Health Coverage Before Medicare: What Early Retirees Pay in 2026

If you retire before 65, you need your own health coverage until Medicare starts. The usual options are COBRA from your last employer, a spouse's workplace plan, a retiree plan if your employer offers one, or an ACA Marketplace plan. For 2026 Marketplace coverage, the premium tax credit is back to its original rules: it is available only when household income is between 100% and 400% of the federal poverty line, which for 2026 coverage is $62,600 for a single person and $84,600 for a couple.²⁴ The temporary enhanced credits expired after 2025 and, as of October 10, 2026, Congress has not restored them.¹

For an early retiree, that 400% line matters more than almost any other number in the plan. Your income in retirement is partly a choice: which account you draw from, whether you sell investments at a gain, whether you convert to Roth. Those choices can move you from a large credit to none.

What changed for 2026

From 2021 through 2025, Congress temporarily removed the 400% income ceiling, so households above it could still get a credit.² Those enhanced credits ended at the end of 2025. KFF, writing on October 6, 2026, reports that no extension passed.¹ A separate 2025 law also removed the cap on paying back excess advance credits, starting with tax years beginning after December 31, 2025.⁵

Rule	2021–2025	2026 plan year
Income ceiling for the credit	None (temporary)2	400% of the poverty line2
Most you are expected to pay for the benchmark silver plan, as a share of income	Lower, temporary percentages	2.10% to 9.96%, depending on income3
Paying back advance credits if your income comes in higher than estimated	Capped below 400% of the poverty line	No cap: you repay the full excess2

The effect was large. Across all Marketplace enrollees, the average monthly premium paid after credits rose 58%, from $113 in 2025 to $178 in 2026, according to KFF's analysis of CMS open-enrollment data.⁶

Is this settled? For the 2026 plan year, yes in practice: the year is under way and the rules above apply. For 2027 it is not fully settled, because Congress could still act. If it does, the 2027 figures below may change. Status checked October 10, 2026.

How income sets your premium

The Marketplace uses modified adjusted gross income (MAGI): your adjusted gross income plus untaxed foreign income, non-taxable Social Security benefits and tax-exempt interest.⁷ For most early retirees MAGI is close to AGI. That means the source of each dollar you spend matters:

• Withdrawals from a traditional 401(k) or IRA are taxable income and count.
• A Roth conversion is taxable income in the year you do it and counts.
• Realized capital gains and dividends in a taxable account count. Only the gain counts, not the full sale proceeds.
• Spending cash savings, or withdrawing your own past Roth IRA contributions, generally does not add to AGI.
• Tax-exempt municipal bond interest is added back, so it counts here even though it is not taxed.⁷

The credit works like this. The government sets an expected contribution, a percentage of your income, toward the second-lowest-cost silver plan where you live (the "benchmark"). The credit is the benchmark premium minus that contribution. For 2026 the percentage starts at 2.10% below 133% of the poverty line and rises to 9.96% between 300% and 400%.³ Above 400%, there is no credit at all.²

For 2026 coverage, eligibility uses the 2025 poverty guidelines, because the IRS rule uses the guidelines most recently published on the first day of open enrollment.² In the 48 contiguous states and DC those are $15,650 for one person plus $5,500 for each additional person, so $21,150 for a couple.⁴ Alaska and Hawaii have higher figures.

Worked example: a couple, both 60, in 2026

Assumption for illustration only: the benchmark silver premium for this couple is $24,000 a year ($2,000 a month). Real benchmark prices depend on your ZIP code and ages, and insurers can charge older people up to 3 times what they charge younger ones.⁸ Get your own figure from HealthCare.gov or your state's marketplace.

Household MAGI	% of poverty line (2025 guidelines, household of 2)	Expected contribution rate	Couple pays for the benchmark plan, per year	Premium tax credit
$32,000	151%	about 4.25%	about $1,361	about $22,639
$45,000	213%	about 7.07%	about $3,181	about $20,819
$60,000	284%	about 9.46%	about $5,678	about $18,322
$84,000	397%	9.96%	about $8,366	about $15,634
$85,000	402%	none	$24,000	$0

Rates inside a band are interpolated in a straight line, as the IRS table works; figures are rounded. The last two rows are the cliff. A $1,000 difference in MAGI changes the couple's cost by more than $15,000. And because repayment is no longer capped, a couple who estimated $84,000, took the credit in advance, and then ended the year at $85,000 would owe the whole advance credit back at tax time.²

Two practical consequences follow. First, plan withdrawals, capital gains and Roth conversions for the calendar year, not the month. A December sale that tips you over 400% costs the whole year's credit. Second, if you expect to land near the line, keep a cushion below it rather than aiming for it exactly.

