the answers because it's going to depend on your individual situation, but, again, it comes back to what I always talk about, which is having a process. A process for identifying your options and filtering through what's going to make the most sense in your specific situation.

One of the things I always stress is that even when we work with couples, I am always going to be looking at these decisions from the wife's perspective. Not just what might work today for both, but what happens if something changes tomorrow.

Wendy McConnell: Okay. I like that.

Eric Blake: Basically, what if something happens to the husband? What does that decision look like for the wife on her own? I've shared the story about a client we had a couple of years ago. He retired, started Social Security, and passed away within just a matter of weeks after that. She was under age 60 at the time and was really in a tough spot. It became a matter of helping her identify what her resources were and putting a plan together so she could not just live, but actually move forward.

A big part of that was health insurance. What was she going to do about health insurance, especially at the age she was at the time? Again, it's about connecting some of these dots.

When we're looking at it from the wife's perspective, we ask whether it would still be manageable and whether it would still make sense if it were just her. Or would it create unnecessary stress or complexity in her financial life? Because that's often where the real risks are going to show up.

As a free resource for today's conversation, we've put together a simple checklist called Will Healthcare Change as I Transition into Retirement? It's designed to help you think through the exact decisions we're discussing today so you can better understand what may apply to your situation and, more importantly, what questions you should be asking. You'll find a link to that resource in the show notes for this episode, or you can go to simplyretirementpodcast.com.

Wendy McConnell: Sounds good.

Eric Blake: One of the biggest challenges with healthcare planning in retirement is that it's not always just one decision. It can often be two separate decisions happening at the same time. You may have one spouse moving onto Medicare while the other is still trying to figure out how to bridge the gap until they get to Medicare.

Wendy McConnell: Okay.

Eric Blake: You may have both spouses under age 65, where you're trying to replace employer coverage entirely. That's where it becomes important because, in many cases, you may be the one coordinating these decisions. But if it's just you managing them on your own someday, it becomes a much tougher conversation.

We know healthcare is going to be one of the largest expenses in retirement, and it's also one of the least understood.

Wendy McConnell: It's not just in retirement anymore.

Eric Blake: Right. We're going to touch on that as well because I know that's one of the things that, especially in our political environment, can be really confusing and cause panic that may not be justified in certain situations. I want to provide some clarity around that.

Wendy McConnell: Awesome.

Eric Blake: One of the questions I always hear is, "Can we just keep what we have?" Sometimes you can, at least temporarily. But the cost and structure of that coverage are likely to change more than you might expect.

Instead of looking for a quick answer, it's more about understanding your options, how long you need those options to last, and what the trade-offs are between cost, coverage, and flexibility.

Let's start with COBRA because this is often the first option people consider, especially if they're under 65 and have recently left their employer, whether that's because of retirement or being laid off. COBRA allows you to continue your employer health coverage after you leave your job.

Here's what often surprises people. While you're working, you're not paying the full cost of your coverage. Your employer is typically paying some portion of it, sometimes a large portion. Once you move to COBRA, that employer subsidy goes away, and you're responsible for the entire amount. What felt manageable before can quickly become a much larger expense. Sometimes we're talking thousands of dollars per month for the exact same coverage.

That's why COBRA should not automatically be your decision. In some cases, especially after a layoff, the former employer may cover the cost of COBRA for a period of time, which sounds great. But there's one big catch, especially when we're talking about retirement. COBRA is not considered creditable coverage for Medicare enrollment purposes.

Wendy McConnell: Yeah, because I'm confused right now.

Eric Blake: For Medicare, once you turn 65 and become eligible, creditable coverage refers to insurance that's considered good enough to allow you to delay enrolling in Medicare without facing penalties later.

Typically, that means active employer coverage from your job or your spouse's job. If you're 65 and still working, which many people are, and you're with an employer that generally has more than 20 employees and offers health coverage, you can continue that coverage without enrolling in Medicare. If you work until age 67, you're not penalized for delaying enrollment.

