You may have enough money to retire. But do you have enough money to retire before Medicare begins?
For many people, this is where the excitement of early retirement runs into a very practical concern.
You've spent decades working. Your retirement accounts have grown. Maybe your mortgage is nearly paid off. You've run the numbers and you're beginning to believe that retiring at 60, 62, or 63 could actually be possible.
Then you think about health insurance.
If you're leaving a job that provides medical coverage, you may need to replace that insurance until you become eligible for Medicare, generally at age 65.
Depending on your circumstances, that could mean several years of paying premiums, deductibles, and other medical expenses without an employer helping with the cost.
But here's something that deserves just as much attention: the amount you pay for health insurance may be influenced by how you generate your retirement income.
That means deciding when to retire and deciding where to withdraw your money are more connected than you might think.
What Are My Health Insurance Options If I Retire Before 65?
You don't necessarily have to remain employed until Medicare begins. But you do need a plan for maintaining coverage.
Several options may be available, and the best choice depends on your household, healthcare needs, and financial situation.
1. Coverage Through Your Spouse's Employer
If your spouse is still working and has employer-sponsored health insurance, joining that plan may be worth considering.
Losing your own employer-sponsored coverage can create a special enrollment opportunity to join a spouse's plan, subject to the plan's rules and enrollment deadlines.
However, don't assume adding yourself to your spouse's insurance will be inexpensive.
Ask the employer's benefits department what the additional premium would be, whether the deductible changes, and how your doctors and prescriptions would be covered.
Sometimes this is the simplest solution. Other times, individual insurance may be worth comparing.
2. COBRA Coverage
COBRA may allow you to temporarily continue the health insurance you had through your employer.
For eligible individuals who lose coverage because of termination of employment or a reduction in hours, federal COBRA generally provides up to 18 months of continuation coverage. Certain circumstances allow longer periods.
The advantage is familiarity. You may be able to keep the same insurance plan, provider network, and coverage structure.
The disadvantage is cost.
Once you leave your employer, you may become responsible for the full cost of coverage, including the portion your employer previously paid, plus an allowable administrative charge.
Federal COBRA premiums can generally be as much as 102% of the applicable cost of coverage.
And because COBRA is temporary, it may not cover the entire period between retirement and Medicare eligibility.
For example, someone retiring at 61 would generally need a longer-term solution than an 18-month COBRA period.
The U.S. Department of Labor explains COBRA eligibility, duration, and coverage rules.
3. Health Insurance Through the Marketplace
If you retire before 65 and lose your employer-sponsored health insurance, you may be able to purchase coverage through the Health Insurance Marketplace.
Depending on your state, you'll use HealthCare.gov or your state's Marketplace.
Losing qualifying employer coverage generally creates a Special Enrollment Period, allowing you to enroll outside the regular annual enrollment window.
Marketplace plans vary in their premiums, deductibles, provider networks, prescription coverage, and maximum out-of-pocket costs.
Some households also qualify for premium tax credits that help reduce the monthly cost of insurance.
And this is where retirement income planning becomes particularly important.
The amount of assistance you qualify for may depend on your household income—not simply how much money you have saved.
You can review eligibility and coverage options through HealthCare.gov's retirement coverage guidance.
Does My 401(k) Affect How Much I Pay for Health Insurance?
Potentially, yes.
And this is an important distinction that many people overlook.
Having $1 million in a 401(k) does not automatically mean you're ineligible for Marketplace premium tax credits.
The Marketplace generally evaluates household income using a calculation called modified adjusted gross income, or MAGI.
For Marketplace purposes, MAGI generally starts with adjusted gross income and adds certain items, including tax-exempt interest, nontaxable Social Security benefits, and excluded foreign earned income.
Taxable withdrawals from traditional IRAs and 401(k)s generally increase adjusted gross income.
That means the money you withdraw to support your retirement lifestyle may also influence the cost of your health insurance.
Not Every Dollar You Spend Is Taxable Income
Imagine that you retire at 62 and need approximately $70,000 to cover your annual living expenses before accounting for income taxes.
You have money in a traditional IRA and additional savings in the bank.
Consider two possible approaches:
- Approach A: Withdraw $70,000 from your traditional IRA.
- Approach B: Withdraw $40,000 from your traditional IRA and use $30,000 of existing bank savings.
