The healthcare gap: covering yourself from retirement to Medicare

Your main options are COBRA, ACA marketplace plans, or coverage through a spouse's employer. COBRA is usually the most expensive. ACA plans can be very affordable if you manage your income carefully, since subsidies are tied to your reported income — not your wealth.

The cost most pre-retirees underestimate

Run the numbers on retiring at 62 and health insurance is often the line item that makes it feel impossible. A couple in their early 60s buying coverage on the open market can easily face $2,000 to $3,500 per month before ACA subsidies — $24,000 to $42,000 a year, on top of everything else.

But the sticker price isn't the full story. Subsidies can cut that number dramatically. Whether you qualify, and for how much, depends almost entirely on your reported income.

COBRA: familiar, but usually the most expensive

COBRA lets you stay on your employer's plan for up to 18 months after leaving your job. The coverage is identical to what you had, which matters if you're mid-treatment or need to keep specific providers.

The catch: you pay the full premium — your share plus what your employer was covering — plus a 2% administrative fee. If your employer was covering $1,400 of a $1,600 monthly family premium, your COBRA bill is roughly $1,632 per month. Most people are surprised by that number.

COBRA makes the most sense when you need continuity of care for a short stretch, or when you're close enough to 65 that it bridges the full gap.

ACA marketplace plans: often the right answer

Marketplace plans through healthcare.gov are often the most cost-effective option for early retirees. The premium tax credit is based on your modified adjusted gross income (MAGI) relative to the federal poverty level. If you draw mostly from a Roth IRA or manage taxable income carefully, your MAGI can be low enough to qualify for significant subsidies — sometimes making a solid Silver plan cost a few hundred dollars a month instead of a few thousand.

The risk runs both ways. Fall below 100% of the federal poverty level and you're disqualified from the subsidy in states without Medicaid expansion. Earn too much and it shrinks or disappears. Managing income deliberately in early retirement isn't just a tax decision — it directly sets your health insurance cost.

Other ways to bridge the gap

• A spouse's employer plan is usually the simplest and cheapest option if your spouse is still working
• Part-time or contract work with benefits can cover the gap while keeping income low enough for ACA subsidies
• Some professional associations offer group health plans — coverage and cost vary widely
• Health sharing ministries are not insurance and do not guarantee payment

Frequently asked questions

How much does health insurance cost if you retire before 65?

It depends on your income, the plan, and where you live. Without subsidies, a couple in their early 60s might pay $2,000–$3,500 per month. With ACA subsidies, that can drop to a few hundred dollars per month depending on how much taxable income you report.

Can I get ACA subsidies if I retire early?

Yes, if your income falls within the subsidy range. The credit is based on your modified adjusted gross income, not your wealth. Retirees who draw from Roth accounts or manage taxable income carefully can often qualify.

How long can I stay on COBRA?

Generally 18 months after leaving your job, or 36 months in certain qualifying circumstances such as divorce or a dependent aging out of coverage.