Wendy McConnell: Well, that part makes sense. I mean, why would they penalize you for putting it off? But what I'm thinking is, what if I lose my job at 63 and a half?

Eric Blake: That's where this comes in. We're actually working with a brand-new client going through this exact scenario. He's about a year and a half away from Medicare eligibility and was recently let go from his job. Now he's asking whether he can retire, and one of the biggest questions we have to answer is what to do about healthcare between now and Medicare eligibility.

In his case, he could choose to stay on COBRA for a period of time. But if you stay on COBRA beyond age 65, or even enroll in COBRA after age 65, it does not qualify as creditable coverage for Medicare purposes.

Let's use your example. Suppose you're 64 and start COBRA, planning to stay on it for 18 months. You begin COBRA at 64, turn 65, and continue until age 65 and a half. During that time, you never enrolled in Medicare because you didn't know the rules. You can actually receive a lifetime penalty for not enrolling at the proper time.

Wendy McConnell: So you have to make sure that you enroll exactly when you're supposed to.

Eric Blake: Yes. That's the tricky part. People don't realize that COBRA is not the same as employer coverage for Medicare purposes. That's why I said COBRA is not considered creditable coverage that allows you to delay Medicare enrollment.

Wendy McConnell: Okay. I just don't understand why we would want to delay it anyway.

Eric Blake: If your employer-provided coverage is better than what Medicare provides...

Wendy McConnell: Yeah. Okay.

Eric Blake: Or maybe your employer is paying a significant portion of your premium. That might be a reason to say, "I don't want to enroll in Medicare at 65 if I'm working until 67. I'd rather keep my employer coverage."

Wendy McConnell: Okay. Yeah, you're right. I didn't consider that. I was just thinking, "Why wouldn't you take it? Take it, take it."

Eric Blake: Hey, everyone. It's Eric. I hope you're enjoying today's episode. I want to take just a quick moment to share a resource I think you'll find valuable.

Have you ever found yourself asking, "How much can I put into an IRA this year?" or "How much can I earn before my Social Security gets reduced?" Those are the kinds of questions that come up all the time, and the answers change, often more than you think.

That's why we created a free two-page Tax and Retirement Planning Cheat Sheet, updated for 2026, with the key tax, Social Security, and retirement numbers all in one place. You can download it right now at simplyretirementpodcast.com/retirementcheatsheet. It's a simple reference you can keep handy whenever questions come up.

Now, back to the episode.

If it's available, we often encourage clients to utilize Health Savings Accounts, or HSAs.

Wendy McConnell: Yeah.

Eric Blake: But if you're going to enroll in Medicare, you have to stop all HSA contributions six months prior to your Medicare eligibility.

Wendy McConnell: Okay.

Eric Blake: Again, if you intend to work until age 67 and want to maximize your HSA contributions, that would be a reason not to enroll in Medicare Parts A or B. Even taking the free Medicare Part A at age 65 immediately makes you ineligible to continue making HSA contributions.

Wendy McConnell: What is the proper age to file? Is it six months beforehand? Is there a month window? When is the right time?

Eric Blake: In terms of Medicare, if you think about the general enrollment period, there are different enrollment periods depending on your situation. But generally, you can enroll as early as three months before your 65th birthday, then during your birth month, and then up to three months afterward. That's a total of seven months.

Wendy McConnell: Okay. I like it.

Eric Blake: If you're already retired and ready to transition to Medicare, you're all set. But because many people continue working beyond age 65, you need to make an informed decision about whether you should enroll. If you have good employer coverage and plan to work for another couple of years, that may be a reason to delay enrollment.

But if you retire at age 64 and stay on COBRA for the next 18 months, that's different. If you simply stay on COBRA for that full period without enrolling in Medicare at age 65, you could face a late enrollment penalty.

