Health Insurance If You Retire Before 65: Your Options Until Medicare
Medicare starts at 65, so retiring earlier means covering the gap yourself. For most early retirees the choice is COBRA, a Marketplace plan with a tax credit, a spouse’s plan or retiree coverage. With the enhanced subsidies gone, how you draw your income now matters as much as which plan you pick.
Your options
| Option | What it costs | Watch out for |
|---|---|---|
| COBRA | Up to 102% of the plan’s full cost, including the part your employer paid | Ends after 18 months for most people. No tax credit while you’re on it. |
| Marketplace plan | Full price minus a premium tax credit based on your income for the year | No credit above 400% of the poverty line. New network and deductible. |
| Spouse’s job plan | Whatever the employer charges for adding you | Ends when your spouse retires or goes on Medicare. |
| Retiree coverage | Set by your former employer | If you enroll in it, you can’t get the Marketplace tax credit. |
| Medicaid | Free or low cost | In states that expanded Medicaid, adults usually qualify up to 138% of the poverty line. |
Run COBRA against the Marketplace for your numbers with the COBRA vs. Marketplace calculator.
Timing the switch
Losing job coverage gives you a Special Enrollment Period. You can pick a Marketplace plan from 60 days before to 60 days after your coverage ends, so you can line up a plan that starts the day after the job plan stops. If you choose COBRA instead and later drop it on purpose, you generally have to wait for Open Enrollment (Nov 1–Jan 15) to switch to the Marketplace. You can also switch from COBRA during Open Enrollment even if it isn’t running out.
Your income is the lever
The Marketplace tax credit depends on your modified adjusted gross income for the calendar year, and in retirement you choose a lot of it. HealthCare.gov counts:
- Counts: most traditional IRA and 401(k) withdrawals, pension income, capital gains, and all Social Security benefits, taxable or not.
- Doesn’t count: qualified distributions from a Roth account. Spending cash you already have isn’t income either; only the interest, dividends and gains it earns count.
That gives early retirees room to plan. Living on cash savings or Roth money in a year keeps income low; a big IRA withdrawal or stock sale can push you over 400% of the poverty line and cost the whole credit. For 2027 coverage in the 48 states and DC, the line is four times $15,960 for one person, plus four times $5,680 for each additional person. The subsidy cliff calculator shows what lowering income is worth, and the subsidy calculator estimates your credit.
Don’t go too low. Below 100% of the poverty line there’s generally no tax credit, and in states that expanded Medicaid, adults under 138% usually get Medicaid instead. Between 100% and 250%, a silver plan comes with cost-sharing reductions that lower its deductible.
Keep an HSA going
From 2026, Marketplace bronze and catastrophic plans count as HSA-eligible (Notice 2026-05), and catastrophic plans can’t be bought with the tax credit. On a bronze plan you can keep contributing up to $4,500 (self-only) or $9,000 (family) in 2027, plus $1,000 at 55 or older. Each dollar also lowers the income the Marketplace counts. Work out your limit with the HSA contribution calculator.
Getting to Medicare
Your Initial Enrollment Period for Medicare runs from 3 months before the month you turn 65 to 3 months after. Sign up for Part B on time: Marketplace coverage, COBRA and retiree coverage don’t let you delay it without a penalty. Marketplace coverage doesn’t end on its own when Medicare starts, so update your application to end it. Once you have Part A, you no longer qualify for Marketplace savings. See the turning 65 checklist.
Questions
What is the cheapest health insurance if I retire at 62?
For many people it’s a Marketplace plan with the premium tax credit, if they can keep income at or below 400% of the poverty line. Above that, compare COBRA, a spouse’s plan and retiree coverage at full price.
Do IRA withdrawals count as income for the ACA?
Most traditional IRA and 401(k) withdrawals do. Qualified Roth distributions don’t.
Does Social Security count as income for the Marketplace?
Yes, all of it, including the part that isn’t taxed.
Can I get the tax credit if I have retiree coverage?
Not while you’re enrolled in it. If you’re only eligible for retiree coverage and don’t enroll, you may still qualify.
Sources
- HealthCare.gov, “Health coverage for retirees” (Marketplace, COBRA, retiree coverage, the 60-day window) — healthcare.gov; “What’s included as income” — healthcare.gov; both checked October 28, 2026.
- U.S. Department of Labor, COBRA guide — dol.gov PDF.
- IRS, Rev. Proc. 2026-26 — irs.gov PDF; HHS poverty guidelines for 2027 coverage — Federal Register.
- IRS, HSA limits for 2027 — irs.gov PDF; bronze and catastrophic plans as HSA-compatible — irs.gov.
- HealthCare.gov, “Medicare and the Marketplace” — healthcare.gov; Medicare.gov, enrolling in Part A and Part B — medicare.gov PDF.
Educational information, not tax or legal advice. · Advertiser disclosure