A lot of the near-retirees I work with are in great financial shape.
But do you know what makes many of them hesitate to retire?
A health insurance quote.
It’s amazing how a $1,200 monthly premium can stop someone with $5,000,000 in savings from doing what they really want to do.
Health care has gotten more expensive, and there’s no sense pretending otherwise. But cost and uncertainty are different problems, and it’s the uncertainty that keeps people at their desks. Once you can quantify the gap, you can plan around it the same way you’d plan around anything else.
Why a Premium Stops Someone Who Can Clearly Afford It
Chances are, for most of your career, employer-sponsored health insurance has been baked into your benefits and personal infrastructure. You likely reviewed your options once a year at open enrollment, maybe made changes when you got married or had children, and otherwise let it run in the background. The premium came out of your paycheck automatically — never appearing on a bank statement, never triggering a bill you had to sit down and pay. It didn’t feel like spending the way a mortgage or a utility bill does. Then you retire, and for the first time, the full cost shows up on an invoice with your name on it.
That number resides in one small box on your W-2. For a lot of executives in their late 50s, that figure clears $25,000 a year. Once you retire, it goes from your employer covering the bulk of your premiums to you fronting the bill.
Insurance is a difficult thing to pay for psychologically. The value isn’t in what you get; it’s in what you’re protected from. That’s a hard transaction to feel good about, especially once the premium hits as a new and visible line item in a budget you’re already scrutinizing more carefully than you ever did during your working years.
It doesn’t help that, for many people, worry is the default setting as retirement approaches, and it needs somewhere to land. Health insurance has this uncanny ability to be one of the most concrete expenses available to point at, while also being remarkably hard to estimate in advance.
As a result, it becomes the catch-all for every unnamed fear about walking away from a paycheck.
What Bridge Coverage Costs Before 65
The enhanced premium tax credits that had capped marketplace costs since 2021 expired at the end of 2025, which brought back the subsidy cliff. Households earning more than 400% of the federal poverty level lose premium tax credits entirely.¹ In 2026, that line sits at $62,600 for a single person and $84,600 for a couple.
KFF estimated the lapse would more than double what subsidized enrollees pay out of pocket — a 114% increase on average.² For people above the cliff, the jump is starker.
MNsure’s own 2026 scenarios help illustrate this point. A 60-year-old couple in Carver County earning $82,485 (390% FPG) faces a gold plan at $1,867 per month, while a couple in Winona County earning $63,450 (300% FPG) sees a silver plan priced at $2,511.
| Location | Plan | Full monthly premium | Annual |
| Carver County (metro) | Gold | $1,867 | $22,404 |
| Winona County (southeast) | Silver | $2,511 | $30,132 |
Minnesota’s individual market rose 21.47% on average for 2026, with carrier increases ranging from 7.40% to 30.76%.³
This is before you factor in deductibles, copayments, and coinsurance. For a couple at 60 in a high-cost rating area, crossing that income threshold by a single dollar can forfeit $18,000 to $22,000 in credits.
Health Insurance Options for Early Retirees
You can enroll in marketplace coverage any time you lose employer insurance. Many people assume they’re limited to the annual open enrollment period each fall, but losing job-based coverage via retirement triggers a special enrollment period that gives you 60 days to pick a plan.
That means you can retire in March or September without a gap and without defaulting to COBRA. Your options are the same either way.
COBRA
Under COBRA, you can keep your employer plan for up to 18 months at the full premium plus a 2% administrative fee. COBRA is a viable option when you’re retiring mid-year with a deductible already met, when you’re mid-treatment with a specialist you’d rather not leave, or when you’re just shy of 65, but as a multi-year strategy, though, it’s expensive, and it expires. However, you can pay for it from an HSA.
The Health Insurance Marketplace
Most people shop healthcare.gov; but several states run their own exchange, like MNsure in Minnesota. Under the Affordable Care Act, marketplace coverage is guaranteed issue, so preexisting conditions can’t be used to deny you or raise your rate. Plans, networks, and prices reset every year, which means shopping annually is part of your retirement plan.
Your Spouse’s Employer Plan
If one partner is younger and still working, staggering your retirement dates by even two years can be worth six figures across the bridge to Medicare. Model this before anything else, as it’s one of the most affordable options available.
Part-Time Work and Association Plans
Twenty hours a week at a benefits-eligible employer can carry a household. Consulting arrangements, board seats, and some professional associations also offer access to group private health insurance. Part-time work solves two problems at once here: it covers the premium while easing the transition out of a career.
