How to Build Medicare Costs Into a Financial Independence Plan Before 65

Financial independence before 65 is a goal many individuals are working toward, more seriously than ever before. Plenty of people are simply hoping to leave the workforce on their own timeline rather than the traditional one society seems to have set.

But one of the most common blind spots in early retirement planning is healthcare, and specifically what happens when you’re no longer covered by an employer’s health plan and not yet eligible for Medicare. Knowing how to prepare for the cost of Medicare, what it will actually run you each month, and how to bridge the gap between early retirement and Medicare eligibility are all pieces of a financial independence plan that too many people underestimate or skip entirely until they’re closer to 65. Getting ahead of this now, while you still have time to adjust your savings strategy, makes the whole picture clearer and more manageable.

Understanding What Medicare Actually Costs

Before you can build Medicare costs into a financial plan, you need a realistic sense of what those costs actually are. Medicare is not free, and the total expense is often higher than people expect when they think about it in abstract terms.

Part A, which covers hospital care, is premium-free for most people who’ve worked and paid Medicare taxes for at least 10 years. Part B, which covers outpatient care like doctor visits, comes with a standard monthly premium that adjusts annually. In 2026, that number is $202.90/month, though higher earners pay more through what’s called IRMAA, the Income-Related Monthly Adjustment Amount.

Part D covers prescription drugs and can add another monthly premium, as can Medigap (Medicare Supplement) or Advantage plans.

When you add it all up, a realistic estimate for a single person might run anywhere from around $300 to $600 or more per month, depending on various factors. These aren’t small numbers, especially with many on a fixed income, so they need a dedicated line in any serious financial independence plan.

The Gap Between Early Retirement and Medicare Eligibility

Here’s where early retirement planning can get complicated. Medicare eligibility for most people starts at 65. If you’re planning to retire at 55, 58, or 62, you’re looking at a gap of anywhere from three to ten years during which you need to cover your own health insurance costs entirely.

ACA marketplace plans are the most common solution, and depending on your projected retirement income, you might qualify for premium tax credits that reduce your costs.

The gap years also represent a period of healthcare cost uncertainty that’s worth building a specific buffer for in your financial plan. Health issues that arise in your late 50s or early 60s, before Medicare eligibility, are covered by whatever private insurance you have—but that coverage might come with higher out-of-pocket costs than Medicare, narrower networks, or other limitations depending on what you choose.

IRMAA: The Surprise Charge for Higher Earners

If your retirement income is above certain thresholds, you’ll pay more for Medicare than the standard premium. This is IRMAA—the Income-Related Monthly Adjustment Amount—and it applies to both Part B and Part D premiums.

IRMAA is based on your income from two years prior. So, your 2026 Medicare premiums are based on your 2024 income. For people transitioning from high-earning careers to retirement, this means that even after you’ve stopped working, your Medicare premiums might reflect your former income for a year or two before adjusting downward.

The good news is that you can appeal IRMAA if your income has significantly decreased due to a life-changing event like retirement. The Social Security Administration handles these appeals, and they’re worth pursuing if your income drops substantially.

Building Healthcare Into Your Retirement Budget

Treat healthcare as its own budget category with its own dedicated projections rather than lumping it into general living expenses.

Start with what you know: estimated Medicare premiums for Part B, Part D, and any Medigap or Medicare Advantage coverage. Add realistic estimates for out-of-pocket costs, such as dental, vision, hearing, and the cost-sharing that Medicare doesn’t cover. Then add a buffer for unexpected medical expenses, because unexpected things happen.

Healthcare costs historically increase faster than general inflation, which means your healthcare budget line in year one of Medicare enrollment shouldn’t be used as a flat projection for all subsequent years.

Health Savings Accounts

If you’re still working and covered by a high-deductible health plan, a Health Savings Account is one of the most valuable tools available for building a healthcare cost cushion before 65, and for funding Medicare costs after.

HSA contributions are tax-deductible, the money grows tax-free, and withdrawals for qualified medical expenses are also tax-free. That triple tax advantage makes HSAs uniquely powerful for healthcare savings. Contributions must stop once you enroll in Medicare, but accumulated funds can continue to be used tax-free for qualified expenses including Medicare premiums, out-of-pocket costs, dental, vision, and long-term care insurance premiums.

Long-Term Care

No honest discussion of Medicare costs in a financial independence plan is complete without addressing long-term care. Medicare covers very limited long-term care, such as some skilled nursing facility care under specific conditions, and home health care only when it’s skilled and medically necessary. The ongoing custodial care that many people eventually need, help with daily activities over months or years, is not covered by Medicare.

The financial exposure here is huge. A multi-year need for this level of care can deplete even well-funded retirement savings.

Address this risk, either through some type of long-term care insurance or specific self-funding strategies. The point is, doing it before you retire gives you the most options at the most reasonable cost.

Social Security Timing

For early retirees, Social Security timing interacts with Medicare planning in ways worth understanding. You can’t claim Social Security before 62, and delaying past 62 increases your eventual benefit. If you retire before 62 and bridge the gap with savings, you have flexibility when you start Social Security.

