Retiring early is a dream for many, but figuring out how to afford health insurance before Medicare starts can be daunting. Henry, age 60, and his wife Lolita, age 53, show how savvy planning and the Affordable Care Act (ACA) help early retirees bridge this critical gap until Medicare begins at 65—without breaking the bank.

Meet Henry and Lolita: Financial Snapshot

• Savings: $953,000 total

  • $550,000 in a traditional IRA

  • $250,000 in a Roth IRA

  • $125,000 in a brokerage account

  • $28,000 in cash

• Home: Owned outright, valued at $600,000

• Future Social Security (starting at 67):

  • Henry: $4,046 per month

  • Lolita: $2,023 per month (spousal benefit)

They’re in a strong position and want to retire now, well before Henry qualifies for Medicare. Their home is paid off, and their nest egg offers flexibility. The biggest hurdle? Ensuring affordable health coverage until Henry turns 65—a challenge shared by thousands of early retirees.coveredca+1

The ACA: A Lifeline for Early Retirees

The ACA Marketplace provides comprehensive plans regardless of pre-existing conditions, with generous subsidies for households with moderate incomes. In California—including Stanton where Henry and Lolita live—the ACA, known locally as Covered California, offers extra state subsidies alongside federal premium tax credits, maximizing their savings.reddit+2

For a couple earning about $45,000/year, subsidies lower their health insurance costs dramatically:

• Full price for Silver plan: $1,700–$1,850/month

• With subsidies: $320–$390/month

• Annual savings: typically $15,000–$18,000

• Source: Covered California and national ACA calculators for 2025

Managing household income is key. Subsidies are available for incomes up to about $78,000/year. Henry and Lolita carefully engineer withdrawals from their IRAs, brokerage account, and cash savings to keep their modified adjusted gross income (MAGI) within the eligible range—maximizing coverage at minimal cost.healthinsurance+1

Bridging the Years Until Medicare

Henry needs ACA coverage for 5 years (age 60–65). By keeping MAGI near $45,000, their annual health insurance cost is about $4,200, compared to a whopping $21,600 at full price. That’s $85,000 saved over five years—money that stays invested to grow further. Lolita will continue on an ACA plan until she qualifies for Medicare herself.latimes+1

Here’s an income strategy for subsidy eligibility:

• Use Roth IRA principal withdrawals and existing cash (which are not taxable and don’t count toward MAGI).

• Make small withdrawals from traditional IRAs, staying under the ACA subsidy cliff.

• Sell brokerage assets smartly to manage capital gains.

What Happens at 65?

When Henry turns 65, he’ll transition to Medicare—typically much more affordable than ACA coverage. Lolita can remain on the ACA plan until her own Medicare enrollment at 65. By age 67, both will receive Social Security, boosting their cash flow and further reducing the need for portfolio withdrawals.

Tips for Early Retirees

• Plan Income Withdrawals: Lower MAGI means higher ACA subsidies.

• Check the Marketplace Every Year: Premiums and subsidies change; shopping annually ensures the best deal.

• Keep Savings Flexible: Use tax-free withdrawals (Roth and cash) to control taxable income.

• Know the Risk: ACA subsidies may change politically after 2025, so stay updated and ready to adjust.

Conclusion

Henry and Lolita’s story highlights the importance of understanding ACA rules, managing taxable income, and shopping smart for health plans. With thoughtful planning, early retirement in California can be both healthy and financially secure—all the way until Medicare begins.coveredca+4

Early retirement is possible—and health coverage affordable—with the right tools and some careful strategy.