How Early Retirees (Like Me) Get Affordable Health Insurance Without a Job

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One of the biggest concerns about early retirement is how to afford healthcare without an employer-sponsored plan. It’s a valid worry, health insurance in the U.S. isn’t cheap, and medical costs can be unpredictable.

I am a Chartered Financial Analyst. I retired at 42. I spent 20 years modeling every financial scenario I could think of.

I modeled market crashes, inflation, real estate dips, everything except healthcare. It felt like the one thing I couldn’t fully solve. I didn’t understand it, until I actually retired. Turns out, I overestimated the risk.

Healthcare in early retirement has been a non issue for my family of five.

In this article, I’ll break down how early retirees can manage healthcare costs strategically and legally.

If healthcare is the thing scaring you when you think about early retirement, then you’re going to like this article.

But first let me give a quick disclaimer. I am a credentialed financial expert. I retired young. I wrote this article about my experience, but I do not know your specific situation.

I don’t even know what state you live in, and every state treats healthcare differently. So talk to professionals. This article is meant to inform and inspire, not to recommend.

👉 Let’s break it all down, step by step.

Table of Contents

Your Income, Not Net Worth Drives Healthcare Costs

Most people assume your savings determine how much you’ll pay for health insurance in retirement. That’s not how it works.

The number that matters is Modified Adjusted Gross Income (MAGI), not your net worth.

Why MAGI Matters More Than You Think

This is the part that caught me off guard. You can have millions in the bank, but if your MAGI is low, you qualify for premium tax credits through the Affordable Care Act (ACA).

That means lower monthly premiums, even if your actual wealth is high.

When I first saw how cheap my premiums were, I felt guilty. It didn’t seem right that someone with assets like mine could pay so little. But once I realized this was by design, it’s income-based because the IRS runs the system, I saw the opportunity clearly.

I even bought a profitable lifestyle blog. Why? Because it gave me legitimate business expenses that reduced my taxable income, which in turn reduced my MAGI, and dropped my premiums even further.

What’s Counted (and What’s Not) Toward MAGI

Here’s what typically counts toward MAGI:

Wages and salaries (if you’re still working)
Traditional IRA and 401(k) withdrawals
Capital gains from taxable accounts
Rental income (before depreciation)
Business income after deductions

Here’s what doesn’t count:

Roth IRA withdrawals
HSA withdrawals for medical expenses
Depreciation on rental property
Business write-offs for legitimate expenses

This is key. Early retirees can legally manage their MAGI using smart withdrawal strategies, tax planning, and income timing.

That’s how you end up with affordable, or even free health coverage, regardless of net worth.

The Healthcare Marketplace Works in Your Favor

If you retire early, your taxable income usually drops, which puts you in a strong position on the ACA healthcare marketplace.

That’s because the Premium Tax Credit (PTC) is designed to help people with lower income afford health insurance. And early retirees often qualify.

How the Premium Tax Credit Works

The Premium Tax Credit is based on three things:

Your Modified Adjusted Gross Income (MAGI)
The number of people in your household
The state you live in

Lower MAGI equals bigger credits. For example:

A family of four earning $40,000 per year could qualify for premiums close to $0/month
Even families earning $60,000–$70,000 can receive significant subsidies

Early retirees who structure their income carefully can easily hit these ranges, especially if they’re pulling from Roth accounts, taxable investments, or running a small business with deductions.

Video: Save on Taxes: 19 Smart Ways to Keep More of Your Money

Why Income Control Changes the Game

When you’re employed, you can’t do much to change your taxable income. But in early retirement, you’re in control:

Choose where your income comes from (e.g., taxable brokerage account, Roth IRA, rental property)
Decide when to take income (timing is everything)
Use strategies like capital gains harvesting or Roth conversions

Had I plugged my projected income into Healthcare.gov before retiring, I would’ve seen how affordable my premiums actually were, and saved myself a lot of stress.

If healthcare is the one thing holding you back, run the numbers. You’ll likely be surprised how much the marketplace works in your favor.

