Marketplace health insurance before 65 (ACA)

The pre-65 insurance problem

Retire before 65 and you lose employer coverage years before Medicare begins. Most early retirees bridge the gap with an ACA marketplace plan — and the sticker price is steep: often $1,000–1,500 a month per household at these ages.

The saving grace is the premium tax credit: a subsidy based on your income. The catch is that in retirement, you largely choose your income — every 401(k) withdrawal and Roth conversion counts toward it. That makes the subsidy a planning problem, and one this app can now model.

How the credit works (from 2026)

Your expected contribution toward insurance is a sliding share of your MAGI (modified adjusted gross income — see the glossary): from about 2% of income near the federal poverty level up to about 10% at three to four times it. The credit covers the gap between that contribution and the premium.

The crucial feature is the cliff at 400% of the federal poverty level (about $62,600 for a single person, $84,600 for a couple, in 2025 figures — the app grows these with inflation). One dollar of income over that line and the entire credit disappears for the year — not a phase-out, a cliff. For a household with a $15,000-a-year premium, crossing it by $1 can cost thousands.

How to turn it on

1. Turn on tax modeling — the credit is computed from the same income tally.
2. On My Plan → Profile & assumptions, tick I buy my own health insurance (ACA marketplace, pre-65) and enter your full monthly premium — the unsubsidized sticker price.
3. Also enter that same premium as a normal expense (category: health insurance) with an end month at your 65th birthday, when Medicare takes over.

Each year, the app works out your MAGI, computes the credit, and adds it back as an ACA premium credit (est.) line in the month detail — settled across the following year, like the tax bill. The credit stops automatically at 65.

Why this changes other decisions

Once the subsidy is modeled, income planning before 65 gets visibly sharper — most importantly in the Roth conversion comparison, where a conversion that jumps the 400% cliff now pays for the lost subsidy in the results, instead of looking free.

Simplifications, stated plainly: figures use the law in force from 2026 (the 2021–2025 enhanced subsidies expired), the poverty level for the 48 contiguous states, and your entered premium rather than your county's benchmark plan. Medicaid (below 100% of the poverty level) isn't modeled. An educational estimate, not tax advice.