Health insurance before age 65

The healthcare bridge is the single most-underestimated cost for early retirees. A standard retirement calculator that assumes "healthcare" is one budget line doesn't separate the high pre-Medicare cost from the much lower post-Medicare cost. That distinction is usually the difference between an early-retirement plan that works and one that doesn't.

Real numbers help. ACA marketplace premiums for a 60-year-old couple in 2026 typically run $20,000-$30,000 per year before subsidies, depending on state and plan tier. After Medicare kicks in at 65, the equivalent coverage (Original Medicare + a Part D drug plan + a Medigap supplement) costs roughly $6,000-$10,000 per year per person. The pre-Medicare years cost roughly three times as much per year.

Option 1: the ACA marketplace. The Affordable Care Act marketplace is the default option for most early retirees. Plans are guaranteed-issue (no medical underwriting allowed, meaning you cannot be denied for pre-existing conditions). Premiums depend on age, location, plan tier (bronze/silver/gold), and your modified adjusted gross income (MAGI). Premium tax credits scale down as your MAGI rises, with a subsidy cliff at a certain income threshold. Below the cliff, the subsidy can cut your premium dramatically. Above it, you pay full price. Managing your MAGI by drawing from Roth or taxable accounts (which don't increase MAGI as much as pre-tax withdrawals) is the standard tax-planning move for early retirees on the ACA.

Option 2: COBRA from your former employer. After you separate from a job that provided group health insurance, you can typically continue that coverage for up to 18 months under COBRA. The catch: you pay the full premium yourself, including the portion the employer previously paid, plus a 2% administrative fee. For most people this is more expensive than an ACA plan, but it can be worth it if you have a high-quality employer plan and only need coverage for a short transition (e.g., until a spouse's plan kicks in or until you turn 65).

Option 3: spousal coverage. If one spouse continues working and that spouse's employer offers family coverage, the retired spouse can typically join the working spouse's plan. This is the cheapest option when available. Many couples retire one partner first, with the other partner working part-time for a few more years specifically to maintain health insurance for both. The cost of one part-time job's worth of premium coverage is often less than the cost of two ACA premiums.

Tax interaction. Pre-tax retirement-account withdrawals raise MAGI directly. Roth withdrawals don't. Taxable brokerage withdrawals only raise MAGI by the capital-gain portion, not the cost basis. For a couple on ACA marketplace coverage, the choice of which account to draw from each year directly affects how much subsidy they qualify for. Over a 10-year healthcare bridge, this can easily reach $50,000-$100,000 in total subsidy savings.