Wendy McConnell: When you don't need to stay on COBRA.

Eric Blake: Exactly. In that situation, you would want to enroll at age 65.

Whether you also keep COBRA depends on the circumstances. Sometimes, in a layoff situation where a company is letting multiple employees go, they may say they'll cover the cost of COBRA for a period of time. That's where people get tripped up. They think, "If they're paying my coverage for the next 12 months, why wouldn't I take advantage of that?"

Wendy McConnell: Right.

Eric Blake: But for Medicare purposes, that's where the issue comes up.

Wendy McConnell: So if we decide to stay with COBRA or with our employer's coverage until age 67, I'm assuming we need to fill out some sort of form to let Medicare know we're delaying.

Eric Blake: Once you get to age 67 and you're ready to transition to Medicare, they'll ask for documentation showing that you had continuous creditable coverage from age 65 to age 67. That allows you to enroll without being penalized. That word, creditable, is the key phrase.

Wendy McConnell: Okay. I thought maybe you had to fill something out during the seven-month period saying you were going to delay, but that's not the case.

Eric Blake: No, you don't have to do anything. Here's another caveat. If you've already started Social Security before age 65, you'll automatically be enrolled in Medicare. If you don't want to be, you actually have to decline that coverage. That's another thing to be aware of.

Wendy McConnell: Okay.

Eric Blake: Let's talk a little more about Medicare. This is where the confusion often starts. Once one or both spouses reach age 65, the structure of your health insurance changes completely because each person has their own coverage.

Typically, that includes Medicare Part A, Part B, a supplement plan, and a prescription drug plan, or you might choose Medicare Advantage, where it's bundled together. One of the biggest surprises is that you're no longer paying one premium for the family. Each spouse now pays their own premiums.

Wendy McConnell: Okay.

Eric Blake: Even though Part A is usually free, assuming you've built up enough work credits, the other pieces add up because those costs are paid individually. You pay separately for Medicare Part B, Part D, or your Medicare Advantage plan.

Then we get into things like IRMAA surcharges, which we've talked about before. If your income is too high, you may pay an additional Medicare premium.

Wendy McConnell: IRMAA says, "No, you make too much."

Eric Blake: Aunt IRMAA. Yeah. Aunt IRMAA and Uncle Sam. We want to stay away from those people. You don't want to invite them to your family picnic.

Wendy McConnell: No.

Eric Blake: That's why timing really matters. If you're still working and covered under an active employer plan, that's generally considered creditable coverage, allowing you to delay certain parts of Medicare without penalty.

Once that employment ends, or if you're relying on COBRA, that protection changes. It's very important to understand your enrollment windows and make sure you're transitioning at the right time.

Wendy McConnell: Okay.

Eric Blake: Now, from a planning perspective, the shift to individual coverage can actually be helpful because each spouse has their own plan, their own premiums, and their own structure. Again, from the wife's perspective, that can create more clarity and control if she ever needs to manage this whole process on her own.

We also want to make sure we're being intentional. Are we choosing plans that are simple to manage? Are we avoiding unnecessary complexity? At some point, this can become quite overwhelming.

Let's talk about what happens if one spouse is not yet 65, or if you're single and planning to retire before age 65. This is where things become more complex. One spouse may move to Medicare while the other isn't yet eligible. Now you're dealing with two completely different systems at the same time.

The spouse who's not yet 65 will need to explore other options. The first place to look may be employer coverage. You might continue working, even part time, just to maintain health insurance through your employer. If that's not an option, the next two possibilities are COBRA and Affordable Care Act coverage, sometimes referred to as Obamacare.

This is where comparing the numbers becomes really important. In some situations, COBRA for a single individual may actually be more affordable than an Affordable Care Act plan, especially if no subsidies are available. In other situations, the Affordable Care Act may offer more long-term flexibility.

This is where I would say, "Let's slow things down and look at your specific situation." If the wife isn't yet eligible for Medicare, she may be the one carrying the greatest uncertainty.

