Retirement Planning·Jun 21, 2026·13 min

Health Insurance Before Medicare: The Gap That Decides When You Can Retire

When I model my own early-retirement scenarios, the line item that moves my retirement date more than any other isn't my portfolio size or my withdrawal rate. It's health insurance. Medicare doesn't start until 65, and if you leave work before then, you're buying your own coverage in the most expensive stretch of your life to insure. For someone retiring at 55, that's a full decade to fund. It's the single most underestimated number in early-retirement planning, and in 2026 it got more complicated.

I want to walk through what the gap actually costs right now, the one lever that quietly controls most of that cost, and the tradeoff that makes this the hardest puzzle in the years between retirement and Medicare.

The gap nobody plans for early enough

Medicare eligibility begins at 65. Retire before then and you lose employer coverage with no government program to replace it until you turn 65. That's the gap. For someone leaving at 62 it's three years; at 55 it's ten. And it lands precisely when age-based premium rating is at its steepest — ACA rules let insurers charge a 64-year-old up to three times what they charge a 21-year-old for the same plan.

Unsubsidized, the sticker price is genuinely alarming. A benchmark Silver plan for a single person in their early sixties commonly runs well over a thousand dollars a month in 2026, and a couple in that age band can face a combined full-price premium north of $2,500 a month before any tax credit. Numbers like that are what push otherwise-ready retirees to keep working until 65 purely for the employer health plan.

But the sticker price is not what most early retirees actually pay, because of how subsidies work — and that's where the planning happens.

The income lever most people don't know they're holding

ACA premium subsidies are based on your modified adjusted gross income, or MAGI, measured against the federal poverty level for your household size. The lower your income, the larger your subsidy. And here's the part most people miss: in early retirement, you often control your taxable income to a remarkable degree, because you choose which accounts to draw from.

Several sources of cash don't count toward ACA MAGI at all. Qualified withdrawals from a Roth IRA are excluded. The return-of-basis portion of a taxable brokerage withdrawal — the part that's your original contribution, not the gain — doesn't count. HSA distributions for qualified medical expenses are excluded. So a retiree with a few million dollars spread across account types can deliberately draw from Roth and basis, show a modest MAGI on paper, and qualify for subsidies that take a $1,200-a-month premium down to a few hundred. The assets are large; the reported income is small; the subsidy follows the income.

That's the lever. Two households with identical net worth and identical spending can pay wildly different amounts for the same coverage, purely because one sequenced withdrawals to manage MAGI and the other didn't. Over an eight-year gap, the difference runs into the tens of thousands of dollars.

The practical takeaway: in the gap years, which account you withdraw from can matter as much as how much you withdraw. A dollar from a Roth and a dollar from a traditional IRA spend the same, but they affect your subsidy completely differently.

What changed in 2026 — and why I'm dating this carefully

For several years, enhanced premium tax credits made marketplace coverage cheaper and softened the old subsidy cliff. Those enhanced credits expired at the end of 2025. Under the rules that returned for 2026, the cliff at 400 percent of the federal poverty level is back in its hard form: cross that income line by a single dollar and you can lose your subsidy entirely. For a household near the threshold, that can mean the difference between a few hundred dollars a month and the full unsubsidized premium.

This is genuinely in flux as I write. There was active legislation in early 2026 aimed at extending the enhanced credits, and its outcome was unresolved. I'm not going to predict what Congress does. What I'll say is that the strategy in this article — managing MAGI to control your subsidy, and balancing that against conversions and IRMAA — holds regardless of where the specific thresholds land. The exact subsidy percentages and cliff behavior are what change. Before you plan around any specific number, check the current rules at HealthCare.gov, because a published figure from any source, including this one, has a shelf life right now.

Estimate your own gap

Before going further, it helps to put real numbers against your own situation. Our health insurance gap calculator estimates what bridging the years to Medicare could cost after subsidies, and it has a managed-income input so you can see the lever directly — what the same coverage costs if you draw your taxable income down versus leaving it high. It's free and needs no signup.

See your gap cost — and the income lever

The calculator estimates your total cost from your retirement age to Medicare at 65, after ACA subsidies, and shows how much managing your taxable income could save over the bridge. Free, no signup.

The tension with Roth conversions

Here's where it stops being simple. The low-income years that maximize your ACA subsidy are also the best years to do Roth conversions — your other income is low, so the conversion gets taxed in low brackets. Financial-independence planners spend a lot of energy on exactly these gap years for precisely that reason.

The problem: a Roth conversion raises your MAGI in the year you do it. More MAGI can shrink or eliminate your ACA subsidy, and near the cliff the cost of an oversized conversion isn't just the tax — it's the subsidy you forfeit on top. So you're pulled in two directions. Convert aggressively to shrink future required minimum distributions and lock in low rates, and you spend more on health insurance now. Keep income low to maximize the subsidy, and you leave conversion headroom on the table that you'll pay for later in higher RMDs and bigger tax bills.

And there's a third thread. Income in these years also sets your Medicare IRMAA surcharge two years down the road, because IRMAA uses a two-year MAGI lookback. A conversion at 63 can quietly raise your Medicare Part B and D premiums at 65. So the real optimization in the pre-Medicare window is three-way: the ACA subsidy now, the conversion tax now, and the IRMAA surcharge later. You can model each piece on its own — the Roth conversion calculator and the IRMAA calculator each take one slice — but the value is in seeing them together against your actual numbers.

What Medicare costs when you finally get there

It's worth correcting a common assumption: hitting 65 doesn't make healthcare free. Medicare has real premiums. In 2026 the standard Part B premium is about $202.90 a month per person. A Part D prescription plan averages around $35. And most people add a Medigap supplement to cover what Original Medicare leaves exposed, commonly $125 a month or more depending on the plan and your area.

