Retiring before 65 means solving a real logistics problem most retirement calculators skip entirely: Medicare doesn’t start until 65, and someone leaving work at 55 or 60 has years to cover on their own.
The Real Size of the Gap
Someone retiring at 62 has a three-year gap to Medicare eligibility. Someone retiring at 55 has a full ten-year gap. That gap has to be filled with COBRA, an ACA marketplace plan, a spouse’s employer coverage, or retiree health benefits from a former employer if the employer still offers them — there’s no fifth option.
COBRA: Continuity at Full Price
COBRA lets you keep your exact former employer plan for up to 18 months, but you pay the full premium yourself plus a 2% administrative fee — the employer subsidy that made the premium affordable while you worked there disappears completely. COBRA tends to make the most sense for someone within 12-18 months of turning 65 who wants to preserve continuity of care with existing doctors rather than switching plans twice in quick succession.
ACA Marketplace: The Dominant Choice for Longer Gaps
For most early retirees covering more than 18 months, an ACA marketplace plan with premium tax credits is the lower-cost path. Subsidy eligibility currently phases out at 400% of the federal poverty level — $63,840 for a single person in 2026 — above which the full, unsubsidized premium applies.
The MAGI Trap That Catches Early Retirees Off Guard
ACA subsidies are based on Modified Adjusted Gross Income, and a large Traditional IRA or 401(k) withdrawal counts fully toward that MAGI calculation — a $100,000 Traditional account withdrawal in a single year can push a retiree well past the subsidy cliff and cost thousands in lost premium assistance. The identical $100,000 pulled from a Roth IRA or a taxable brokerage account doesn’t count toward MAGI the same way, since qualified Roth withdrawals aren’t taxable income at all. This is a real, concrete reason the account-type withdrawal sequencing decision matters specifically during the pre-Medicare years, on top of the tax-bracket reasons that usually get more attention.
The 60-Day Enrollment Window
Leaving a job triggers a Special Enrollment Period, giving you 60 days after your last day of employer coverage to enroll in an ACA marketplace plan without waiting for the standard open enrollment period. Missing that window without a qualifying life event can leave you without coverage options until the next open enrollment period.
The Bottom Line
Model your MAGI for each of the pre-Medicare years separately, factoring in exactly which accounts you’ll draw from — the difference between a Traditional withdrawal and a Roth or taxable withdrawal in these specific years can be the difference between qualifying for a substantial ACA subsidy and paying full premium out of pocket.
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