Subscribe
Share
Share
Embed
Freedom for Retirement™ is the podcast designed to help you move beyond the fear of the complexity of finances so you can be financially free to achieve personal significance. Tune in with Josh Duncan each week to turn fear into fuel that drives you into Freedom & Significance.
Welcome to the Freedom for Retirement Podcast. If you're a high earning professional, business owner, or someone approaching retirement and wondering whether you are truly on track, you are in the right place. This podcast is all about helping you make smart, confident financial decisions without the fear, confusion, or sales pressure that so often comes with money advice. Each episode is designed to break down complex topics like retirement planning, investing, taxes, and cash flow in plain English so you can understand what really matters and avoid the most common and costly financial mistakes. Everything you hear here is educational, fiduciary focused, and grounded in real world planning experience working with clients just like you.
Josh:I'm your host, Josh Duncan, partner at F5 Financial Planning. Let's get started.
Josh:Have you ever dreamed of retiring early at 58 or 62, only to realize that health insurance could cost you more than your mortgage each month until Medicare kicks in at 65? It's a common fear that stops a lot of smart, motivated people just like you from pulling the trigger on that early retirement you've worked so hard for. The good news is with the right plan, you can bridge that gap without derailing your financial freedom. I'm Josh Duncan, partner at F5 Financial Planning, where we take a fiduciary approach to maximizing our clients' wealth. Today, we're going to walk through exactly how to pay for health insurance when you retire before age 65.
Josh:We'll cover the major change to the Affordable Care Act subsidies in 2026, practical strategies to keep your costs low, including health sharing plans, other bridging options, and the exact steps you should take right now to prepare. By the end of this video, you'll have clear actionable takeaways to protect your nest egg and sleep better at night. Stick around because this could save you tens of thousands of dollars over the next few years. Let's dive in. Let's start with the elephant in the room.
Josh:Health care costs and early retirement are one of the biggest obstacles most people underestimate. About it like planning a cross country road trip. You've got your route mapped, your gas and hotel budget set, but suddenly there's a massive toll bridge right in the middle that you forgot about. For early retirees, that toll bridge is health insurance between the day you leave your job and the day you turn 65 and Medicare becomes available. Right now in 2026, the landscape just got a lot more challenging because of changes to the Affordable Care Act subsidies.
Josh:For years, enhanced subsidies from the American Rescue Plan and Inflation Reduction Act removed the so called subsidy cliff. That meant even if your income went above 400% of the federal poverty level, you could still get some help with premiums. Those enhancements expired at the 2025, so starting this year, the cliff is back with a vengeance. Here's what that means in plain English. Subsidies through the ACA marketplace are now only available if your household income stays at or below 400% of the federal poverty level.
Josh:For a single person, that's roughly $62,600 a year. For a couple, it's about $84,600 Go even $1 over that line, and you lose all subsidy help. You pay full freight for premiums, which for a 60 year old couple in many parts of the country can easily run 1,500 to $2,500 a month, or more, depending on your location and plan. On top of that, the percentage of income you're expected to contribute toward premiums has gone back up. At lower income levels, it starts around 2.1%, but it climbs quickly topping out at 9.96.
Josh:And remember, these subsidies are based on your modified adjusted gross income, or MAGI, which includes things like wages, traditional IRA withdrawals, and taxable interest, but not Roth distributions or certain tax free sources. The public is really buzzing about this right now, because so many early retirees in the financial independence community built their plans assuming the old subsidy rules would stick around. Common mistake number one, assuming your pre retirement income level will automatically qualify you. Or worse, not realizing that a big Roth conversion or pretax withdrawal could push you over the cliff and wipe out thousands in subsidies. I've seen clients come to us after the fact, staring at a $12,000 surprise bill because they didn't coordinate their income sources.
Josh:That's why understanding this cliff is step one. But don't worry, we're going to give you the tools to navigate it. So let's talk about the most popular option for many early retirees, the ACA Marketplace. These are the plans you buy through healthcare.gov or your state exchange. They're real insurance.
