How do early retirees pay for health insurance?

The Medicare gap problem

Medicare eligibility is age 65, full stop. There's no early enrollment at 62 (that's Social Security). Every year of early retirement before 65 needs a self-funded solution — and premiums for a 60-year-old are 3× what a 30-year-old pays for the same plan.

1. ACA marketplace + MAGI planning

The single most important option for most early retirees. Here's why: your subsidy is based on Modified Adjusted Gross Income, not net worth. A retired couple living off a $3M portfolio can look "poor" on paper if they draw mostly from savings, Roth accounts, and long-term capital gains — and qualify for large subsidies.

Enhanced subsidies (in effect for 2026) mean many early-retiree households at $60K–$150K MAGI still get meaningful help.

2. COBRA as a short bridge

COBRA gives you up to 18 months of your former employer's plan, but you pay the full premium. Useful when you're within 18 months of Medicare or need to protect an in-progress treatment relationship. See our cheaper alternatives to COBRA.

3. Working spouse's plan

If your spouse is still working, joining their plan is almost always the cheapest option — group coverage is heavily subsidized by the employer. This is often the deciding factor in when the higher-earning spouse retires.

4. Retiree health benefits

Rare in the private sector today, but common for federal, state, and municipal workers, teachers, and some legacy corporate plans. If your former employer offers subsidized retiree coverage, compare it against a subsidized ACA plan — sometimes the ACA wins, especially at lower MAGI.

5. Private off-exchange plans

Same underwriting rules as ACA (no denials, no pre-existing exclusions) but no subsidy. Makes sense when your MAGI is high enough that no subsidy applies and you want a broader PPO network for travel or specialists.

What it actually costs at 55, 60, 62 (2026 ballpark)

Unsubsidized silver-plan premiums for a non-smoker, before any subsidy:

• Age 55, single: $700–$950/month
• Age 60, single: $900–$1,200/month
• Age 62, couple: $1,900–$2,600/month combined

With a subsidy targeting ~250% of the federal poverty level (about $52K MAGI for a couple), that same 62-year-old couple often pays $300–$550/month combined — a $20K/year swing on a decision most retirees don't realize they control.

The MAGI planning play

Because subsidies are cliffs and slopes, small MAGI moves can be worth thousands in premium credits. Common levers:

• Draw from taxable accounts at long-term capital gain rates, not IRAs.
• Delay Social Security and delay traditional IRA distributions until 65 (or later).
• Roth conversion planning — the year you do a big conversion, expect zero ACA subsidy and plan around it.
• Use HSA withdrawals for qualified medical expenses to keep MAGI low.

This is planning territory, not tax advice — coordinate with a CPA and a financial planner. The interaction between ACA subsidies, IRMAA (Medicare surcharges after 65), and Roth conversions is where most of the money lives.

Frequently asked questions

Can I get Medicare at 62?
Almost never. Medicare starts at 65 unless you qualify by disability (24-month waiting period after SSDI approval) or ESRD.

How much should I budget for health insurance in early retirement?
Plan for $8,000–$18,000/year per person after subsidy, more if you're unsubsidized. Add $3,000–$6,000/year for out-of-pocket costs.

Do ACA subsidies count investment income?
Yes — MAGI includes ordinary income, capital gains, dividends, tax-exempt interest, and taxable Social Security.

What about health-sharing ministries?
Cheaper monthly cost but not insurance — no guarantee of payment, membership rules around lifestyle, and often exclude pre-existing conditions. Not a recommended primary solution for most early retirees.