Deb and Tom are 62. They’ve worked and saved diligently for four decades, their retirement portfolio says they can retire, and they’re ready to be done. 

What’s stopping them? 

Three years of health insurance.

This is a conversation we have often with clients ready to leave work before age 65, when Medicare kicks in. Ask anyone on Medicare and they’ll confirm: it’s a great program once you get there. The problem is the gap. Most people who’ve had employer-sponsored health insurance coverage their whole lives have done enough research to know that buying health insurance privately is expensive. Like, second mortgage expensive. 

So, what can an early retiree do until 65? Four paths can bridge the gap. 

• If one spouse is still working, ride along on their plan.
• COBRA lets you hold employer coverage for up to 18 months at 102% of the cost. 
• You might consider a healthcare sharing ministry, which is not health insurance but works well for some people. You just have to know what you’re getting into.
• Buy health insurance coverage through the Affordable Care Act’s (ACA) health insurance exchanges. In Pennsylvania, this is done at Pennie.com.

For early retirees, the ACA/Obamacare marketplace is often the best of these because the price is tied to income you can plan and control. Planned surgically, it can mean very affordable insurance coverage.

Here’s how it works. The ACA provides a premium tax credit, or subsidy, applied directly to your monthly premium. An unsubsidized plan for an older single person can run over $21,000 a year. With the right income, a subsidized plan can drop below $100/year out of pocket.

The size of the subsidy depends on your modified adjusted gross income, or MAGI. It’s not tied to your assets, net worth, or portfolio size. Just the income that shows up on your tax return.

That changed this year. From 2021 through 2025, enhanced credits were available at nearly any income level. Those expired on January 1, 2026, and the old rules came back. The credit now cuts off above 400% of the federal poverty level. For a two-person household in our area, that’s roughly $84,000 of MAGI.

It works like a cliff. One dollar over, and you receive nothing. 

The reason early retirees are well-positioned to use this health insurance option is that they can often control what shows up on their tax return. In retirement, you decide where to draw from. Withdrawals from a 401(k) or IRA count as ordinary income. So do realized gains from a taxable investment account, dividends, interest, and bond yields. Social Security, once claimed, adds to the total. That’s a lot of dials. Near an $84,000 ceiling, each one is important.

I do a lot of this planning for clients: helping determine from where to draw income to fund a comfortable lifestyle while paying as little in tax as possible. Before the enhanced credits expired, ACA coverage was one of the best tools we had, and a forgiving one. It still works, it just demands more care.

A few good rules. 

1. Know your ceiling and run the math regularly, like a hawk.
2. Watch for income that doesn’t feel like income, like a maturing CD or year-end mutual fund payouts, as these sneak onto your tax return without much fanfare.
3. And plan across all the years before Medicare, not just one at a time. 

The bridge to Medicare is still standing. It’s narrower than it was a year ago, but it’s there, and it’s compelling for many people.

Deb and Tom gave notice in 2025. We mapped their income through age 64. They’re not three years away from retirement anymore, they’re retired.

If health insurance is the thing that keeps you at work, do some digging. Pennie may be your bridge too. Some resources:

• Pennie.com has a variety of resources on how these tax credits work and who is eligible, in addition to the ability to run your own calculations.
• KFF.org’s Health Insurance Marketplace Calculator is helpful, as are their many articles on the topic.
• For non-PA residents, healthcare.gov may be the default marketplace (other states have their own), and the website has more details on ACA health insurance plans.
• And of course, I work with retirees looking to invest well and keep more of what they’ve built through smart tax and retirement planning. For hands-on guidance, reach out any time for a conversation.

Contact Jake

Disclaimer:

This is a hypothetical example and not representative of actual clients. 

Advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser. Harvest Rock Advisors, LLC and Cambridge are not affiliated. Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a broker/dealer, member FINRA/SIPC.