Both approaches provide $70,000 in cash before taxes.
But they can produce very different taxable income figures.
Assuming the IRA contains entirely pre-tax money, the first approach generally creates $70,000 in taxable retirement distributions.
The second creates $40,000 in taxable retirement distributions. Simply spending $30,000 of existing bank deposits generally doesn't create additional taxable income.
These are simplified illustrations. Other income, taxes owed, investment earnings, and individual circumstances would affect the actual result.
But the distinction matters.
Even though you're spending the same amount, your income for Marketplace purposes could be substantially different.
And depending on your household circumstances, that difference could affect your eligibility for premium tax credits.
This is one reason I believe retirement income planning should consider more than simply how much you can withdraw from your investments.
It should also consider where that money comes from.
Can I Qualify for Health Insurance Assistance If I Have Substantial Retirement Savings?
Possibly.
Marketplace premium tax credits are generally based on qualifying household income, family size, and other eligibility requirements—not simply the total value of your retirement portfolio.
For example, someone could have substantial savings accumulated in retirement accounts but relatively modest taxable income in a particular year.
Whether they qualify for financial assistance depends on how that income is calculated and the rules in effect for the coverage year.
What Changed With Marketplace Subsidies in 2026?
There is an important development for people planning early retirement.
Temporary federal enhancements to Marketplace premium tax credits applied from 2021 through 2025. During those years, the usual 400%-of-federal-poverty-level income ceiling was temporarily removed.
Those enhancements expired at the end of 2025.
Under the rules applicable to 2026 coverage, households with income above 400% of the applicable federal poverty level generally do not qualify for premium tax credits.
For example, for 2026 coverage in the 48 contiguous states and Washington, D.C., the 400% threshold is:
- $62,600 for a household of one
- $84,600 for a household of two
These thresholds are based on the 2025 federal poverty guidelines used for the 2026 coverage year. Different guidelines apply in Alaska and Hawaii, and eligibility also depends on other requirements.
Income limits and federal laws can change, so the thresholds should be verified for the year in which coverage is needed.
For someone considering retirement before Medicare, this makes projected income particularly important.
A large taxable retirement-account withdrawal could affect eligibility for health insurance assistance.
So could a substantial capital gain or a taxable Roth conversion.
The IRS provides current guidance on premium tax credit eligibility.
What If I Want to Do Roth Conversions Before Medicare?
The years between retirement and required minimum distributions can create opportunities for tax planning.
For some people, that includes converting money from a traditional IRA into a Roth IRA.
But there's a potential complication if you're also receiving Marketplace premium tax credits.
The taxable portion of a Roth conversion generally increases your adjusted gross income for the year.
That additional income could reduce or eliminate your eligibility for premium assistance.
Here's the important part: you could create additional taxable income without receiving any additional money to spend.
That doesn't necessarily make a Roth conversion a bad idea.
It means the potential long-term tax benefits should be weighed against the current tax cost and any effect on health insurance premiums.
A Roth conversion that looks attractive when evaluating income tax brackets alone may look different once healthcare costs are included.
What Happens If I Underestimate My Retirement Income?
Marketplace premium assistance is often based on the household income you expect to receive during the coverage year.
But your actual income may turn out differently.
Perhaps you take a larger retirement-account withdrawal than expected.
Maybe you sell an investment and realize a substantial capital gain.
Or perhaps you receive unexpected business or consulting income.
If your actual income ends up higher than projected, you may have received more advance premium tax credits than you were entitled to.
Those credits are reconciled when you file your federal income tax return.
Beginning with the 2026 tax year, federal law eliminated the previous repayment caps on excess advance premium tax credits.
That means taxpayers generally must repay the full amount of any excess advance credits received.
This makes accurate income projections and timely reporting of income changes especially important.
The IRS explains the change to repayment rules beginning in 2026.
Should I Choose the Health Insurance Plan With the Lowest Premium?
Not necessarily.
Monthly premiums matter, but they are only one part of the cost.
A plan with a lower monthly premium may have a higher deductible, different prescription coverage, or a provider network that doesn't include your preferred doctors.
Before choosing a plan, compare:
- Monthly premiums
- Annual deductibles
- Maximum out-of-pocket expenses for covered services
- Copayments and coinsurance
- Prescription drug coverage
- Provider and hospital networks
- Coverage for ongoing medical conditions
For someone with relatively predictable healthcare needs, one type of plan may be appealing.
