Healthcare is the bridge between leaving your job and Medicare at 65. Ignore it, and you're building a house with no roof. My philosophy is to study the systems before you need them, not after, and healthcare planning isn't a FIRE nice-to-have. It's foundational.
For more than a decade, my family's health coverage was tied to visa-sponsored employment. One layoff could have cost us our income, our legal status and our health insurance all at once. That reality forced me to think about healthcare coverage differently than most people do. Employer-sponsored coverage is a benefit, not a guarantee, and I had that lesson drilled into me long before I started planning for financial independence.
What Healthcare Actually Costs Without an Employer
Here's one of the wake-up calls that reshaped my plan. I asked HR what they actually paid for my family's coverage: about $18,000 a year, and that's still below average. I'd been viewing health insurance as "free" because all I ever saw was my share deducted from my payroll. The average employer share of family premiums now tops $20,000 a year. That's the cost I'll have to replace on my own once I stop working.
ACA marketplace premiums can feel like a second mortgage. Family coverage runs $1,500 to $2,500 a month without subsidies, and those premiums rise faster than general inflation. A 55-year-old couple shopping on the marketplace faces $21,600 to $28,800 a year in premiums alone, before deductibles and copays. For our example household retiring at 55 with $2.5 million, healthcare could consume $216,000 to $288,000 over the decade before Medicare. None of that is in the $100,000 the household spends now, so the premiums alone add about 22 to 29 percent on top of it.
Your Options Before Medicare
Healthcare costs are best handled with a plan, not a scramble. When I stop working, the main bridges to Medicare are an ACA marketplace plan, COBRA from my last employer for a limited stretch, my wife's employer plan, or a part-time job that offers benefits.
COBRA lets you keep your exact employer plan for up to 18 months, but you pay the full premium yourself plus a 2 percent admin fee, on average about $850 a month for one person and about $2,400 for a family, depending on your plan. It buys time, but it's expensive and temporary.
Health sharing ministries come up often in the FIRE community, but treat them with real caution. They aren't insurance. They can decline to pay, they often exclude pre-existing conditions, and they don't carry the same regulatory protections. Monthly costs can run 40 to 60 percent lower than ACA premiums for healthy couples, but the savings disappear fast if something serious happens.
One option worth a look: if you're pursuing a Barista FIRE or part-time work strategy, take a part-time job specifically for health benefits. Some employers offer coverage at 20 to 30 hours a week. That's a real bridge, and it keeps you active in the years between leaving full-time work and Medicare.
Build Healthcare Into Your FIRE Number
I apply the same systems to healthcare that I apply to the rest of our finances. Healthcare belongs in your FIRE number as a full line item: this year's spending, plus the full cost of the health insurance plan you'll buy yourself, all times 25. That slightly overstates the cost once Medicare kicks in at 65, and I treat that as a cushion.
Run this math yourself. Take that plan's full yearly price (say $20,000) and multiply by 25. That's $500,000 just for healthcare. On top of $100,000 in other spending, your FIRE number goes from $2.5 million to $3 million.
The 25x doesn't change with your age: at 40 or at 55, the line item gets the same multiple. The number to multiply isn’t the $18,000 my employer pays. It’s the full marketplace price. For the 55-year-old couple above, paying $21,600 to $28,800 a year, 25 times is $540,000 to $720,000 more invested.
I track every healthcare dollar in our budgeting app, which gives me real history on what care actually costs our family instead of guesses. Our retirement projections stress-test that line across scenarios. For our example household spending $100,000 a year, a full-price marketplace plan for a couple in their 40s or early 50s runs about $15,000 to $25,000, and it rises toward 65. That puts spending at $115,000 to $125,000 and lifts the FIRE number from $2.5 million to between $2.875 million and $3.125 million; the $20,000 above sits right in the middle. Most people work to prevent lifestyle inflation on discretionary spending while overlooking the mandatory expense that could consume 15 percent of their retirement budget.
