Imagine finalizing your financial plan, seeing that your savings have finally hit the magic number, and realizing you can walk away from your career at age 60. The math works perfectly—until you pull up a health insurance quoting tool and discover that premiums for a couple in their early sixties can easily exceed $1,500 a month. Suddenly, the dream of walking away feels financially reckless.

Bridging the gap between your final paycheck and your 65th birthday is often the single biggest hurdle for those looking to retire before 65. Because Medicare eligibility does not begin until age 65, early retirees are forced to navigate a complex, often expensive web of private health insurance markets, former employer plans, and stopgap measures to keep themselves covered.

Navigating health coverage before Medicare requires strategy, foresight, and an understanding of how your retirement income directly impacts your healthcare costs. By treating your health insurance strategy with the same rigor you apply to your investment portfolio, you can protect your physical health without jeopardizing your financial longevity.

The Bottom Line Up Front

• The ACA is heavily subsidized: Affordable Care Act marketplace plans base their subsidies on your income, not your net worth. Careful income management can drastically lower your premiums.
• COBRA is a short-term bridge: It allows you to keep your exact employer coverage for up to 18 months, but you will pay the entire premium plus a 2% administrative fee.
• Part-time work changes the math: Taking a lower-stress job that offers health benefits—often called “Barista FIRE”—protects your retirement assets from massive medical premiums.
• HSA funds have strict rules: You generally cannot use Health Savings Account funds to pay for private insurance premiums, though COBRA premiums are a notable exception.

The Affordable Care Act (ACA) Marketplace

For most Americans stepping into early retirement, the Affordable Care Act marketplace serves as the primary engine for early retirement insurance. Before the ACA, securing private health insurance in your early sixties was notoriously difficult; pre-existing conditions could result in outright denials or astronomical premiums. Today, insurers cannot deny you coverage or charge you more based on your health history.

The true power of the ACA marketplace lies in Premium Tax Credits (PTCs). These subsidies are designed to cap your health insurance premiums at a specific percentage of your household income. Thanks to recent legislative enhancements, no household pays more than 8.5% of their Modified Adjusted Gross Income (MAGI) for a benchmark silver plan through 2025.

Managing Income to Maximize Subsidies

Because ACA subsidies are tied exclusively to your MAGI—and not your total wealth—early retirees have a unique advantage. You might have $2 million in the bank, but if you generate a low MAGI, you can qualify for heavily subsidized, or even free, health insurance.

To optimize your ACA premiums, you must carefully control where you draw your retirement income. Withdrawals from traditional 401(k)s and IRAs count as taxable income, pushing your MAGI higher and reducing your subsidies. However, pulling funds from a Roth IRA, spending down cash savings, or selling investments with a high cost basis (where the capital gain is minimal) will keep your MAGI low.

Consider a couple retiring at age 62. If they withdraw $100,000 entirely from a traditional IRA, their ACA premiums might cost them $1,200 a month. If they instead withdraw $40,000 from their traditional IRA and pull $60,000 from a Roth IRA or cash reserves, their taxable income drops to $40,000. At that income level, their premium for a robust Silver plan could drop to less than $100 a month.

To explore how different income levels affect your potential subsidies, you can utilize tools provided by the National Council on Aging (NCOA), which offers comprehensive guidance on managing healthcare costs as you age.

COBRA Options: The 18-Month Bridge

If you leave your job and dread the idea of switching doctors or changing your prescription formularies, COBRA offers immediate continuity. The Consolidated Omnibus Budget Reconciliation Act requires employers with 20 or more employees to let you stay on their group health plan for up to 18 months after you leave.

The catch is the cost. While you were employed, your company likely subsidized a significant portion of your premium—often between 70% and 85%. Under COBRA, you assume 100% of the premium cost, plus a 2% administrative fee. If you were paying $300 out of your paycheck for family coverage, the actual cost of that plan might be $2,000 a month. Under COBRA, that full $2,000 becomes your responsibility.

Despite the high cost, COBRA options make sense in a few specific scenarios:

• You retire mid-year and have already met your deductible: Switching to an ACA plan means starting over with a $0 deductible. Sticking with COBRA through December prevents you from paying double out-of-pocket maximums in a single calendar year.
• You are within 18 months of turning 65: If you retire at 63 and a half, COBRA provides a seamless bridge directly into Medicare.
• You are undergoing active, complex medical treatment: The disruption of changing insurance networks during chemotherapy or a scheduled surgery is rarely worth the premium savings an ACA plan might offer.

Part-Time Work for Health Benefits

Retirement does not have to be a binary switch between working 50 hours a week and working zero. A growing number of early retirees transition into part-time roles specifically to secure health benefits. This strategy drastically lowers your out-of-pocket healthcare costs while allowing your retirement portfolio more time to grow.