For someone managing a chronic medical condition or expecting significant treatment, a different plan may offer better overall protection.
The objective isn't necessarily to buy the least expensive insurance.
It's to understand what the coverage could actually cost under different circumstances.
How Should I Plan for the Years Between Retirement and Medicare?
Rather than treating health insurance as a separate expense, I would incorporate it directly into the retirement income plan.
1. Identify Exactly When Employer Coverage Ends
Your last day of employment and your last day of insurance coverage may not be the same.
Confirm the coverage termination date with your employer before choosing a retirement date.
2. Estimate Your Health Insurance Costs
Compare available employer, COBRA, and Marketplace options.
Include premiums and a reasonable allowance for out-of-pocket medical expenses.
3. Project Income for Each Year Before Medicare
Your income at 61 may look very different from your income at 64.
Review expected pension payments, investment income, retirement-account withdrawals, Social Security benefits, and other taxable income.
4. Coordinate Withdrawals With Health Insurance Planning
Consider how drawing money from different accounts could affect taxable income and potential Marketplace assistance.
The goal isn't simply to minimize income on paper. It's to find a strategy that makes sense after considering taxes, portfolio sustainability, liquidity, and healthcare costs together.
5. Plan for the Transition to Medicare
For most people, Medicare eligibility begins at age 65.
The initial enrollment period generally starts three months before the month you turn 65, includes your birthday month, and ends three months afterward.
Some people are enrolled automatically, while others need to take action.
It's important to understand those deadlines because late enrollment can sometimes result in coverage gaps or penalties.
Also remember that COBRA and retiree coverage generally do not provide the same Medicare Part B enrollment protections as qualifying coverage based on current employment.
You can review enrollment rules at Medicare.gov.
Frequently Asked Questions About Retiring Before 65
Can I Retire at 60 and Buy My Own Health Insurance?
Yes. You may be able to purchase individual health insurance through the Marketplace or directly from an insurance company.
Availability, enrollment timing, plan options, and potential financial assistance depend on your circumstances.
Does Having a Large 401(k) Disqualify Me From Marketplace Subsidies?
Not automatically.
Marketplace premium tax credits are generally determined using qualifying household income and other eligibility requirements rather than the total balance in your retirement accounts.
However, taxable withdrawals from traditional retirement accounts generally count toward household income.
Do Roth IRA Withdrawals Count as Income for Marketplace Insurance?
Qualified Roth IRA distributions generally are not included in taxable income and therefore ordinarily do not increase Marketplace MAGI.
However, Roth IRA distribution and conversion rules can be complicated, particularly when withdrawals are not qualified. The tax treatment should be verified before relying on Roth assets as a source of retirement income.
Can I Keep COBRA Until I Turn 65?
Possibly, depending on your age and eligibility, but federal COBRA coverage following employment termination generally lasts up to 18 months.
Someone retiring several years before Medicare may need another form of coverage after COBRA ends.
Will I Automatically Get Medicare When I Turn 65?
Not necessarily.
Automatic enrollment depends on factors such as whether you're already receiving Social Security retirement benefits.
If you're not automatically enrolled, you generally need to apply during the applicable enrollment period.
Should I Wait Until 65 to Retire Just Because of Health Insurance?
Not necessarily.
For some people, the additional cost of health insurance makes working longer the more comfortable financial decision.
For others, an early retirement plan may be entirely reasonable once healthcare costs and retirement income are properly coordinated.
The answer depends on your financial resources, coverage options, spending needs, and what additional years of retirement mean to you.
Don't Let an Unanswered Question Make the Retirement Decision for You
Health insurance is a legitimate reason to think carefully about retiring before 65.
But it shouldn't automatically become the reason you spend another three, four, or five years working.
There is a difference between discovering that you genuinely cannot afford to retire and assuming that you cannot because you haven't run the numbers.
You may find that healthcare costs are higher than expected and that working a little longer makes sense.
Or you may discover that you have more options than you realized.
Either way, you deserve to make that decision with an understanding of what it will actually cost.
You've spent years building the financial resources to give yourself choices. Before deciding you have to keep working until 65, find out what those choices really are.