ACA Subsidies and the Income Game
Before 65, ACA subsidies depend entirely on your income. The mix of withdrawals you take from taxable, tax-deferred, and Roth accounts directly affects what you pay for coverage. Enhanced ACA premium tax credits expired at the end of 2025, bringing back the 400 percent federal poverty level subsidy cliff, roughly $62,600 for a single person or about $84,600 for a couple. Exceed that threshold and premiums spike. A 64-year-old just above the cliff can pay more than $11,000 more a year for coverage once the enhanced credits are gone.
I plan to structure my retirement income using Roth conversion ladders and zero-tax strategies: moving pre-tax money into a Roth a slice at a time in the low-income years, and living on capital gains inside the 0% bracket. The goal is to keep modified adjusted gross income below the subsidy threshold so my family qualifies for premium assistance. This takes years of preparation. You can't start converting the day you retire and expect immediate results. My withdrawal strategy will prioritize drawing from taxable accounts first, while Roth conversions done in earlier years provide tax-free income that doesn't count toward ACA subsidy calculations. Build premiums into your FIRE number as a fixed expense, not an afterthought, and learn the income rules before you leave your job.
Prevention and Keeping Costs Down
The two habits I rely on most are an invested HSA and prevention. We pay medical bills out of pocket and let our HSA keep growing.
Medical bills don't shrink as you age. They balloon. People 55 and older account for 57 percent of all U.S. health spending while making up about 30 percent of the population. A single 65-year-old retiring today can expect to spend about $185,500 on healthcare through retirement, according to Fidelity's latest estimate: 43 percent on Medicare premiums, 47 percent on other medical costs, and 10 percent on prescriptions.
Preventive checkups and screenings are usually covered at no cost under the ACA and catch problems while they're cheap to fix. Our home treadmill and weights, a family streaming fitness membership with strength, cardio, yoga, and stretching programs, Tai Chi, and clean eating keep our current costs low, with fewer doctor visits and no ongoing medications. Pairing financial preparation with real investment in your health and wellness gives you a double defense: lower costs today and less risk tomorrow. I also keep our emergency fund in high-yield savings so a medical bill never forces me to sell investments at a bad time.
Healthcare in the U.S. is expensive enough that some retirees are flying abroad for treatment. Medical tourism is growing fast. Patients can save 40 to 80 percent compared with U.S. prices, and India alone hosts hundreds of thousands of medical tourists a year. My brother is a doctor in India, so I have a direct line to quality care at a fraction of the cost. The round-trip airfare plus the treatment can be less than a single procedure here, even with insurance. Not everyone has family connections abroad, but research the option, especially for expensive elective procedures. Just weigh the risks first: if something goes wrong, the follow-up care happens back home, and your U.S. plan may not cover any of it.
Medicare at 65 and the IRMAA Trap
At 65, Medicare takes over. Part A covers hospital care and is usually premium-free if you or your spouse worked about ten years. Part B covers doctors and outpatient care with a monthly premium. Part D covers prescriptions. Most people then choose between Original Medicare with a Medigap supplement or an all-in-one Medicare Advantage plan.
The enrollment window matters. It runs from three months before the month you turn 65 to three months after (seven months total). Miss it, and you pay a late enrollment penalty of 10 percent of the Part B premium for every 12-month period without coverage after eligibility. That penalty sticks for life.
Income matters even on Medicare. Higher-income retirees pay a surcharge called IRMAA on Part B and Part D premiums, based on income from two years earlier. Your 2024 income determines your 2026 Medicare premiums. In 2026, the standard Part B premium is $202.90 per month for individuals with modified adjusted gross income at or below $109,000, or $218,000 filing jointly. Cross that line and IRMAA surcharges add up fast: Part B premiums jump to $284.10 at the first tier and climb all the way to $689.90 per month for income above $500,000 single or $750,000 joint.
A large Roth conversion at 63 or later can push you into a higher IRMAA bracket and raise your Medicare premiums two years later. Do the big conversions before 63, and from 63 on keep each year's total income below $109,000 single or $218,000 joint so they don't bite you when Medicare starts.
