How much does healthcare cost if I retire before 65?
ACA marketplace coverage for an early retiree costs $400–$1,500/month per person ($5,000–$18,000/year) depending on age, location, and income. A couple retiring at 55 should budget $12,000–$25,000/year until Medicare at 65. ACA subsidies dramatically reduce costs if Modified AGI stays below $77,000 (single) or $103,000 (couple).
Formula
Monthly ACA cost ≈ benchmark silver plan − subsidy. Subsidy increases as income decreases (max at 150% FPL = ~$1,500/month for couple).
Example
Couple, age 55, MAGI $60k/year. Silver plan: $1,800/month. ACA subsidy: ~$900/month. Out-of-pocket: $900/month ($10,800/year). Deductibles/copays: add $2,000–$5,000/year. Total healthcare budget: $13,000–$16,000/year.
How it works in detail
Healthcare is the #1 early retirement wild card. Options: (1) ACA Marketplace — subsidized if income is low (Roth conversion ladder keeps AGI low = cheaper premiums), (2) COBRA — extends employer coverage for 18 months but at full cost (typically $800–$2,000/month), (3) Health sharing ministries — cheaper but limited coverage, (4) Spouse's employer plan. The ACA subsidy cliff is critical for FIRE planners: keep Modified AGI under 400% of Federal Poverty Level ($58,320 single / $78,880 couple in 2024) and premiums are capped at 8.5% of income. The Roth conversion ladder works perfectly here: low AGI = cheap healthcare AND tax-free Roth access. Budget $15,000–$20,000/year per couple as a conservative baseline.
Factor healthcare costs into your early retirement plan
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How can I retire at 55?
To retire at 55, you need roughly 30× your annual expenses (due to a 40+ year retirement) and a bridge strategy to access retirement accounts before 59½. On $80,000/year spending, that's $2,400,000. Key strategies: taxable brokerage for the bridge years, Roth conversion ladder, Rule of 55, and SEPP/72(t) distributions.
Can I afford to retire? How do I know I'm ready?
You can retire when your annual portfolio withdrawal (4% of investments) plus Social Security plus any pension exceeds your annual expenses by a 10–20% margin. If you spend $70,000/year and have $1.5M invested + $24k Social Security at 67, your income ($60k + $24k = $84k) exceeds expenses with a 20% buffer — you're ready.
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