Educational information, not individual financial advice.
Key Takeaways
If you retire before 65, you have a gap to cover — health insurance without employer coverage and without Medicare. For early retirees, this is often the single biggest financial obstacle to making retirement work.
Unsubsidized health insurance for a 60-year-old couple in the individual market can run $1,500–$2,500 per month. Over 5 years from 60 to 65, that's $90,000–$150,000. Over 10 years from 55 to 65, it approaches $300,000.
That's a major chunk of a retirement portfolio.
After leaving employer coverage, COBRA lets you continue the same plan for up to 18 months by paying the full premium yourself (employee + employer portion + 2% administrative fee).
Advantages:
Disadvantages:
COBRA works as a bridge if your retirement date happens to be close to 65. If you're retiring at 58, COBRA only covers you to age 59.5, leaving 5.5 years uncovered.
The Affordable Care Act created individual-market plans with subsidies based on income. Key features:
Subsidies. Premium tax credits are available for households with MAGI between 100% and 400% of the federal poverty level (FPL). The Inflation Reduction Act extended enhanced subsidies through 2025 that remove the 400% FPL cliff, so subsidies phase out smoothly without a hard cutoff, and cap premiums at 8.5% of income. Whether this extension continues past 2025 depends on Congress.
For a retired couple with $60,000 MAGI, subsidies can cover most of the premium. For the same couple at $200,000 MAGI, subsidies are minimal or zero.
This is where early-retirement planning gets interesting. Your MAGI is heavily controllable in early retirement:
An early retiree with diverse account types can often structure withdrawals to keep MAGI low, qualifying for substantial ACA subsidies. Roth conversions and Traditional withdrawals might be deferred until Medicare starts at 65.
Savings can be substantial. A couple managing MAGI at 200% of FPL ($42,000) vs 400% ($83,000) can save $15,000+/year in premiums through subsidies.
If one spouse is still working and has employer coverage, the other can often be covered as a dependent. This is usually much cheaper than individual-market plans.
Both spouses retiring simultaneously eliminates this option. If timing permits, staggering retirement (one spouse continues working 2–3 more years) can provide bridge coverage with much better economics.
Some employers (Starbucks, Costco, REI, UPS, certain healthcare systems) offer health benefits to part-time workers with reduced hour requirements. "Barista FIRE" strategies often involve working 15–20 hours/week specifically for the health benefits.
A barista at Starbucks with benefits during early retirement years can save the full cost of private insurance ($20,000–$30,000/year) in exchange for relatively low-demand work.
Non-insurance cost-sharing arrangements like Medi-Share and Samaritan Ministries. Typically 30–50% cheaper than ACA plans but:
These work for some people but are not a full substitute for insurance.
Healthcare costs are a significant driver of the early-retirement decision. Before retiring early, get concrete quotes for the specific plans available in your area at your expected income level. A realistic cost estimate should shape both the target portfolio and the withdrawal strategy in early retirement years.
Some early retirees plan their first 5–10 years with the explicit goal of keeping MAGI below 400% FPL (around $85k MFJ in 2026) to maximize ACA subsidies. This may mean deferring Roth conversions until 65.
Horizons lets you model healthcare expenses separately by age range. A common pattern: $24,000/year from retirement to 65 (pre-Medicare), then $9,000/year from 65 onward (Medicare premiums, Medigap, Part D, out-of-pocket). The engine applies the transition at the month you turn 65.
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