Healthcare in Early Retirement Calculator

Why Healthcare Is the Biggest Early Retirement Expense Most People Miss

Most people planning for early retirement underestimate healthcare costs by using their current paycheck deduction as a benchmark. What they pay as an employee is a fraction of the full premium — their employer was silently covering 70%–80% of the actual cost. The full employer-sponsored family plan premium in 2024 averaged approximately $23,000/year. Employees saw maybe $5,000 of that. Early retirees see all of it.

For a couple retiring at 55, the bridge to Medicare at 65 can easily total $200,000–$400,000 in healthcare premiums alone — more than most people have saved in their entire career by age 35. This is not a reason to avoid early retirement, but it must be a central planning input, not an afterthought.

COBRA vs. ACA: Which Is Right for You?

COBRA lets you continue your employer's health plan for up to 18 months after leaving employment. You pay the full premium (employer + employee share) plus a 2% administrative fee. The advantage: network and coverage continuity; you keep your existing doctors and any in-progress treatments without disruption. The disadvantage: it's almost always more expensive than ACA plans.

ACA marketplace plans are the typical long-term solution for early retirees. Premiums are age-rated (older enrollees pay more) and are available regardless of health status. Premium Tax Credits (subsidies) dramatically reduce costs for early retirees who can manage their Modified Adjusted Gross Income (MAGI).

The ACA Subsidy Strategy for Early Retirees

ACA subsidies are income-based. For 2026 coverage, eligibility is measured against the 2025 poverty guidelines ($15,650 for one person, $21,150 for a couple). A couple retiring at 55 with $60,000 in MAGI (284% of FPL) is expected to contribute about 9.46% of income — roughly $5,680/year — toward the benchmark silver plan, and the premium tax credit covers the rest. Contributions start at 2.10% of income below 133% FPL and top out at 9.96% from 300% to 400% FPL.

The 400% FPL cliff is back for 2026. The enhanced subsidies that removed the income cap applied only through 2025. In 2026 a household with MAGI above 400% of FPL — $62,600 for one person, $84,600 for a couple — gets no premium tax credit at all, and there is no longer a cap on repaying excess advance credits at tax time. Staying $1 under the line can be worth thousands of dollars.

The key insight: not all income counts equally for ACA MAGI. Qualified Roth IRA withdrawals are not counted. Health Savings Account (HSA) distributions for qualified medical expenses are not counted. But municipal bond interest is added back, and so is the untaxed part of Social Security — ACA MAGI counts all of your benefits. Early retirees who front-loaded Roth conversions before retiring can live well while reporting relatively low MAGI — qualifying for substantial subsidies. This is one of the highest-value planning opportunities in the entire early retirement playbook.

Once you understand the healthcare cost, planning the income strategy to fund it becomes the next step. The 72(t) SEPP calculator can show whether penalty-free IRA distributions can cover healthcare costs before 59½. And part-time work — even a small amount — can cover the healthcare premium entirely while leaving the portfolio untouched, as the part-time work calculator demonstrates.