Health insurance is the single largest expense and biggest anxiety for anyone retiring before 65. Medicare does not start until 65 regardless of when you stop working. A 55-year-old couple purchasing private insurance can expect to pay $15,000 to $30,000 per year without subsidies. That is $150,000 to $300,000 over the 10-year gap — enough to derail an otherwise solid retirement plan. But the cost is manageable if you understand your options and plan strategically.
Option 1: ACA Marketplace Plans
The Affordable Care Act marketplace is the primary insurance source for early retirees. In 2026, plans are available in every state, cannot deny coverage for pre-existing conditions, and offer premium subsidies based on your modified adjusted gross income. This is the crucial detail: subsidies are based on income, not assets. You could have $3 million in savings and still qualify for substantial subsidies if your taxable income is low — which is often achievable in early retirement through careful withdrawal planning.
| MAGI (Couple) | Approximate Monthly Premium (Silver) | Annual Subsidy Value | Notes |
|---|---|---|---|
| Under $24,000 | $0-$100 | $18,000-$24,000 | May qualify for Medicaid in expansion states |
| $30,000-$50,000 | $200-$600 | $12,000-$18,000 | Best subsidy sweet spot for most retirees |
| $50,000-$80,000 | $600-$1,200 | $6,000-$12,000 | Moderate subsidies still meaningful |
| $80,000-$100,000 | $1,000-$1,800 | $2,000-$6,000 | Subsidies taper but still exist |
| Over $100,000 | $1,500-$2,500 | $0 | Full cost — subsidy cliff eliminated in 2021 |
The Income Management Strategy
Early retirees can dramatically reduce ACA premiums by managing their modified adjusted gross income. In the years before Medicare, consider drawing from Roth accounts (not counted as income), using taxable account basis (return of principal is not income), and timing capital gains harvesting. Many financial planners call this the Roth conversion sweet spot: do large Roth conversions in years you are willing to pay higher premiums, and minimize income in years you need maximum subsidies.
Option 2: COBRA Continuation
COBRA allows you to keep your employer's group health plan for up to 18 months (36 months for some qualifying events). The catch: you pay the full premium plus a 2 percent administrative fee. Employer plans typically cost $700-$1,500/month for individual coverage or $1,500-$2,500/month for family. COBRA is expensive but useful as a short-term bridge if you leave a job mid-year and want to keep your current doctors until the next ACA open enrollment.
Other Bridge Options
- Spouse's employer plan: If your spouse still works, this is often the cheapest option. Open enrollment allows adding a spouse.
- Health care sharing ministries: $200-$500/month but are NOT insurance. They are not regulated, can deny claims, and have annual and lifetime limits. Use with extreme caution.
- Short-term health plans: Cover 3-12 months, cheap ($150-$400/month) but exclude pre-existing conditions and have minimal coverage. Only useful as a true gap-filler.
- Part-time employment with benefits: Companies like Starbucks, Costco, UPS, and REI offer health benefits to part-time workers (20+ hours/week).
- Direct primary care: $75-$150/month for unlimited primary care visits. Pair with a high-deductible catastrophic plan for a cost-effective hybrid approach.
Planning the Bridge: Year by Year
The health insurance bridge is the most expensive part of early retirement planning, but it is solvable. With ACA subsidies, Roth account management, and strategic timing, most early retirees can cover health insurance for $5,000-$12,000 per year — not $30,000. The key is planning the bridge before you burn it by leaving your employer.