For people with significant retirement savings, delaying Social Security until their full retirement age or the max age 70 to increase their benefit is a common strategy. If you’re in this camp, understand how your income sources during the delay period interact with both marketplace insurance costs and eventual Medicare premiums so you have clarity about the overall picture.

Starting the Planning Process Early

The common thread running through all of this is timing. Healthcare costs in retirement, both before and after Medicare eligibility, are more manageable when you start planning for them in advance rather than at the last minute. The people who navigate this transition most smoothly are generally those who treat Medicare and healthcare costs as a specific, researched line item in their financial independence plan rather than a vague future expense to figure out later.

If you’ve got some time before your target retirement date, you have real runway to adjust your savings rate and think through your financial strategies. Use that time well, and healthcare costs will become a planned part of your retirement picture rather than the surprise that derails it.

This post may contain affiliate links.

More Recommended Ebike/Scooters

Check out these other ebikes and scooters I've reviewed:

Urban Arrow Ebike – Last year, I made one of the largest purchases I’ve ever made – I bought a $9,000 electric cargo bike from Urban Arrow. In my Urban Arrow review, I will discuss what it is and why I decided to buy this bike, as well as discuss how impactful a bike like this can be on your journey to financial independence.
Troxus Explorer Step-Thru Ebike – The Troxus Explorer Step-Thru is a fat-tire ebike that I’ve had the pleasure of riding for a while now. It has amazing power, great looks, and awesome range. If you’re looking for a great fat-tire ebike that offers a lot for the price, the Troxus Explorer Step-Thru is definitely one for you to consider. Check out my Troxus Explorer Step-Thru Review.
Hovsco HovBeta Ebike – The HovBeta is a folding ebike with great specs and a lot of interesting features, and importantly, it’s sold at a good price point. I’ve had a blast commuting with it and using it to do deliveries with DoorDash, Uber Eats, and Grubhub. Check out my Hovsco HovBeta Ebike Review.
Vanpowers Manidae Ebike – The Vanpowers Manidae is a fat tire ebike that I’ve been riding as my primary winter commuting bike and have also been using it to do food delivery with apps like DoorDash, Uber Eats, and Grubhub. After clocking in a decent number of miles with this ebike, I wanted to write a post sharing what my experience with the Vanpowers Manidae ebike has been like. Check out my Vanpowers Manidae Review.
Sohamo S3 Step-Thru Folding EBike Review – A Great Value Folding Ebike – The Sohamo S3 Step-Thru Folding Ebike is an entry-level folding ebike that offers a lot of value for the price point. I’ve been riding the Sohamo S3 for a while now, putting the bike through its paces, and I have to say, this bike has exceeded all of my expectations. Check out my Sohamo Review.
KBO Flip Ebike – The KBO Flip is an excellent bike. I’ve had a great time riding it and think it’s a versatile bike that can be used for a lot of purposes and can fit a variety of lifestyles. It’s worked out great for me as a general commuter bike and as a food delivery bike. Check out my KBO Flip Review.
Hiboy P7 Commuter Ebike – The Hiboy P7 is an excellent electric commuter bike that’s offered at an affordable price point. The range and speed of this bike are both very good, so you won’t have any trouble getting anywhere you need to go with it. As a food delivery vehicle, this is also good – with how much range it offers, you’ll be able to work all day on a single charge. Check out my Hiboy P7 Commuter Electric Bike Review.
Himiway Escape Ebike – The Himiway Escape is an interesting bike for anyone looking for a moped-style ebike. If you’re a gig economy worker, the Himiway Escape is particularly interesting and it’s possible to think of it as an investment, especially if you can opt to do deliveries with the Himiway versus using a car. It’s not cheap, but you can definitely make your money back when you compare the mileage you’ll put on your car versus using an ebike. Check out my Himiway Escape Bike Review.
Espin Sport Ebike – The Espin Sport is a good ebike for someone who is looking for an ebike that feels and rides more like a regular bike. There are many ebikes that are really only bikes in name. In reality, they’re basically electric mopeds. The Espin Sport, by contrast, is a bike you could probably ride without the battery and you’d feel like you’re just riding a regular bike. Check out my Espin Sport Review.
Varla Eagle One Scooter – The Varla Eagle One is an excellent scooter that can make sense for a lot of people. It can work as a primary mode of transportation. You can use it to work on gig economy apps like DoorDash, Uber Eats, and Grubhub. And it can also be a recreational vehicle if you’d prefer to use it for that. Check out my Varla Eagle One Review.
Varla Falcon Scooter – The Varla Falcon is an excellent scooter that offers a good amount of power at a lower price point compared to more powerful scooters. It’s not exactly an entry-level scooter, nor is it a high-powered scooter. I think it fits somewhere in-between those two categories – an intermediate scooter if I had to give it a category. Check out my Varla Falcon Review.
Hiboy S2 Scooter – The Hiboy S2 is an excellent entry-level commuter scooter that's perfect for someone looking to save some money in transportation costs and improve their commute. Check out my Hiboy S2 Review.
Hiboy S2R Scooter – The Hiboy S2R is one of the more interesting electric scooters I’ve been able to test out. It’s not a high-powered scooter, but for an everyday transport option, it’s very useful, especially given some of the unique features that it has. Indeed, for the price, the Hiboy S2R might be the best value scooter I’ve used. Check out my Hiboy S2R Review.
Fucare H3 Scooter – The Fucare H3 is a fun scooter and I’ve enjoyed testing it out. For a daily commuter or quick trips or errands, the Fucare H3 is probably the scooter I’ll use. It’s portable and easy to maneuver, so it’s just easier to take on the road when I need it. Check out my Fucare H3 Scooter Review.

