Health insurance before Medicare

Retire before 65 and you need a healthcare plan for every month until Medicare kicks in. For a couple retiring at 55, that's 20 person-years of self-funded coverage. Most retirement calculators ignore this entirely. RetireWise models it as a separate line item and lets you see how much it shifts your readiness.

The short answer

  • You have three real options: the ACA marketplace, COBRA from a former employer, or coverage through a working spouse.
  • ACA marketplace plans cost less when your modified adjusted gross income (MAGI) is lower, because subsidies phase in below a threshold.
  • Default RetireWise healthcare estimate is $18,000/year per adult pre-Medicare, dropping to $6,000/year per adult after Medicare starts at 65.

What you'll need

  • A realistic pre-Medicare healthcare cost estimate (depends heavily on state, age, plan tier, and MAGI)
  • A view on whether ACA marketplace, COBRA, or spousal coverage applies to your situation
  • Awareness that pulling from pre-tax accounts raises MAGI, which can reduce ACA subsidies

How RetireWise handles it

The ACA marketplace is the default option for early retirees. Plans are guaranteed-issue (no medical underwriting) and premium tax credits scale with income. Below ~400% of the federal poverty level, credits are substantial. Above the cliff, you pay full price. Managing your MAGI by drawing from Roth or taxable accounts rather than pre-tax can save tens of thousands of dollars over a multi-year bridge.

COBRA lets you keep your former employer's group health plan for up to 18 months after you leave. The catch is you pay the full premium (employer + employee portions) plus a 2% admin fee. It's usually more expensive than the ACA but worth it if you have a high-quality plan and only need coverage for a few months while transitioning.

Spousal coverage is the cheapest option when available. If one spouse keeps working with employer health insurance, the retired spouse can typically join their plan. This is the single most powerful retire-early lever for couples. One spouse working part-time for the benefits often costs less than two ACA premiums.

RetireWise models healthcare as two separate spending lines: pre-Medicare (your estimate, defaults to $18,000/year per adult) and post-Medicare (your estimate, defaults to $6,000/year per adult). The simulator inflates both annually and shifts from pre- to post-Medicare automatically at age 65. The wizard's Income/Spending step lets you override both values to match your specific situation.

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