Add those up and a realistic all-in figure is roughly $350 to $400 per person per month — call it $700 to $800 for a couple — before dental, vision, hearing, and other out-of-pocket costs Medicare doesn't cover. The gap years before 65 are the expensive spike, but Medicare is a steady, ongoing line in the budget for the rest of retirement, and it tends to climb faster than general inflation. A plan that models healthcare as a single flat number, or assumes it disappears at 65, is understating one of the largest costs in retirement.

How planbend handles this

Inside the planbend app, healthcare isn't a flat guess. The retirement model treats the pre-65 years as their own phase, estimating an age-banded ACA premium with a subsidy based on the taxable income your plan actually produces — which means when you change your withdrawal sequence, the health insurance cost moves with it. At 65 it switches to a real Medicare cost built from the Part B, Part D, and Medigap figures above rather than a placeholder, and it rises at medical inflation through late life, because that's what healthcare actually does.

The point isn't to tell you when to retire or what to convert. It's to let you see the three-way tradeoff — subsidy, conversion, IRMAA — against your own numbers, so the health insurance gap is a planned phase rather than the vague "big expense" that quietly pushes retirement dates back by years.

Model the whole picture with planbend

The calculators above each handle one slice. The full app ties the pre-65 ACA gap, Roth conversions, IRMAA, and your withdrawal strategy into one plan that updates together. planbend has a free-forever tier with the core planning tools; the advanced retirement modeling is part of Pro — $12/mo, $99/yr, or a one-time lifetime purchase.

Frequently asked questions

How do I get health insurance if I retire before 65?

Most early retirees buy a plan through the ACA marketplace at HealthCare.gov or their state exchange. Leaving a job is a qualifying life event that opens a 60-day special enrollment window, so you don't have to wait for open enrollment. Other options are COBRA (your old employer plan for up to 18 months, at full price plus a fee) and a spouse's employer plan if one is available. For most people with a multi-year gap, the marketplace is the practical choice.

How much does health insurance cost before Medicare in 2026?

Unsubsidized, a benchmark Silver plan for someone in their early sixties commonly runs $1,000 to $1,500 a month, and more for a couple, because ACA rules let insurers charge older adults up to three times what they charge a 21-year-old. But premiums are capped at a share of income for those who qualify for subsidies, so the net cost can be far lower. What you actually pay depends almost entirely on your income.

What changed with ACA subsidies for 2026?

The enhanced premium tax credits that had lowered marketplace premiums since 2021 expired at the end of 2025. Under the rules that returned for 2026, the subsidy cliff at 400 percent of the federal poverty level is back: a dollar of income over that line can eliminate your subsidy entirely. As of mid-2026 there was active legislation to extend the enhanced credits, but its fate was unresolved. Because this is a moving target, treat the specific thresholds in any article as of its date and verify current rules at HealthCare.gov before you plan around them.

How do early retirees lower their health insurance cost?

By managing taxable income, which drives the subsidy. Marketplace subsidies are based on modified adjusted gross income (MAGI), and several sources don't count toward it — qualified Roth withdrawals, the return-of-basis portion of taxable-account withdrawals, and HSA distributions for medical expenses. An early retiree who draws primarily from Roth and basis can show low MAGI despite substantial assets, qualifying for subsidies that cut the premium sharply. This is the lever most people don't realize they're holding.

What is the ACA subsidy cliff?

It's the point where subsidies stop abruptly rather than phasing out. Under the rules in effect for 2026, income above 400 percent of the federal poverty level can eliminate your premium tax credit entirely — meaning one extra dollar of income could cost you thousands in lost subsidy. This is why a planned Roth conversion or a realized capital gain near the threshold needs to be sized carefully in the gap years.

Why does this affect my Roth conversion strategy?

The same low-income years that maximize your ACA subsidy are also the best years to do Roth conversions, because the conversion is taxed at a low rate. But a conversion raises your MAGI, which can shrink or eliminate your subsidy and, separately, raise your Medicare IRMAA surcharge two years later. So in the pre-65 window you're balancing three things at once: cheap health insurance now, low conversion tax now, and lower future RMDs and IRMAA. There's no universal answer — it's a tradeoff to model against your own numbers.

What does Medicare itself cost once I turn 65?

Medicare isn't free. In 2026 the standard Part B premium is about $202.90 per month per person, a Part D drug plan averages roughly $35, and a Medigap supplement to cover the gaps commonly runs $125 or more — so a realistic all-in figure is around $350 to $400 per person per month, before dental, vision, and other out-of-pocket costs Medicare doesn't cover. For a couple that's roughly $700 to $800 a month and up. The gap years are more expensive, but Medicare is a continuing cost, not the end of healthcare spending.

Is COBRA a good option for the gap?

COBRA makes the most sense in one specific case: you're mid-treatment with in-network specialists and want continuity of care for a few months while you transition. It lets you keep your exact employer plan for up to 18 months, but you pay the full premium plus an administrative fee, often $700 to $1,200 a month or more, with no income-based subsidy. For anything longer than a short bridge, a subsidized marketplace plan is usually cheaper.

Update cadence for this article?

Health policy is unusually active right now, so I'll revisit this whenever the subsidy rules change rather than only once a year. The premium figures, the subsidy-cliff status, and the Medicare premium numbers are all current as of June 2026; if Congress extends the enhanced credits or the 2027 figures are published, I'll refresh the affected sections and note the date.

Last updated June 21, 2026. Premium figures, subsidy rules, and Medicare costs are current as of that date. Health policy is unusually active right now — I'll refresh this whenever the subsidy rules or annual figures change rather than waiting for a yearly update. This is information for planning, not financial, tax, or insurance advice. Have questions about your own situation? Connect with a licensed professional.