Josh:They cover preexisting conditions, and they include all the essential health benefits like preventative care, hospitalization, and prescriptions. The key to making them affordable is maximizing your subsidy, and that comes down to controlling your Magi. Here's a real world example. Let's say you're a 62 year old couple retiring with a solid portfolio. If you keep your taxable income under $84,600 this year, you could qualify for substantial help that brings your monthly premiums down to hundreds of dollars instead of 2,000.
Josh:That's real money. Strategy number one for keeping income low. Prioritize tax free and tax efficient withdrawals. Pull from your Roth IRA or Roth four zero one k first. Those qualified distributions don't count toward Magi at all.
Josh:Next, sell shares from your taxable brokerage account, but choose the lots with the lowest gains to keep capital gains low. You can also use tax loss harvesting to offset any gains you do take. Remember, capital gains stack on top of other income you have, so be very careful here. Strategy number two, time your Roth conversions carefully. Many clients love doing Roth conversions in their early retirement years to reduce future taxes and required minimum distributions.
Josh:But if you're relying on ACA subsidies, you might want to pause or limit those conversions until after 65, or do smaller strategic conversions that keep you just under the 400% threshold. We run the numbers for our clients using specialized software to show the trade offs with these strategies. The analysis for this strategy typically requires multiple iterations throughout the year as income accumulates. Strategy number three, consider part time work, or consulting the pays in nontaxable ways, or keeps you under the limit. Some clients take a fun twenty four hour a week gig that includes benefits, or they structure a small business to defer income.
Josh:And don't forget health savings accounts. If you're on a high deductible ACA plan, you can still contribute to an HSA and use it tax free for medical costs. The money grows tax deferred and comes out tax free for qualified expenses. It's like a supercharged retirement account just for health care. These strategies are not binary and can be combined with one another to create the best plan for you.
Josh:This analysis can be quite a bit of work, so know that going into it. Common mistake here, forgetting that subsidies are based on your estimated income for the year you enroll, but you have to reconcile it on your tax return. If your actual income ends up higher, you could owe back some of the advanced payments. That's why we help clients run multiple scenarios before they retire. The Marketplace Estimator tool is free and powerful.
Josh:Plug in your ZIP code, age, and estimated income, and it shows you real quotes. Do this every year during open enrollment, which usually runs from November 1 to January 15, or during a special enrollment period if you lose employer coverage. Now if the ACA route still feels too expensive even with subsidies, or if you want to keep your income a bit higher for other planning reasons, let's talk about health sharing plans. These are not insurance. They're membership based programs where members agree to share each other's medical costs.
Josh:Think of it like a modern day barn raising where the community pitches in when someone has a big bill. You can use these videos on health sharing plans that go much deeper into how they work, comparison to traditional insurance, and who they're best for. If you haven't watched those, I highly recommend checking them out because they lay out the full pros and cons for you. But here's the quick overview for today's context. Health sharing plans can cost a fraction of traditional insurance.
Josh:Monthly shares for a healthy couple in their early sixties might run just $300 to $600 compared to $1,500 or more on the unsubsidized marketplace. That's a game changer for early retirees who want to keep more of their portfolio growing instead of paying premiums. The big advantages, lower cost, often no network restrictions, so you can see any doctor, and they focus on sharing major medical events. Some also have wellness incentives or discounts for healthy lifestyles. But there are important limitations you must understand.
Josh:They are not regulated like insurance, so there's no guarantee your bills will be shared. Preexisting conditions are often excluded or have waiting periods. Some services like mental health or certain preventative care might not be covered at all. And some require a statement of faith or adherence to certain lifestyle guidelines. For the right person, someone who is healthy, has savings set aside for the shareable amount or deductible equivalent, and aligns with the program's values, this can be an excellent branch to Medicare.
Josh:We've had several clients at F5 Financial switch to a health sharing plan and save thousands of dollars a year. Money they then invested or used to travel. But we always run the numbers and review the specific guidelines together because it's not a one size fits all. If you're considering this, start by comparing the top programs. Look at their annual limits, what counts as a shareable expense, and their track record of actually paying shares.
Josh:And remember, you can typically stop these plans at any time and go back to an ACA plan. The key is matching the option to your health values and risk tolerance. The ACA and health sharing aren't the only bridges. Let's quickly cover the other practical choices so you have the full toolbox. First, COBRA.
