Health insurance before 65: the gap nobody warns you about
Talk to people who've retired early and this is the thing that worried them most. Not running out of money. Health insurance. Medicare doesn't start until 65, so if you leave work at 50 you've got 15 years to cover on your own, and it's one of the biggest line items in an early-retirement budget.
A guide from Zero Risk Retirement · reflects 2026 rules
Your options between work and Medicare
There are really three ways to bridge the gap, and most people end up using more than one over the years:
The ACA marketplace (healthcare.gov or your state's exchange). For the great majority of early retirees this is the main answer, because your income is usually low enough to get help paying for it. More on that below.
COBRA. You can usually keep your old employer's plan for up to 18 months after you leave, but you pay the full premium plus a 2% fee, with no employer subsidy. It's useful as a short stopgap, especially mid-year, and rarely the cheapest long-term route.
A spouse's plan. If your partner is still working and has coverage, getting added to their plan is often the simplest and cheapest option of all.
Why the marketplace is friendlier than it looks
Here's the part that surprises people. Marketplace subsidies, formally the premium tax credit, are based on your modified adjusted gross income, not your net worth. You can have a seven-figure portfolio and still get help, because a lot of what an early retiree lives on (cash savings, the return of your original investment principal when you sell shares) isn't income in the eyes of the formula. Only the gain portion, dividends, interest, and any retirement-account withdrawals count.
For 2026, the premium tax credit applies to households earning between 100% and 400% of the federal poverty level, and it caps what you pay for a benchmark silver plan at roughly 2% to 10% of your income on a sliding scale. If your income is between 100% and 250% of poverty, you also get cost-sharing reductions that lower your deductible and copays, but only on a silver plan.
One important 2026 change: the enhanced subsidies from the pandemic era expired at the end of 2025, so the old "subsidy cliff" is back. Earn even a dollar over 400% of the poverty level and you currently get no premium tax credit at all, which for an older couple can mean a swing of well over a thousand dollars a month. Congress was debating restoring the enhanced credits in early 2026, so check healthcare.gov for the rules in your coverage year before you plan around this.
MAGI is the lever you actually control
Because the subsidy is income-based, an early retiree has an unusual amount of control over the price. You decide how much to sell, how much to convert, which accounts to draw from, and all of that moves your MAGI. Keep your income in the sweet spot and your insurance can be remarkably cheap. Let it drift too high and you lose the help.
This is where it collides with the rest of your plan. A Roth conversion ladder adds the converted amount to your income for that year, and realizing big capital gains does the same. Both can shrink your subsidy or, with the cliff back, knock you off it entirely. So there's a genuine trade-off: convert aggressively now and pay more for insurance, or keep income low for cheap insurance and convert less. On the flip side, things like HSA contributions lower your MAGI and can help you stay under a threshold. There's no single right answer, but it's worth modeling both ways rather than stumbling into a surprise.
Putting it in the calculator
The calculator has a dedicated annual health-insurance field for exactly this reason, because it's too big to hand-wave. My suggestion: run your expected income through the KFF marketplace calculator to get a realistic after-subsidy premium for your age and zip code, then drop that yearly figure into the health-insurance input. That way your retirement number includes the real cost of staying covered until Medicare takes over at 65.
How do I get health insurance if I retire before 65?
Medicare starts at 65, so before then your main options are the ACA marketplace at healthcare.gov, COBRA continuation from your old employer for up to 18 months, or joining a spouse's plan. For most early retirees the marketplace is the long-term answer, because your income is usually low enough to qualify for premium subsidies that COBRA does not offer.
Can early retirees get ACA subsidies?
Often yes. Subsidies are based on your modified adjusted gross income, not your net worth, and many early retirees live partly off cash and brokerage principal that does not count as income. For 2026 the premium tax credit covers incomes from 100% to 400% of the federal poverty level. The enhanced subsidies expired at the end of 2025, so above 400% there is currently a hard cliff with no help at all.
Do Roth conversions and capital gains affect ACA subsidies?
Yes, and this is the big trap. Roth conversions and realized capital gains both add to your MAGI, which can shrink your subsidy or, with the 2026 cliff back in place, push you over 400% of the poverty level and wipe it out entirely. There is a real tension between converting for a Roth ladder and keeping your income low enough to qualify for cheap insurance.
How much should I budget for health insurance in early retirement?
It varies a lot by age, location, and income, so a flat rule of thumb is misleading. A subsidized marketplace plan might cost a couple of hundred dollars a month, while an unsubsidized one for an older couple can run well over a thousand. Use the KFF marketplace calculator for a realistic estimate at your income, then put that number in the calculator's health insurance field.
Sources
HealthCare.gov — the official ACA marketplace; the place to confirm current rules and enroll.
Medicare.gov — coverage generally begins at age 65.
Not financial, tax, or insurance advice. ACA rules are changing and vary by state and year; confirm current details at HealthCare.gov or with a licensed broker. Reflects 2026 rules.