Retiree Health Benefits and Your HSA
Retiree health benefits have become rare, but a handful of large employers still offer them, so check before you assume. And if you’re on a high-deductible workplace plan today, the health savings account is valuable tool at your disposal. HSA reimbursements can cover COBRA premiums now and Medicare premiums after 65, though not marketplace premiums.
How Much Control Do You Have Over What You Pay?
More than you’d think.
Marketplace pricing runs off your modified adjusted gross income (MAGI), and in early retirement you have more influence over that number than at any other point in your life. Withdrawals from an IRA or 401(k) count. So do pension income, realized capital gains, interest, and taxable Social Security benefits. Cash reserves, cost basis in a taxable account, Roth withdrawals, and HSA distributions largely don’t.
Consider a couple retiring at 61 who need $115,000 a year. If they fund that entirely from an IRA, their income lands well above the cliff, putting them at full sticker price. If they fund the same $115,000 from a blend of cash, taxable accounts, and Roth withdrawals, they may land under the threshold with a substantial credit.
The Roth Conversion Tradeoff
Between your retirement date and 65, your taxable income is probably the lowest it will ever be again. No paycheck, no required minimum distributions, and Social Security could still be years away. That makes those years the ideal stretch to convert traditional IRA dollars into a Roth IRA, paying tax now at a low rate to avoid a bigger bill once RMDs begin at 73.
The complication is that those are the same years when your income sets your health insurance premium. Every dollar you convert raises your MAGI, and enough of them will carry you over the subsidy cliff. So the two strategies can work against each other.
Which approach comes out ahead depends on the size of your pre-tax accounts, how many years you’re bridging to Medicare, and what your RMDs could look like at 73. Your advisor should help you model each scenario
IRMAA and the Two-Year Lookback
In 2026, Medicare’s income-related surcharges begin at $109,000 for single filers and $218,000 for joint filers, with Part B surcharges running from $81.20 to $487 per month on top of the $202.90 standard premium.⁴ IRMAA looks back two years, which means your 2024 tax return sets your 2026 premium.
The practical consequence is that your final big year of W-2 income, or an ambitious Roth conversion at 63, follows you into Medicare until your income drops and you can request a redetermination.
What to Do in the Five Years Before You Retire
There are a handful of strategies to consider — and the earlier you start, the more options are available.
- Find your real number. Start with Box 12, Code DD on your W-2 to see what your coverage costs. Then pull a live quote for your ZIP code and age on healthcare.gov or your state exchange.
- Fund and invest your HSA. Contributions, growth, and qualified withdrawals are all tax-free, which no other account offers. Those dollars can later pay COBRA premiums during your bridge years and Medicare premiums after 65.
- Map your income from your retirement date through age 73. Mark where the subsidy cliff falls, where Medicaid eligibility begins, where IRMAA thresholds sit, and how much room you have for Roth conversions along the way. Seeing all four on one timeline usually clarifies the sequencing.
- Choose your retirement date deliberately with the help of your advisory team. Leaving on December 31 rather than July 1 changes your COBRA runway, your deductible reset, and which tax year gets examined for IRMAA purposes.
- Decide between Medigap and Medicare Advantage before you turn 64. Your guaranteed-issue window runs six months from your Part B start date. After it closes, most states permit medical underwriting on preexisting conditions, which can make switching difficult later on.
Healthcare Is a Manageable Line Item
Many near-retirees treat health insurance like a gate. That said, once you’ve quantified that number in the context of your withdrawal strategy, your tax picture, and your timeline, it usually settles into what it always was: a manageable expense.
Some might look at the full picture and decide to work another two years. Others discover they’ve been standing at an open door.
If you’re weighing a retirement date and health coverage is the piece you keep circling back to, we’d be happy to help you walk through your options. Schedule a free consultation.
¹ Healthinsurance.org, “Marketplace enrollees face return of the ‘subsidy cliff’ in 2026”
³ Minnesota Commerce Department, “Fact Sheet: 2026 health insurance rate changes for the individual market”
⁴ Centers for Medicare & Medicaid Services, “2026 Medicare Parts A & B Premiums and Deductibles”
See If You're a Good Fit
Your responses go directly to a senior member of our team, who’ll guide the next steps toward a personal conversation. No automation. No sales pressure.
