Stopping work at 64 can put you in the most expensive 12 months of your healthcare life. Employer coverage ends and Medicare has not started. A married couple shopping the ACA marketplace at that age is staring at the steepest premiums in the individual market. Standard retirement calculators tend to miss these premiums plus deductibles and out-of-pocket maximums.
Unsubsidized ACA marketplace coverage for two 64-year-olds runs about $1,800 to $2,400 a month, depending on state and plan tier. On the high end, that is close to $29,000 in premiums alone. Layer on a family deductible and the out-of-pocket maximum, and a serious medical event in that one year can easily push total healthcare spending past $50,000.
For perspective, the Bureau of Labor Statistics puts average annual household expenditures at $78,535 in 2024. A $51,000 healthcare gap is roughly two-thirds of what a typical household spends on everything combined.
Once Medicare starts at 65, things get better. The standard 2026 Part B premium is $202.90 a month for each spouse with income at or below $218,000 for a joint filer.
But first you have to get through this gap year. ACA premium tax credits phase out as modified adjusted gross income (MAGI) rises. To unlock meaningful subsidies, a couple typically needs to keep MAGI well below the upper threshold. But keeping MAGI low means pulling less from tax-deferred accounts, which forces you to spend down taxable brokerage and Roth assets to fund living expenses.
That is the central decision: do you accept a higher tax bill now to draw freely from your IRA, or do you suppress income to capture subsidies and live off the after-tax side of the balance sheet?
For most couples with $1.5 million, suppressing MAGI wins, experts say. The reason is leverage. A subsidy that cuts premiums by even $1,000 a month is $12,000 of tax-free help for the year, equivalent to a Treasury-bond yield you cannot replicate anywhere else in your portfolio. With the 2026 standard deduction for joint filers at $32,200, a couple can pull a meaningful amount from a brokerage account at the 12% bracket ceiling of $24,800 or even into the 22% bracket and still keep MAGI in subsidy-friendly territory by leaning on Roth and basis from taxable accounts.
Two Paths Worth Considering
- Bridge with the marketplace and manage MAGI aggressively. Fund living expenses with a mix of taxable brokerage sales (where only the gain portion counts toward MAGI), Roth withdrawals (which do not count), and a modest IRA draw. Couples who can keep MAGI in a range that preserves premium tax credits often cut their healthcare bill in half. You must be disciplined. One large IRA withdrawal or capital gain in December can claw back the entire year of subsidies.
- Use COBRA for the bridge. If your employer plan was generous, COBRA can be cheaper than unsubsidized ACA and lets you ignore MAGI optimization entirely. It runs 18 months in most cases, which conveniently covers the gap to Medicare. The tradeoff is sticker shock: You pay the full group premium plus an administrative fee, with no subsidy ladder underneath.
Working six more months and timing your last day for the month you turn 65 is the cleanest fix of all. It makes the healthcare gap year go away, and preserves whatever employer subsidy you have been receiving.
What to Do First
Price the marketplace plans in your state for next year with realistic MAGI estimates before you give notice. If your draft budget puts MAGI above the subsidy cutoff, model what spending Roth and taxable basis first does to the tax math. Fund an HSA to its family maximum in every remaining working year and treat it as a healthcare-only side account for that bridge year.
64 is just one year early. But health insurance can be extremely costly for that one year. Plan for it, or consider pushing retirement to 65.
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