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Retiring at 60 sounds great until you price health insurance for the five years before Medicare starts at 65. Those gap years are the most expensive health insurance you will ever buy as an individual. Insurers can charge older adults up to three times what they charge a 20-something for the same plan, and the enhanced federal subsidies that softened that blow expired at the end of 2025. Here is how early retirees are covering the gap in 2026 and what each option really costs.
Why the gap years are so expensive
Federal rules let insurers use age as a pricing factor, capped at a 3-to-1 ratio. A 60-year-old pays roughly three times the premium of a 21-year-old for the same plan. At 55 or 60, you sit near the top of that range, so your unsubsidized premium is the highest the market produces.
For four years, enhanced premium tax credits masked this. Those credits, created during the pandemic and extended through 2025, lowered what marketplace shoppers paid and removed the income cap on eligibility. They expired on December 31, 2025 and were not renewed. Benchmark marketplace premiums jumped about 22 percent in 2026, and the old subsidy cliff is back: earn even one dollar over 400 percent of the federal poverty level and you get zero premium help. Average net premiums for marketplace enrollees rose from about $113 to about $178 a month, and many shoppers dropped to cheaper bronze plans to cope.
None of this means the gap is unbridgeable. It means the strategy matters more than it did two years ago.
Option one: the ACA marketplace
The marketplace remains the default option for most early retirees. Losing employer coverage when you retire triggers a special enrollment period, so you do not have to wait for open enrollment. Every marketplace plan covers pre-existing conditions with no waiting periods, and the essential health benefits apply.
The key variable is your income. Premium tax credits are still available under the pre-2021 formula if your income falls between 100 and 400 percent of the poverty level. This creates real planning opportunities. In the years between retirement and Medicare, many people have unusual control over their taxable income. Managing Roth conversions, capital gains timing, and part-time work income to stay under the 400 percent threshold can be worth thousands in subsidies. Talk to a tax advisor before you retire, because the income you report determines the help you get.
One caution: the marketplace only helps if your income is in the subsidy range and you buy through the exchange. Off-exchange plans do not qualify for credits.
Option two: COBRA
COBRA lets you keep your employer’s plan for up to 18 months after you leave, but you pay the full premium plus a 2 percent administrative fee. Employer plans cost employers and employees combined well over $20,000 a year for family coverage on average, so COBRA for a 60-year-old can easily run $700 to $1,000+ per month for individual coverage.
COBRA makes sense as a bridge when you need less than 18 months of coverage, when you are mid-treatment with specialists you want to keep, or when you have already met your deductible for the year and switching plans would reset it. As a five-year solution it is the most expensive option on this list. Our comparison of COBRA vs marketplace vs Medicaid breaks down the math.
Option three: a working spouse’s plan
If your spouse is still working and has employer coverage, joining their plan is usually the cheapest good option available. Losing your own coverage is a qualifying life event that triggers a special enrollment period on your spouse’s plan. Employer group premiums are subsidized by the employer, the risk pool includes young healthy workers, and the coverage is typically generous.
The main limitation is timing. If your spouse retires before you hit 65, you both land in the gap together. Plan the sequence of retirements with health coverage in mind, not just finances.
Option four: part-time work with benefits
Some employers offer health benefits to part-time workers, typically those working 20 to 30 hours a week. Retail, hospitality, and some school districts are known for this. Working part-time for benefits is a legitimate strategy for the gap years, and the paycheck is a bonus. Check the waiting period before benefits start and whether the plan meets minimum value standards.
Option five: short-term plans, with eyes open
Short-term health plans are cheaper than marketplace coverage because they cover less. They can exclude pre-existing conditions, cap benefits, and skip essential health benefits. In 2026 they remain an option in many states for healthy early retirees who want catastrophic protection at a lower price. They are a gamble, not a plan: fine if you stay healthy, dangerous if you do not. Our guide to short-term health insurance covers who should consider them and who should stay away.
How to budget for the gap
Price your worst realistic year, not your average one. Take the annual premium for a silver marketplace plan in your area at your age, add the out-of-pocket maximum, and treat that total as your annual health budget for the gap years. If subsidies bring the premium down, treat the savings as a bonus rather than the plan.
Also remember that Medicare at 65 is not free either. Budget for the Part B premium (currently $202.90 per month), plus Medigap or Medicare Advantage, plus Part D. The gap years are expensive, but going in with real numbers beats going in surprised. People who model the full cost from retirement day to age 65, including the subsidy income planning, consistently report that the number was manageable once it was concrete. It is the unknown version that keeps people working longer than they want to.