The low-income trap

Early retirees who live on savings can show very low MAGI. That can backfire in the other direction. In states that expanded Medicaid, adults with household income below 138% of the poverty line qualify for Medicaid rather than Marketplace credits.⁹ In states that did not expand Medicaid, adults below 100% of the poverty line can fall into a gap: too much income for that state's Medicaid, too little for the credit.⁹ If you plan to keep MAGI low on purpose, check which side of these lines you will land on, and in which state.

COBRA: the simple bridge with a hard end date

COBRA lets you keep your former employer's plan, usually for up to 18 months; certain life events extend it to 36 months.¹¹ It applies to group plans of employers with 20 or more employees, and you can be charged up to 102% of the plan's full cost, meaning the employer's share plus your own plus an administrative fee.¹⁰

COBRA has one useful property and one trap. The useful property: if you leave work at 63 and a half or later, 18 months of COBRA can carry you to 65 with no change of doctors or deductible mid-year. The trap: if you drop COBRA voluntarily before it runs out, you generally have to wait for the next Marketplace open enrollment, unless you have another qualifying life event.¹² When COBRA ends on schedule, you get 60 days to enroll in a Marketplace plan.¹² Losing job-based coverage also opens a Marketplace window, so compare both before you elect COBRA, not after.

Medicare at 65 and the enrollment window

Medicare covers people 65 or older who meet citizenship or residency requirements.¹³ Your Initial Enrollment Period lasts 7 months: it starts 3 months before the month you turn 65 and ends 3 months after it.¹⁴ Plan the end of your bridge coverage around that window, not around your birthday alone.

Comparing the options

Option	Who it fits	What decides the cost	Main risk
ACA Marketplace with credit	MAGI you can keep between about 100% (or 138% in expansion states) and 400% of the poverty line	Your MAGI and local benchmark price	Crossing 400% and repaying the full advance credit
ACA Marketplace without credit	MAGI above 400%	Full list price for your age and area	Price rises with age; insurers may charge older adults up to 3 times more8
COBRA	Retiring within 18 months of 65, or mid-treatment	Full plan cost up to 102%10	Ends on schedule; dropping early locks you out until open enrollment12
Spouse's workplace plan	One partner keeps working	Employer's premium share for family coverage	Coverage ends when that job ends
Employer retiree plan	Rare; check plan documents	Plan terms	Employer can change or end it

A spouse's plan deserves a second look in couples where one partner is younger or plans to keep working. Adding a retiring spouse to a working spouse's family coverage may cost less than two years of Marketplace premiums above the cliff, and it takes MAGI out of the health-cost calculation entirely. The comparison depends on the employer's contribution, which only that employer's plan materials can tell you.

Looking ahead to 2027

Open enrollment for 2027 coverage runs from November 1, 2026 to January 15, 2027 on HealthCare.gov.¹⁷ If current law holds, the 400% ceiling stays. The IRS has already published the 2027 table: expected contributions run from 2.15% to 10.22% of income.¹⁵ Eligibility for 2027 coverage will use the 2026 poverty guidelines, which are $15,960 for one person and $21,640 for two in the 48 contiguous states and DC.¹⁶ By our arithmetic, 400% of those figures is $63,840 for a single person and $86,560 for a couple. Treat those as working numbers until the Marketplace publishes its own 2027 figures on November 1.

When this page does not apply

• You have access to coverage through a current employer, yours or a spouse's, that meets the affordability standard. Workplace coverage generally rules out the Marketplace credit.
• You are already 65 or older and eligible for Medicare.
• Your MAGI will be far above 400% regardless of how you draw income. The cliff is then irrelevant and the decision is about price and network, not subsidies.

The withdrawal side of this problem, how much you can take from a portfolio each year, is covered in the 4% rule guide. If part of your retirement income is freelance or business income, it adds to MAGI too; the non-W2 income guide explains how it is taxed. The full set of early-retirement topics is on the early retirement hub.

Short answers

Do retirement account withdrawals count as income for ACA subsidies? Taxable withdrawals from traditional 401(k)s and IRAs are part of AGI and therefore of MAGI.⁷ Spending cash savings does not add to it.

What happens if income ends up above 400% after taking advance credits? For 2026 and later tax years, you repay the full amount of the advance credit.²⁵