Before Medicare

Retiring before 65: the coverage gap and how people bridge it

Short answer: you have three realistic options between leaving work and turning 65, and they are the ACA marketplace, COBRA, or a spouse’s employer plan. The marketplace is where most early retirees land, and it got substantially more expensive: the enhanced premium tax credits expired at the end of 2025 and have not been renewed, which brought back the income cliff at 400% of the federal poverty level and raised what subsidized enrollees pay by roughly 114% on average. That makes managing your taxable income as important as choosing your plan, and it makes the arithmetic of retiring at 62 different from what it was three years ago.

By the Medicare Decoder team · Updated September 30, 2026 · 4-minute read · Figures are official CMS amounts, checked against CMS

Key takeaways

The enhanced ACA premium tax credits expired December 31, 2025 and have not been renewed, so subsidies are smaller and the 400% income cliff is back.
Cross the cliff by a single dollar and you lose the entire premium tax credit, which can mean thousands of dollars.
Marketplace premiums rise with age, so 60 to 64 is the most expensive stretch, exactly when many people retire.
COBRA usually costs the full employer premium plus a fee and lasts up to 18 months, which rarely bridges a gap of several years.
COBRA is not creditable coverage for delaying Medicare Part B, and misunderstanding that causes permanent penalties.

Jump to The three options What the marketplace costs now The income cliff The COBRA trap Handing off to Medicare FAQ

The three options

Option	Typical cost	Length	Best when
ACA marketplace plan	Varies by age, income, and state; subsidies apply below the income cliff	Any length until 65	Most early retirees, especially with controllable income
COBRA	Full employer premium plus up to a 2% administrative fee	Usually up to 18 months	Short gaps, or mid-treatment continuity with the same doctors
Spouse’s employer plan	Whatever the employer charges for family coverage	While the spouse works	Available and usually the cheapest option when it exists

Leaving a job is a qualifying life event that opens a Special Enrollment Period on the marketplace, so you are not limited to the annual window.

What the marketplace costs now

The financial picture changed materially. The enhanced premium tax credits created in 2021 expired on December 31, 2025 and were not renewed. KFF analysis found average premium payments for subsidized enrollees rose about 114%, and that people aged 50 to 64 were hit hardest because marketplace premiums are age-rated and this group makes up a large share of enrollees. For illustration, KFF calculated that a 60-year-old earning $65,000 pays roughly $10,389 more per year than they would have with the enhanced credits. Premium tax credits still exist; what disappeared were the expanded versions and the cap that limited premiums to 8.5% of income for higher earners.

Practical consequence: shop every year, compare bronze against silver honestly (bronze premiums are lower but deductibles are higher, and many people moved that direction), and check whether your state runs its own marketplace with additional subsidies, because several do.

The income cliff, and why it matters more than your plan choice

With the enhanced credits gone, the subsidy cliff returned: households earning even one dollar above 400% of the federal poverty level lose the premium tax credit entirely, rather than having it taper. For an early retiree, income is unusually controllable, which makes this a planning problem rather than a fixed fact. The moves that commonly push people over without warning: a Roth conversion, a large IRA withdrawal, realizing capital gains, selling property, or taking Social Security early. Each can cost far more in lost subsidy than it gains, and because credits are reconciled at tax time, exceeding the threshold can also mean repaying subsidies you already received. This is worth a conversation with a tax professional before you execute anything in a year you are buying marketplace coverage.

The COBRA trap

COBRA lets you keep your employer plan, typically for up to 18 months, but you pay the entire premium (the employer’s share included) plus an administrative fee, which usually makes it expensive rather than convenient. Two things people get wrong:

The math. Compare the full COBRA premium against a marketplace plan with any subsidy you qualify for. COBRA wins mainly when you are mid-treatment and keeping the exact network matters, or when the gap is genuinely short.
The Medicare consequence, which is the expensive one. COBRA is not creditable coverage for delaying Medicare Part B. If you are 65 or older and relying on COBRA instead of enrolling in Part B, you can accrue a permanent late enrollment penalty and face a coverage gap. This is among the most common and most costly Medicare mistakes, covered in the mistakes article and the working-past-65 article.

Handing off to Medicare at 65

Your marketplace plan does not convert into Medicare and will not tell you to switch. The sequence that avoids trouble:

Enroll in Medicare during your Initial Enrollment Period, the seven months around your 65th birthday month. The month-by-month checklist lays out the order.
End the marketplace plan deliberately when Medicare starts. Premium tax credits are not available for months you have Medicare Part A, and keeping both can mean repaying subsidies.
Decide your path before you enroll: Advantage or Original Medicare with Medigap and Part D. The comparison and the nine-question decoder both help; the Medigap timing window in the Medigap pricing article is the part that expires.
If your spouse is younger and was on your marketplace plan, sort their coverage separately before you drop it. The younger-spouse gap covers that handoff.

Questions people also ask

What health insurance can I get if I retire before 65?

Three realistic options: an ACA marketplace plan, COBRA continuation of your employer plan for up to 18 months, or coverage through a working spouse's employer plan. Leaving a job is a qualifying life event, so you can enroll in marketplace coverage outside the annual open enrollment window.

Did ACA subsidies for early retirees go away?

The enhanced premium tax credits expired December 31, 2025 and have not been renewed. Regular premium tax credits still exist, but they are smaller and the 400% of poverty income cliff returned. KFF found average premium payments for subsidized enrollees rose roughly 114%, with people aged 50 to 64 hit hardest.

What is the ACA subsidy cliff?

With enhanced credits expired, households earning more than 400% of the federal poverty level lose premium tax credits entirely rather than having them phase out. Exceeding the threshold by even a small amount can cost thousands, and subsidies received during the year may have to be repaid at tax time.

Is COBRA a good option before Medicare?

Sometimes, for short gaps or when keeping your exact provider network mid-treatment matters. You pay the full premium plus an administrative fee, usually making it costlier than a subsidized marketplace plan, and it lasts only about 18 months.

Does COBRA count as coverage for delaying Medicare?

No. COBRA is not creditable coverage for Part B purposes, so relying on it at 65 or older can create a permanent late enrollment penalty and a coverage gap. Enroll in Medicare during your Initial Enrollment Period even if you still have COBRA.

Sources for this article

HealthCare.govHealthCare.gov: marketplace plans, premium tax credits, and special enrollment periods.
KFFHow the loss of enhanced premium tax credits affects older adults: the premium impact analysis for people aged 50 to 64.
Medicare.govMedicare.gov: enrollment windows and how Medicare interacts with other coverage.

Figures checked against these sources on September 30, 2026. We update within days when CMS publishes new amounts.

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