Why Smart Retirees Pay Less For Health Insurance Before 65

If the number on healthcare.gov has you feeling trapped, your actual number could be a fraction of the cost. I had a couple who'd been staring at a $28,000 figure for months, convinced it was the reason they couldn't retire. It wasn't. Yet health insurance is the number one thing stopping people who are financially ready to retire from pulling the trigger. But the people who retire early without paying a fortune, they aren't rich. They just know a few methods to bring that number Number down significantly. So in this video, I'm going to walk you through five of them, including the one exercise I do with every client before we look at anything else, and the income trick that could cut your premiums by tens of thousands a year. If you're new here, I'm Lina Armath, a CFP professional and partner at Sensible, where we help simplify retirement. So let's get into it. Before looking at a single plan or premium, there's an exercise every smart retiree does first, run the worst case. For many of my clients, it's been the single most important thing we've done. So we take whatever that scary health insurance number is, the one that made you close your laptop and think early retirement was off the table. Now add it on top of what you expect to spend each year in retirement and ask one question. If I had to cover this every single year, would my savings last? Not does it make me uneasy? Does it still work? Because if the answer is yes, that number isn't stopping you. All you're really doing is sacrificing more of your best years to avoid a cost your plan can already handle. That couple I mentioned at the start were looking at $28,000 a year. When I ran their plan with that number in it, it still worked. Sure, it was a lot of money, but they were able to take the three-month trip around Europe that they'd always talked about and nothing broke. Now if you ran the numbers and your savings don't sustain it, don't worry. That's exactly what the rest of this video is for. And if the worst case does work for you, everything that follows is money back in your pocket. This one is the one most people never check. If you're a couple and one of you wants to retire while your spouse is still working, the health insurance problem might already be solved and you don't even know it. Most employers and professional roles offer And when you retire. That counts as a life event, which means you can join your spouse's employer plan immediately outside of open enrollment, and you could avoid any gap in coverage at all. Employers typically cover 70 to 80 percent of the premium, so your plan that would cost you $2,400 a month on your own might cost the household $500 to $700 a month through your spouse's employer. In my experience, this is the most overlooked option there is. People spend weeks researching ACA plans without ever trying the one that's right in front of them. So check their employer plan first. One phone call to HR could save you thousands of years and remove one of the biggest obstacles standing between you and your retirement date. Here's the first thing I'd look at if the spouse plan isn't an option for you. Most people with serious retirement savings assume they earn too much to qualify for ACA subsidies, so they don't even try. But that assumption could be costing you the tens of thousands of dollars. The ACA doesn't care what your net worth or your 401k balance is. It only cares about one number, your reportable income for that year. And in retirement, that's something you can often control. The irony is that if you're making that assumption, Probably did everything right. You maxed out your 401k. You saved into pre-tax accounts. And now every dollar you withdraw counts as ordinary income. You've built real wealth. And the way it's structured means the ACA sees you as a higher earner, even though you don't have to be. For 2026, the threshold sits at $62,600 for a single person and $84,600 for a married couple in modified adjusted gross income. Stay under that and your premiums could be significantly reduced. Cross it by even a dollar and you're paying full price. And here's where it gets interesting because qualified Roth withdrawals don't count toward your reportable income. Neither does the principal from your taxable brokerage account, only the gains. And you get to choose which shares you sell. So say you need $60,000 to live on. You sell $60,000 of shares from your brokerage account, but you choose shares you originally bought for $50,000. Only $10,000 shows up on your tax return. You lived on $60,000, but the ACA only sees $10,000. Pull that same $60,000 from a traditional IRA, and every single dollar counts as ordinary income. So that's the difference between significant subsidies and paying full price. And it's a decision most people don't even know that they're making. Now don't go too far. There's a lower limit as well as an upper one. If your income drops too low, you get pushed into Medicaid. So the goal isn't zero income, it's the sweet spot. High enough to stay on private ACA plans, low enough to qualify for meaningful subsidies. So managing your income is key to making the ACA affordable, but that's a year-by-year strategy. What about the moment you actually walk out the door? This is where most people either panic and sign up for COBRA immediately or dismiss it completely because of the cost. And in my experience, both are the wrong way to approach it. So what is COBRA? It's a federal law that lets you continue your employer health insurance after you leave your job. That means you keep your exact same plan, your same doctors, same network, same prescriptions for up to 18 months. The catch is you're now paying 100% of the premium, plus a 2% admin fee. Depending on your plan, that could run anywhere from $1,300 to $2,500 a month or more. And the cost of COBRA is what stops people from considering it. But before you dismiss it, I want to show you three things that most people miss. The first is that if you've been building up an HSA during your working years, you can use those funds to pay COBRA premiums completely tax-free. That's an IRS exception most people miss. Normally, you can't use HSA money for insurance premiums, but COBRA is different. For someone with a healthy HSA balance, that changes the real out-of-pocket costs significantly. And by the way, if you're still a few years away from retirement and you're on a high deductible plan, max that HSA every year. The 2026 limit is $4,400 for individuals, $8,750 for families, plus $1,000 catch-up if you're 55 or older. Those funds can pay COBRA premiums now and most Medicare premiums later, completely tax-free. The second thing to know about COBRA is if you retire mid-year and you've already met your deductible, staying on your existing plan can actually make financial sense. You have a procedure coming up or an ongoing treatment, resetting on a brand new plan mid-year means starting your deductible from scratch. COBRA lets you avoid that. And third, you don't have to decide straight away. You actually have 60 days to elect COBRA after leaving your job. The window gives you time to properly shop your options before committing, rather than signing up on your last day out of panic. COBRA isn't a long-term solution. Think of it as a bridge, not a plan. And think of your HSA as a health care fund for life, not just for the gap. Used together, they can help give you the freedom you need to retire on your terms without sacrificing the one thing you can never get back, and that's your active years. But what if none of those options work for you? Well, there's one more option worth knowing about, and it's that private short-term insurance plans available through a number of carriers can cost 40 to 50 percent less than unsubsidized ACA plans in some cases. They often come with access to large recognized provider networks as well. The trade-offs are real, but depending on your situation, they could make sense. These plans involve medical underwriting. They can ask about your health history and potentially decline you. They don't cover everything an ACA plan covers. Pre-existing conditions are typically excluded and if you become seriously ill, you're not required to renew your policy. One thing to know, how long you can actually keep a short-term plan varies by state, and the federal rules are in flux right now. So treat these as a short bridge, not a multi-year solution, and check what's allowed where you live. But if you're healthy and your income sits above that subsidy threshold, don't default to full-price ACA premiums before checking the private market. It could save you thousands a year. Now here's the problem. A lot of people think that the cost of health insurance is the reason they can't retire. But what I actually see with the people I work with every day, it's deeper than that. It's the uncertainty of not knowing their retirement will actually last. And that comes down to more than just health insurance. It's about having a plan That gives you the confidence to enjoy the life you've been building. And that's exactly what I do every day. So if you're thinking of retiring before 65 and you want to know how much you can safely spend in retirement, there's a link below to book a call with me. But look, health insurance is only one piece of an early retirement. The other stuff is exactly what I cover in this video right here. Thank you.