Josh:If you just left a job with 20 or more employees, you can usually continue your exact same employer plan for even up to eighteen months. The upside is continuity of doctors and coverage you already know. The downside, you pay full premium plus a 2% admin fee, which can easily top $2,000 a month for a family. We usually look at COBRA only as a short term bridge, Maybe six to twelve months while you shop the marketplace or transition to a sharing plan. Second, spouse's employer plan.
Josh:If your partner is still working and has coverage, jumping on their plan is often the simplest and cheapest option. As always, there may be some trade offs of providers, and that needs to be weighed into your decision. Check the open enrollment window or qualifying life event rules for your spouse's plan before making the leap. Third, part time work with benefits. Now some clients love this.
Josh:A twenty to thirty hour a week job at a university, hospital, or even certain retail chains can come with surprisingly good health coverage. It also keeps you socially engaged and might provide other perks. Fourth, private insurance or short term plans. These are off exchange policies. They can be flexible, but they often cost more than subsidized ACA plans, may deny preexisting conditions, and don't have to cover essential benefits.
Josh:We see these used mostly by very high income folks who don't qualify for subsidies anyway. Fifth, if you're lucky enough to have retiree health coverage from a former employee or union, grab it. These are becoming rarer, but they can be gold. The mistake I see most often is treating these options in isolation. The best plan is usually a combination or a phased approach.
Josh:COBRA for the first few months while you get your income dialed in, then marketplace or health sharing for the long haul. Always run the numbers with your specific ages, location, and health situation because premiums can vary widely by state. So how do you prepare for this early retirement opportunity so it doesn't become a financial headache? Here are the five concrete steps we walk every client through at F5 Financial Planning. Step one, build your health care budget now.
Josh:Use online calculators to estimate premiums under different income scenarios and in out of pocket costs. A good rule of thumb is to budget eight to 12% of your retirement spending just for health care before Medicare. Factor in inflation at at least 3% because costs rise every year. Step two, optimize your accounts for flexibility. Max out your health savings account while you're still working and eligible.
Josh:That triple tax advantage is huge. Build up your taxable brokerage and Roth accounts, so you have tax free withdrawal options to control the Magi. If you have a lot in traditional retirement accounts, start modeling Roth conversions in the years before you retire or during periods when you have other coverage. A rule of thumb is to fill up your current tax bracket with Roth conversions. Step three, don't treat health insurance premiums in isolation by running the numbers with a fiduciary adviser.
Josh:We use sophisticated planning software to stress test your entire retirement against different health insurance scenarios, market returns, and tax law changes. It's eye opening to see how a $2,000 a month premium difference compounds over five or seven years. Step four, get your health in order. The healthier you are, the more options you have. Lower premiums on ACA plans, better rates, or fewer exclusions on sharing plans, and less out of pocket spending overall.
Josh:Schedule your annual physical, address any pending issues, and start that exercise routine you've been meaning to begin. Step five, stay flexible and review annually. Life changes, your health changes, tax laws change, build in annual check ins with your adviser during open enrollment so you can pivot as needed. By taking these steps now, you turn what could be a major obstacle into a manageable, even empowering part of your early retirement plan. Let's wrap this up by recapping the five key points we cover today.
Josh:First, recognize the real challenges of pre Medicare health care costs, and the return of the ACA subsidy cliff in 2026. Second, learn how to navigate the marketplace by strategically managing your modified adjusted gross income with Roth conversions, tax efficient investing, and careful timing. Third, consider health sharing plans as a lower cost alternative, especially if you've watched my earlier videos on the topic. Fourth, explore the full range of bridges like COBRA, spouse coverage, or part time benefits. And fifth, prepare now by budgeting, optimizing accounts, running the numbers, prioritizing your health, and staying flexible.
Josh:At F5 Financial Planning, we don't just educate, we partner with you as a fiduciary to create a comprehensive plan that maximizes your wealth so you can live with purpose and significance. Early retirement is absolutely possible when you plan for the details most people
Josh:subscribing to the podcast and leaving a review. It helps more people find the show and continue learning how to make smarter financial decisions. I'm Josh Duncan, partnered F5 Financial Planning. If you would like to learn more about how we help our clients achieve financial freedom for personal significance, please visit our website at www.f5fp.com. Thanks for listening, and I'll see you in the next episode.