More Recommended Investing App Bonuses

For additional investing app bonuses, be sure to check out the ones below:

M1 Finance ($75) – This is a great robo-advisor that has no fees and allows you to create a customized portfolio based on your risk tolerance. You also get $75 for opening an account. Check out my M1 Finance Referral Bonus – Step-By-Step Guide.
SoFi Invest ($25) – SoFi Invest is an easy brokerage account bonus that you can earn with just a few minutes of work. Use my SoFi Invest referral link, fund your SoFi Invest brokerage account with just $10 and you’ll get $25 of free stock. I also have a step-by-step guide for the SoFi Invest referral bonus.
Robinhood (1 free stock) – Robinhood gives you a free stock valued between $2.50-$225 if you open an account using my referral link.
Public (1 free stock) - Public gives you a free stock valued between $3-$70 if you open an account using my referral link.

More Recommended Bank Account Bonuses

If you’re looking for more easy bank bonuses, check out the below options. These bonuses are all easy to earn and have no fees or minimum balance requirements to worry about.

Ally Bank ($100) – Of all the banks out there, Ally is, without a doubt, my favorite. At the moment, Ally is offering $100 to customers who open an eligible Ally account and meet the requirements. Here are the step-by-step directions to earn your Ally Bank referral bonus.
Chime ($100) - Chime is a free bank account that offers a referral bonus if you use a referral link and complete a direct deposit of $200 or more. In practice, any ACH transfer into this account triggers the bonus. This bonus is easy to earn and posts instantly, so you’ll know if you met the requirements as soon as you move money into the account. I wrote a step-by-step guide on how to earn your Chime referral bonus that I recommend you check out.
US Bank Business ($400/$1200) – This is a fairly easy bank bonus to earn, since there are no direct deposit requirements. In addition, you can open the Silver Business Checking account, which comes with no monthly fees. Check out how to earn this big bonus here.
Current ($50) – Current is a free fintech bank that’s offering new users a $50 referral bonus after signing up for an account using a referral link. Current is an easy bonus to earn and also gives you access to three savings accounts that pay you 4% interest on up to $2,000. That means you can put away up to $6,000 earning 4% interest. That’s very good and makes Current an account I recommend to everyone. Check out my step-by-step guide on how to earn your Current Bank bonus.
Novo Bank ($40) - Novo bank is a free business checking account that’s currently offering a $40 bonus if you open a Novo business checking account using a referral link. In addition to being a good bank bonus, Novo is also a good business checking account. It has no monthly fees or minimum balance requirements and operates a good app and website. Indeed, it’s the business checking account I currently use for this blog. Check out my post on how to easily open a Novo account.
Varo ($25) – Varo is a free fintech banking app similar to Chime or Current. It’s currently offering a $25 bonus to new users that open a new Varo account with a referral link. The bonus for this bank is very easy to meet, all you need to do is spend $20 within 30 days of opening your Varo account. Check out my step-by-step guide to learn how to earn this bonus.

Kevin is an attorney and the blogger behind Financial Panther, a blog about personal finance, travel hacking, and side hustling using the gig economy. He paid off $87,000 worth of student loans in just 2.5 years by choosing not to live like a big shot lawyer.

Kevin is passionate about earning money using the gig economy and you can see all the ways he makes extra income every month in his side hustle reports.

Kevin is also big on using the latest fintech apps to improve his finances. Some of Kevin's favorite fintech apps include:

SoFi Money. A really good checking account with absolutely no fees. You'll get a $25 referral bonus if you open a SoFi Money account with a referral link, and an additional $300 if you complete a direct deposit.
5% Savings Accounts. I'm currently getting 5.24% interest on my savings through a company called Raisin. Opening a Raisin account takes minutes to complete, it's free, and all of your funds are FDIC-insured. I explain how it works, why I'm now using it to store my emergency fund and any other cash savings I have, and why I recommend everyone check it out in this review.
US Bank Business. US Bank is currently offering new business customers a $400/$1200 signup bonus after opening a new account and meeting certain requirements.
M1 Finance. This is a great robo-advisor that has no fees and allows you to create a customized portfolio based on your risk tolerance. You also get $75 for opening an account.
Empower. One of best free apps you can use to monitor your portfolio and track your net worth. This is one of the apps I use to track my financial accounts.

Feel free to send Kevin a message here.