“Don’t simply retire from something; have something to retire to.” — Harry Emerson Fosdick

Many large corporations—including popular coffee chains, hardware stores, and grocery networks—offer robust medical, dental, and vision benefits to employees working as few as 20 hours a week. Securing one of these roles provides a steady routine, social interaction, and a heavily subsidized insurance policy that completely removes the stress of navigating the private market.

Relying on Spousal Coverage

If you are married and your spouse plans to continue working, transitioning to their employer-sponsored health plan is usually the most cost-effective and straightforward solution. When you lose your job-based health coverage due to retirement, it triggers a Special Enrollment Period. This allows your spouse to add you to their workplace plan immediately, rather than waiting for their company’s annual open enrollment period.

Before making the leap, review your spouse’s benefits package closely. Some employers impose a “spousal surcharge”—an additional monthly fee added to the premium if the spouse has access to coverage elsewhere. Fortunately, because you are retired and genuinely do not have access to another employer plan, you typically will not be subject to this surcharge, but it is a detail worth verifying with their HR department.

Comparing Your Main Coverage Options

To clarify how these strategies stack up against each other, review this breakdown of your primary health insurance options before turning 65.

Common Retirement Traps

Securing health insurance in your late fifties or early sixties is fraught with potential missteps. Because the financial stakes are so high, a single error in enrollment or income estimation can cost you thousands of dollars.

“The goal of retirement is to live off your assets—not live off your regrets.”

Keep a sharp eye out for these frequent stumbling blocks:

Trap 1: Misunderstanding HSA Rules

If you spent your working years diligently funding a Health Savings Account (HSA), you might plan to use those funds to pay your early retirement insurance premiums. Proceed with extreme caution. The IRS explicitly states that HSA funds cannot be used to pay for private health insurance premiums (like ACA marketplace plans) without incurring taxes and a 20% penalty. There is, however, a critical exception: you can use HSA funds to pay for COBRA premiums penalty-free.

Trap 2: Falling for Short-Term or “Junk” Plans

As you search for coverage, you will be bombarded with advertisements for short-term health insurance, indemnity plans, or health care sharing ministries. These products often boast incredibly low monthly premiums. However, they are not ACA-compliant. This means they can deny coverage for pre-existing conditions, impose strict annual payout caps, and exclude essential benefits like prescription drugs or mental health care. Relying on these plans is essentially gambling with your financial future; a single major diagnosis could lead to catastrophic out-of-pocket costs.

Trap 3: Missing the Medicare Transition Window

No matter which early retirement insurance strategy you choose, it all ends at age 65. You must proactively transition to Medicare. Your Initial Enrollment Period (IEP) begins three months before your 65th birthday month and ends three months after. Failing to enroll in Medicare Parts A and B during this window can result in lifetime late enrollment penalties. You can research the exact timeline and requirements directly at Medicare.gov to ensure a seamless transition.

When to Consult a Professional

Because health coverage before Medicare intersects deeply with your tax strategy and investment withdrawals, winging it is rarely a good idea. Consider seeking professional guidance in the following scenarios:

• Consult a Fiduciary Financial Advisor: When you need to engineer your retirement withdrawals to maximize ACA subsidies. An advisor can map out exactly which accounts to pull from—and in what sequence—to keep your MAGI below critical thresholds.
• Consult an Independent Health Insurance Broker: When you are evaluating the ACA marketplace. A licensed broker can help you interpret network rules, compare out-of-pocket maximums, and verify that your preferred doctors and prescriptions are covered. Their services are typically free to you, as they are compensated by the insurance companies.
• Consult a State Health Insurance Assistance Program (SHIP) Counselor: As you approach age 64. These federally funded counselors provide free, unbiased guidance on transitioning from your private early retirement plan to Medicare.

You can find robust, objective planning materials regarding this transition through USA.gov Retirement Resources, which aggregates data from across federal agencies to help you plan your timeline.

Frequently Asked Questions

Taking the Next Step Toward Your Early Retirement

Securing health coverage before Medicare requires you to assess your budget, evaluate your taxable income, and compare the precise costs of COBRA versus the ACA marketplace. Start by projecting your annual retirement living expenses and identifying exactly which accounts you will draw from to fund your lifestyle. Once you have a clear picture of your taxable income, visit your state’s health insurance exchange to run preliminary quotes.

You have worked decades to build a retirement you can enjoy. Do not let the complexity of health insurance keep you tied to a desk longer than necessary. Take control of the data, model out your income, and build a bridge to age 65 that keeps both your health and your wealth fully intact.

Information in this article reflects current rules as of the publication date and may change. Always confirm benefit details directly with Social Security Administration, Medicare.gov, or relevant government agencies before making decisions.

Last updated: February 2026. Medicare and Social Security rules change annually—always verify current details at official government sources.