What are my options if I retire before 65?
If you retire before 65 you can choose from the five kinds of coverage below. Compare them before your job coverage ends, because the sign up deadlines are short.
| Option | How it works | What to watch for |
|---|---|---|
| COBRA | Keeps your employer plan, usually for up to 18 months, or up to 29 months with a disability extension. | You can pay up to 102% of the full premium, with no employer share. During a disability extension it can be up to 150%. |
| Spouse's employer plan | Losing your job coverage lets you join a spouse's plan outside its usual enrollment period. | The deadline is set by the plan and is often shorter than 60 days. Ask the benefits office right away. |
| Retiree coverage from your employer | Some employers keep retirees on a plan until Medicare. | Ask what it costs, how long it lasts and whether it works with Medicare later. |
| Marketplace plan | You have 60 days after losing job coverage to enroll, and you can apply up to 60 days before it ends. | Savings depend on your income. Above 400% of the poverty level there are none. |
| Medicaid | You can enroll any month if your income is low enough where you live. | Rules depend on your state, so check your state Medicaid agency. |
How much does a marketplace plan cost for a retiree?
It depends on your income, not on how much you have saved. The benchmark plan is the second lowest cost silver plan in your area. For 2027 coverage, the IRS expects you to pay 2.15% of your income for it at the lowest incomes, rising to 10.22% between 300% and 400% of the poverty level. The premium tax credit covers the rest of the benchmark plan's price. Above 400% there is no credit.
- 100% of poverty ($15,960)2.15%
- 150% of poverty ($23,940)4.30%
- 200% of poverty ($31,920)6.78%
- 250% of poverty ($39,900)8.66%
- 300% of poverty ($47,880)10.22%
- 400% of poverty ($63,840)10.22%
Source: IRS Revenue Procedure 2026-26, section on 2027 applicable percentages; HHS 2026 poverty guidelines
Between the points shown, the percentage rises smoothly. For a household of two, 100% of poverty is $21,640, and each additional person adds $5,680.
How does the 400% income limit affect early retirees?
If your household income is even $1 above 400% of the poverty level, you get no premium tax credit at all. For one person that is $63,840, and for two people it is $86,560. Before 2026, enhanced credits removed this limit, and for 2027 the original rule is back. In retirement, your pension, IRA withdrawals and investment income decide which side of the line you are on.
| Income $63,000 | Income $64,000 | |
|---|---|---|
| Share of poverty level | About 395% | About 401% |
| Premium tax credit | About $363 a month | None |
| You pay for a $900 plan | About $537 a month | $900 a month |
| Yearly cost | About $6,439 | $10,800 |
In this example, $1,000 more income costs about $4,361 a year in lost savings. If you can choose when to take income, ask a tax professional how to stay under the line. Our 2027 marketplace savings guide covers the general rules for everyone.
Which income counts toward the limit?
The marketplace uses modified adjusted gross income (MAGI). For most people it is close to the adjusted gross income on their tax return. MAGI also adds untaxed foreign income, nontaxable Social Security benefits and tax-exempt interest.
- Usually counts: wages and self-employment income, pension payments, interest and dividends, capital gains, and withdrawals from traditional IRAs and 401(k) plans.
- Selling savings you already paid tax on counts only for the gain, not the amount you originally put in.
- Contributions to a health savings account and to a traditional IRA can lower the figure for some people. A tax professional can tell you what applies to you.
- Estimate your income for the year you want coverage, and update the application when it changes. Savings you receive above what you qualify for are repaid when you file your taxes.
How do I avoid a gap in coverage?
To avoid a gap, work backward from your last day of job coverage:
- Up to 60 days before your job coverage ends, you can apply for a marketplace plan. Ask your employer for the exact end date.
- After it ends you have 60 days to enroll in a marketplace plan.
- You have at least 60 days to elect COBRA, counted from when coverage ends or from the date of your election notice, whichever is later.
- Do not cancel COBRA before the marketplace plan starts, unless you have a qualifying reason to switch.
What happens when I turn 65?
Marketplace coverage does not end by itself when Medicare starts. Once you are eligible for premium-free Part A, you cannot get premium tax credits, and you pay full price for a marketplace plan if you keep it. Update your marketplace application to end the plan, up to three months before Medicare begins.
Your Medicare window opens three months before you turn 65. COBRA does not extend it.
If you have an HSA, stop contributing before Medicare starts. Our guides on the Medicare timeline and on HSA limits explain the dates.
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