Some States Offer Generous Medicaid Options

Medicaid (not to be confused with Medicare) is a state-run program, and some states have surprisingly high income limits. That means early retirees who manage their taxable income wisely might qualify for free or nearly free coverage, regardless of net worth.

Medicaid Eligibility Can Go Higher Than You Think

In expansion states, the income cutoffs are more generous than most people expect:

A single adult earning around $20,000/year may qualify
A family of three may be eligible with income near $34,000/year

These limits are based on a percentage of the Federal Poverty Level (FPL), and they adjust slightly each year.

Thanks to the ACA, many states raised their limits to 138% of the FPL, opening the door for early retirees with controlled income.

Check Your State Before You Assume You Don’t Qualify

Each state sets its own Medicaid guidelines. Some have embraced expansion, while others haven’t. But one constant remains: MAGI determines eligibility, not wealth.

With smart planning, using things like Roth IRA withdrawals, business deductions, or real estate depreciation, you can legally reduce your taxable income and qualify for Medicaid, even if you’re financially independent.

Before ruling it out, look up your state’s current income limits. You might be eligible for more support than you think.

Controlling Your Income Lowers Healthcare Costs

This is one of the biggest advantages of retiring early: you control your income. You’re not tied to a paycheck or a pension. That means you get to decide how much income shows up on your tax return, and that directly affects your healthcare costs.

Income Timing and Sources Matter

Early retirees have multiple levers to pull:

Taxable brokerage accounts: You only pay tax on capital gains, not on the original investment (cost basis)
Roth IRAs: Qualified withdrawals are tax-free and don’t count toward MAGI
Rental income: Depreciation lets you earn real money while reducing what you report
Capital gains harvesting: Sell appreciated assets, then rebuy to reset your cost basis with little or no tax
Strategic Roth conversions: Convert traditional IRA funds during low-income years to lower future tax bills

This level of flexibility lets you build a custom income plan that supports your lifestyle and keeps your MAGI low enough to qualify for healthcare subsidies.

Video: When A Roth IRA Does Not Make Sense

Owning a Business Creates More Deductions

Running a business, even a small one, can help reduce your MAGI further. That’s exactly why I bought a lifestyle blog. It allowed me to:

Generate income on my terms
Write off legitimate business expenses
Keep more cash while lowering my taxable income

It’s a win-win: I stay engaged, earn income, and keep my healthcare costs low, all within IRS rules.

HSAs Are a Tax-Free Superpower

A Health Savings Account (HSA) is one of the most powerful financial tools available, especially for early retirees. It’s the only account that offers a triple tax advantage, and when used right, it can lower both your healthcare spending and long-term tax burden in a big way.

Save It Now, Use It Later (Tax-Free)

Here’s why HSAs are so valuable:

Tax-free contributions: You don’t pay income tax on money you put in (as long as you qualify).
Tax-free growth: You can invest HSA funds, just like a 401(k) or IRA.
Tax-free withdrawals: As long as the money is used for qualified medical expenses, you don’t pay a dime in taxes, ever.

Unlike Flexible Spending Accounts (FSAs), HSAs don’t expire. The money rolls over year after year, and the account belongs to you, not your employer.

I maxed out my HSA every year while working, and it turned into a quiet little medical fund that’s still working for me in retirement.

Even After 65, It Still Works

If you retire early and don’t touch your HSA right away, that’s fine.After 65, HSA withdrawals for non-medical expenses incur income tax but no penalty, unlike the 20% penalty pre-65.

You’ll just pay ordinary income tax on non-medical withdrawals, the same as you would from any other retirement account.

But here’s the smart move: use it for medical expenses to avoid all taxes entirely. It’s one of the best stealth tools for managing healthcare in early retirement, and it stays useful for life.

Paying Cash Can Sometimes Be Cheaper

Health insurance feels like a must-have, but in many situations, paying cash can actually save you money. Especially if you’re healthy and rarely visit the doctor, alternative payment strategies can keep costs low and eliminate insurance headaches.

