If you retire at 56, there’s a nine-year gap between leaving your employer’s health plan and the start of Medicare at 65. For most early retirees, health care is the biggest expense and the biggest worry. One large medical bill without insurance can derail the best-laid retirement plans.
You’ve figured out how to access your retirement accounts. Now, how do you cover health care?
You have four main options: COBRA, the ACA Marketplace, your spouse’s plan (unless they plan on retiring early too!), and retiree health benefits. Let’s take a look at each.
COBRA: You can keep your employer’s plan for up to 18 months, but you pay the full premium plus up to a 2% admin fee. That can be expensive. COBRA works best as a short-term bridge, especially if you’re in the middle of treatment or have already met your deductible for the year.
ACA Marketplace: Losing your employer coverage is a qualifying event, so you can enroll outside of open enrollment. You can apply up to 60 days before your coverage ends and up to 60 days after. Premium subsidies are based on your income, not your assets. For early retirees, that’s a big deal (more on this below).
Your spouse’s plan: If your spouse is still working, joining their employer plan is often the simplest and cheapest option.
Retiree health benefits: Some employers still offer them. Check with HR before you give notice.
The ACA subsidy cliff is back
From 2021 through 2025, enhanced tax credits made Marketplace coverage affordable for many more people. Those enhancements expired at the end of 2025. Now subsidies are available only if your household income falls between 100% and 400% of the Federal Poverty Level. Go one dollar over, and your subsidy drops to zero.
For 2026 coverage, that cutoff is:
- $62,600 for a single person
- $84,600 for a married couple
- $128,600 for a family of four
For 2027 coverage (the plans you’ll choose this fall), it rises slightly:
- $63,840 for a single person
- $86,560 for a married couple
- $132,000 for a family of four
(These figures are for the continental U.S.; Alaska and Hawaii are higher.)
Why this matters: income planning is health care planning
Here’s where early retirees have an advantage. Once your paycheck stops, you control much of your taxable income, based on which accounts you withdraw from.
Money from your 401(k) or traditional IRA counts as income. Spending from cash savings doesn’t. Selling investments in a taxable brokerage account typically counts only the gain, not the full amount. Watch for less obvious items too: the Marketplace also counts tax-exempt interest and the untaxed portion of Social Security.
The right mix of withdrawals can keep your income under the cliff and save you thousands of dollars a year in premiums. The wrong mix can cost you your entire subsidy.
Be careful when estimating, too. If your actual income comes in higher than you projected, you’ll have to pay back the difference at tax time, and the old caps that limited how much you’d repay are gone.
Congress has debated restoring the enhanced subsidies, but as of this writing, nothing has become law. Rules may change, and I’ll keep my clients updated as they do.
A few more things to plan for
Use your HSA. If you have a Health Savings Account, withdrawals for qualified medical expenses are tax-free at any age, and they can even pay COBRA premiums.
Budget for the whole cost. Plan for deductibles and out-of-pocket maximums, not just the monthly premium.
Be cautious with “cheaper” alternatives. Short-term health plans and health-sharing ministries often exclude pre-existing conditions. Read the fine print.
Don’t miss your Medicare window. Enrollment opens around your 65th birthday, and signing up late can mean penalties that last for life.
Open enrollment is coming
2027 Marketplace open enrollment runs November 1, 2026, through January 15, 2027, in most states. Enroll by December 15 for coverage starting January 1. Now is the time to plan next year’s income, before you pick a plan.
At Own Your Monday Wealth Management, I help early retirees build a withdrawal strategy that funds their lifestyle and keeps health care costs in check.
Health care shouldn’t be the reason you keep grinding through Mondays. You’ve earned your Mondays back.
Schedule a call, and let’s plan this together.
This content is for educational and informational purposes only and is not personalized investment, tax, legal, or insurance advice. Subsidy rules and income limits may change; confirm current details at HealthCare.gov. Own Your Monday Wealth Management is an investment adviser registered with the Maryland Securities Division. Registration is not an endorsement by securities regulators and does not imply a certain level of skill or training. Advisory services are offered only to clients or prospective clients where the firm is properly registered or exempt from registration. Information is believed to be accurate as of the date published but is not guaranteed. No strategy can guarantee a particular outcome, and all investments involve risk, including possible loss. Reading this post does not create an advisory relationship. Rules for early withdrawals vary by plan and individual circumstances, and tax and retirement-account rules change. Consult a qualified tax professional before making withdrawals. Additional information about the firm is available in our Form ADV Part 2A and at adviserinfo.sec.gov.