Wendy McConnell: Okay.

Eric Blake: There's been a lot of conversation about subsidies, which are essentially tax credits that help pay a portion of Affordable Care Act premiums. Many people think those subsidies have been completely eliminated, but that's not actually the case.

There are still subsidies available for lower-income individuals. We've essentially returned to where we were before the pandemic. During and after the pandemic, income limits were expanded, allowing more people to qualify. Those expanded limits have expired, so we're back to the original guidelines. The subsidies still exist, they're just available to a smaller group of people.

Wendy McConnell: Okay. You're right. I don't think that's explained very simply at all.

Eric Blake: Exactly. Unfortunately, there's always a political component where one side says one thing, the other side says another, and somewhere in the middle is the truth. That's why I wanted to provide some clarity around what actually is true when it comes to these tax credits.

They are still available. In fact, we have a client right now where we've put together a plan that may allow them to take advantage of these tax credits, even though they have a reasonable amount of income and resources. That's where planning becomes so critical.

If you've built an effective retirement income plan, meaning you have income or assets that don't create high taxable income, you may still be able to use this strategy to help manage healthcare expenses before age 65.

For example, you might draw from after-tax investment accounts or savings. That may help keep your taxable income lower, making you eligible for subsidies that are still available. The key is advanced planning. If you're considering retiring before age 65, what are you doing now to prepare for healthcare during that period?

Wendy McConnell: Okay.

Eric Blake: I also want to provide a simple way to think about your options because this can feel overwhelming.

When evaluating your choices, think about them in this general order. First, Medicare if you're eligible. Second, employer coverage if it's available. Third, COBRA as a short-term bridge. Fourth, Affordable Care Act coverage as a potential alternative. Finally, there are also individual health insurance policies that might make sense for certain people.

This isn't a strict rule. It's simply a framework to help organize your thinking as you evaluate your options.

Across all of these options, I want to come back to our planning perspective. We're not just choosing what works as a couple today. We also want to choose what will work for each person individually, especially the wife, if she ever has to navigate this on her own. That's how we reduce risk and make better long-term decisions.

Wendy McConnell: Got it.

Eric Blake: I know we covered a lot of different areas regarding healthcare. Hopefully, this provided some type of process to help evaluate your options. Is there anything else you think I should add or clarify?

Wendy McConnell: No. I'm just going to ask my financial advisor what I need to do.

Eric Blake: That's a good thing to do. Make sure your financial advisor understands what's going on.

Wendy McConnell: Yes, exactly.

Eric Blake: Awesome. As we wrap up today, here are a few key points to keep in mind.

Health insurance decisions often change significantly when you leave your job. What used to be one family plan may become two separate decisions. COBRA can be helpful, but it isn't always the best long-term option because of cost and timing considerations. Medicare introduces individual choices and separate premiums for each person. When one spouse isn't yet eligible for Medicare, it becomes even more important to carefully compare all of the available options.

This isn't about finding the perfect answer. It's about understanding your options and making an informed decision about your healthcare coverage.

Wendy McConnell: Okay.

Eric Blake: Hopefully we got through that, and hopefully it provided a little more clarity.

As always, thank you for tuning in. Thank you, Wendy, once again, for joining me.

If today's conversation raised questions for you, I encourage you to start by downloading our free checklist that I mentioned earlier, Will Healthcare Change as I Transition into Retirement? It's designed to walk you step by step through the same framework we use in our planning conversations.

If you're looking for a personalized retirement plan that helps you make smart decisions around income, investments, taxes, and healthcare, you can visit getmysimplyretirementroadmap.com to schedule a call with our team.

That's it for today's episode. Again, for all the links and resources mentioned today, visit simplyretirementpodcast.com. Don't forget to like, follow, and share our show. Until next time, please remember, retirement is not the end of the road. It's the start of a new journey.