Why Cash Prices Are Often Lower

Most people don’t realize this: when you pay with cash, you’re often charged less than what insurance companies are billed.

Without the paperwork, delays, or contract pricing, many providers offer cash discounts, sometimes significantly lower than the insured rate.

You also skip the back-and-forth approvals. That means faster appointments, fewer denials, and no surprise bills because you “used the wrong code” or “didn’t meet the deductible.”

Consider Direct Primary Care

One popular option for early retirees is Direct Primary Care (DPC). It works like a membership:

You pay a flat monthly fee (often $50–$100/month)
You get unlimited doctor visits, same-day scheduling, and basic lab work
There’s no insurance involvement at all

I haven’t used this strategy myself, but it’s popular among early retirees who value simplicity and cost control.

For those in good health, paying cash or using a DPC membership can cut healthcare expenses by thousands each year, without the hassle of traditional insurance.

Healthcare Sharing Ministries as an Alternative

Healthcare Sharing Ministries (HCSMs) aren’t insurance, but they’re another option for people who are healthy, financially independent, and looking to avoid high premiums.

These are faith-based cost-sharing programs where members help cover each other’s medical bills.

Pros and Cons of Cost-Sharing Plans

Here’s the upside:

Lower monthly cost than traditional insurance
No provider networks, you can see any doctor
Works well for healthy individuals who don’t need regular care

But there are trade-offs:

These ministries aren’t legally required to pay your claims
Many have religious restrictions, meaning they won’t cover procedures that conflict with their beliefs
Preventive care, pre-existing conditions, or certain medications may not be covered at all

HCSMs are best suited for those with a high risk tolerance and a solid financial cushion.

It’s not for everyone, but for the right person, it can be a way to cover unexpected medical expenses without overpaying for unused insurance.

Medicare Kicks in at 65, Bridging the Gap Is the Key

If you’re planning to retire early, healthcare doesn’t need to be covered forever just until age 65, when Medicare eligibility kicks in. At that point, costs drop significantly compared to private plans.

The goal is to find affordable coverage for the years between quitting your job and Medicare enrollment.

Don’t Trigger IRMAA With High Income

Once you hit 65, your Medicare premiums are based on your Modified Adjusted Gross Income from two years earlier. If that number’s too high, you’ll get hit with IRMAA, an added monthly charge on top of your standard Medicare premium.

To avoid that, keep your MAGI low in the years before you enroll. One smart strategy: convert traditional IRAs to Roth IRAs gradually while your income is low.

Doing it early keeps your taxable income lower in later years, which can help you dodge IRMAA altogether.

A little planning now can save you hundreds, or even thousands later.

This isn’t just about making Medicare affordable. It’s about setting up your entire retirement to be tax-efficient, especially once RMDs and Social Security kick in.

The Biggest Mistake I Made: Not Running the Numbers Earlier

I spent 20 years modeling my early retirement. I planned for market crashes, safe withdrawal rates, inflation, you name it. But I skipped one thing: checking what my healthcare premiums would actually cost on the marketplace.

Had I done that one step before retiring, I would’ve seen how affordable it actually was. The reality?

My healthcare costs ended up being comparable to what I paid while working.
My MAGI, not my savings, determined my monthly premiums.
I didn’t need to stress about it nearly as much as I did.

If you’re on the fence about early retirement because of healthcare, take 15 minutes and visit Healthcare.gov. Plug in your expected income and household size. Run the real numbers.

You might find that coverage is not only within reach, it’s far more affordable than you assumed.

Healthcare in Early Retirement Isn’t What You Think

Healthcare feels like the biggest threat to early retirement, until you run the numbers. It’s income-based, flexible, and filled with legal strategies most people ignore. With the right plan, you can cut costs without cutting your lifestyle.

Your net worth matters less than how you manage your income. Most of the fear disappears once you understand how the system actually works.

Don’t let healthcare stop you from living life on your terms.

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How Early Retirees (Like Me) Get Affordable Health Insurance Without a Job