Once you hit your mid-50s, you can use your company’s open enrollment period to assess how your changing health and lifestyle may impact your future financial needs.
Quick takeaways
- Start your open enrollment planning with a careful review of your benefit options. That includes how your changing health may impact potential out-of-pocket costs and scope of coverage.
- While a health savings account carries over year to year, a flexible spending account does not. The latter may not be as useful to you as you near retirement.
- The time you put into open enrollment planning as you’re nearing retirement can help you better budget from year to year.
As you get closer and closer to retirement, open enrollment generally shifts from a routine, check-the-box deadline to a strategic assessment of what you’ll need now and in the future. Why?
One reason is that as you age, you’re simply more at risk for more health challenges, and those challenges may be a consideration for some of your open enrollment options. For example, about 10% of adults age 55-64 have hearing loss, a rate that’s double those age 45-54.
If you’re able to use open enrollment and the planning around it to evaluate your options and help accommodate the what-ifs—from unexpected health hurdles to protecting your family and income, or job shifts—the better you may be able to help protect your budget and financial plans.
You’re probably familiar with the basics of health care enrollment options, including deductibles, co-pays, and out-of-pocket maximums. Still, the fine print matters quite a lot, as your care and needs may shift as you near retirement. For example, does the plan you’re choosing provide coverage for any conditions you may have, preferred providers, or check-ups you may need as you age? Did you have any health care cost surprises in the past year—perhaps a prescription drug without coverage—that you can address now? Use last year’s budget and open enrollment to review any specifics that might matter.
Medicare coverage begins at age 65 (see more on that below). If you leave the workforce before that and retire early, you’ll need to think about gap coverage.
While you don’t have to sign up for gap coverage during open enrollment, it may be useful to connect with your employer so you can evaluate options and adjust your budget. The younger you are (and the further away from Medicare coverage), the more planning it might entail and financial impact it may have. COBRA, for example, only lasts 18 months, while short-term insurance policies are generally just for 364 days. Find out more specifics on all the gap coverage options for health care as you near retirement.
Signing up for Medicare depends on the age you reach 65, not any specific open enrollment time. It also doesn’t matter if you’re perfectly healthy or have a chronic condition; when you reach age 65, generally you’ll sign up for Medicare.
Even if you’re a few years out from that sign-up period, it’s worthwhile understanding the timing requirements (called an Initial Enrollment Period or IPE; use this calculator to see your IEP at the Social Security Administration website). Why? If you don’t sign up during that time period there may be lifetime penalties. What if you or a spouse is still working, with health care insurance you access, but you’ve reached age 65? You can stay on your employer plan if you want, but may still need to sign up for Medicare.
Again, take time during open enrollment to compare the details between your existing plan and Medicare. And, you’ll also want to ensure that once you decide to switch to Medicare that you’ve accounted for any budget impacts in your financial planning.
Some employers may offer disability insurance or life insurance as part of their benefits package. If so, you may have the option to increase your coverage, providing more income replacement if you’re unable to work (with disability insurance), or more resources for your family (through life insurance).
It’s key to review both policies, if offered, and your needs as you’re nearing retirement. If you’re just considering adding coverage, timing is key: You may pay more in premiums the older you are, and with any pre-existing conditions. Once you have coverage, policies generally have either level premiums (which stay the same for however long you have coverage) or age-banded premiums (which increase as you jump from one age group to the next). Check with your human resources department for an explanation and coverage increase options.
One voluntary benefit you can sign up for during open enrollment: hospital indemnity insurance. If you’re nearing retirement and think you may have a health care procedure on the horizon, it’s worth reviewing costs and coverage. It typically provides a benefit for some outpatient procedures and hospital stays, among other needs. Not every workplace offers it; your benefits administrator can help you with details.
While you can generally sign up for and contribute to a health savings account at any time—even outside of open enrollment—it’s worthwhile to evaluate your contributions while you’re also looking at your other benefit choices. The primary reason is that an HSA helps you cover deductibles and more—all those things you reviewed during open enrollment for your health care plan. The two work together.
But as you’re nearing retirement, there are more reasons to consider both maxing out your contributions and utilizing catch-up contributions for HSAs. For starters, distributions you take after age 65 aren’t included in your modified adjusted gross income for tax purposes. And, once you reach retirement age, you can use those funds for other nonmedical retirement expenses. Learn more ways you can use an HSA in retirement.
| 2026 HSA contribution limits | Amount |
|---|---|
| Self coverage | $4,400 |
| Family coverage | $8,550 |
| Catch up contribution, age 55+ | $1,000 |
There are many good things about an FSA—pre-tax contributions to help reduce your taxable income and the ability to save and pay for co-pays, medical equipment, and more, among others. But as you’re using open enrollment time to think ahead to retirement health care planning, you may want to consider if an FSA is a good fit.
These funds are use-it-or-lose-it; if you’re able to plan for expenses you know are upcoming in that year, then an FSA might work. But if you might leave a job before tapping your FSA, you’ll be unable to access the funds or take them with you.
| FSA yearly maximum | Catch up contributions |
|---|---|
| $3,300 | No |
Closing in on a retirement date can be exciting—and benefit planning is often stressful. The time you invest in making the right open enrollment choices for you can help you get the care you need, when you need it. Remember:
- Last year’s plan may not apply to next year’s needs. Compare changes both in plan coverages and your personal health and life needs, too.
- A financial professional and tax advisor can help with answers to key questions. There are tax implications for savings you put in to accounts like an HSA that may affect your choices.
- Open enrollment can be confusing, especially once you enroll in Medicare. Different plan types each have different financial implications. If you’re still employed, your human resources department may be able to help.
- What works for someone else may not work for you. Your needs and your budget is yours, and just because a coverage works for a co-worker or relative doesn’t mean it’ll work for you.
Trying to figure out open enrollment and possible retirement income impacts? Use the My Social Security Retirement Estimate to help calculate your potential benefits based on the age you may begin receiving Social Security.
