You retired before Medicare
The years between retiring and turning 65 are the most expensive stretch of health insurance in most people's lives — and the one where you have the most control over the bill.
Medicare starts at 65. Retire at 62 and you have three years to cover privately, at the point in life when age-rated premiums are at their highest — a 64-year-old can be charged up to three times what a 21-year-old pays for the same plan.
The compensation is that early retirees often have unusual control over their taxable income, and the subsidy is calculated on taxable income.
Why this group can plan the credit
Most people's income is whatever their employer pays them. A retiree living off savings chooses, to a real degree, which accounts to draw from — and the accounts differ in how they hit modified adjusted gross income:
- Traditional IRA or 401(k) withdrawals — fully counted.
- Roth withdrawals — qualified ones are not counted at all.
- Taxable brokerage — only the realized gain counts, not the principal you are spending.
- Cash savings — spending it is not income.
- Social Security — counted in full for this purpose, including the portion that is not taxable. Different from the income tax rules, and a common error.
A household drawing $70,000 a year can be well over the subsidy line or comfortably under it depending purely on which accounts it comes from. That is a planning decision worth taking to an accountant before the year starts, not after.
Where the line is
The credit stops entirely above 400% of the poverty guideline: $63,840 for one person and $86,560 for a couple. For a 62-year-old couple in an expensive county, crossing that line can mean a swing of well over ten thousand dollars in a year.
The stakes are higher here than at any other age, because age-rated premiums are highest and so the credit being lost is largest.
The Roth conversion tension
The years between retiring and 65 are also when conversational wisdom says to convert traditional balances to Roth, while you are in a low tax bracket and before required distributions begin.
That conflicts directly with keeping MAGI under the subsidy line, because a conversion is counted as income. There is a real trade-off between a smaller tax bill later and a larger insurance bill now, and it does not have one right answer — it depends on the size of the balances, the county's premiums and how many years remain to 65.
This is genuinely a question for a financial planner with your actual numbers. We publish the thresholds so you can see what is at stake in the decision.
Other routes worth pricing
- Retiree coverage from a former employer, if offered. Compare it honestly against a subsidized marketplace plan; it is not automatically better.
- COBRA for up to 18 months, which can bridge a short gap while keeping your existing doctors. It cannot take a premium tax credit.
- A spouse's plan, if one of you is still working. Their retirement is itself a qualifying event when it comes.
Do not drift into 65
Medicare enrollment has its own deadlines and its own penalties, and marketplace coverage does not roll into it. The initial enrollment period runs from three months before the month you turn 65 to three months after. Missing it can mean a permanent Part B surcharge.