Long-Term Care: The Cost Nobody Plans For
Help with daily living (at home, in assisted living, or in a nursing home) isn't covered by regular health insurance, and Medicare covers only short stays after a hospitalization. According to federal projections from HHS, about 52 percent of Americans turning 65 today will develop a disability serious enough to require long-term services, and almost 70 percent will need some type of long-term care in their lifetime.
The main options are traditional long-term care insurance, hybrid life insurance policies with a long-term care benefit, or setting aside part of the portfolio to self-insure. I'm still researching which fits our family, and it's a decision worth making before premiums climb with age.
What Others Get Wrong
A friend of mine had an impressive portfolio, well past his FIRE number, and zero healthcare strategy. He assumed he'd "figure it out" when the time came. When he left his job at 52, marketplace premiums for his family ran $2,200 a month, and he hadn't structured his withdrawals to qualify for subsidies. That's $26,400 a year he didn't plan for, and it pushed his actual spending well above the 4 percent safe withdrawal rate.
Another acquaintance planned well but missed the IRMAA angle. She did $200,000 in Roth conversions in a single year at 63. When she enrolled in Medicare at 65, that two-year lookback meant her Part B premium nearly doubled for the year. Spreading those conversions across multiple years would have saved her thousands.
Healthcare planning isn't glamorous. It doesn't get the same attention as picking index funds or optimizing your savings rate. But it can be the single biggest line item in early retirement, and getting it wrong unravels the rest. Pull up your last year of healthcare spending, add the full cost of marketplace coverage for your family, and run it through the 25x calculation to see how much bigger your number gets when healthcare is actually in it.
Medicare starts at 65. Social Security is the other program that starts in your 60s.
What You Need to Remember
- Employer-sponsored health insurance can cost over $20,000 a year, and replacing it on your own is the single biggest expense most early retirees underestimate.
- Structuring your retirement income to stay below ACA subsidy thresholds can save you $10,000 or more per year in premiums before Medicare kicks in at 65.
- Preventive care and healthy habits keep today's medical costs low, and an emergency fund means a medical bill never forces you to sell investments at a bad time.
- Build the full cost of marketplace health insurance into your FIRE number as a line item, not an afterthought. For a couple in their 40s or early 50s, it can add about $375,000 to $625,000 to your target.
- IRMAA surcharges on Medicare premiums are based on income from two years prior, so large Roth conversions from 63 on can raise your costs once Medicare starts.
Questions I Always Get
What if the ACA marketplace doesn't offer good plan options in my state? Plan availability varies by county. Some rural areas have only one or two insurers. If your options are thin, geographic arbitrage can help. Some states have significantly more competitive marketplaces. Short-term health plans offer lower premiums but skip pre-existing conditions and aren't ACA-compliant. A part-time remote job with benefits is another bridge worth a look.
How do I estimate healthcare costs if I'm healthy now but worried about future expenses? Use your current spending as a floor, not a ceiling. Budget the full unsubsidized premium: about $15,000 to $25,000 a year for a couple in their 40s or early 50s, rising to about $32,000 to $35,000 at 60 to 64, plus what you spend on care. Stress-test your plan with a major medical event (a surgery or chronic diagnosis) in years two through five of retirement. If your numbers survive that scenario, they survive most things.
Should I keep my employer's COBRA coverage or switch straight to the ACA marketplace? It depends on your income in the year you leave. COBRA keeps your exact plan at full cost, about $2,400 a month for a family on average. If your income drops enough for substantial ACA subsidies, the marketplace will almost always be cheaper. Losing employer coverage is a qualifying life event that opens a 60-day special enrollment period, so you don't have to wait for open enrollment.
Can I still contribute to my HSA after I stop working or enroll in Medicare? You can keep contributing as long as you're enrolled in a high-deductible health plan, including an ACA marketplace HDHP. Once you enroll in Medicare Part A, contributions stop. But you can still withdraw tax-free for qualified medical expenses for the rest of your life. That's why building your HSA during working years and early retirement matters so much.
When should I actually buy long-term care insurance? The sweet spot is your mid-to-late fifties. Buy too early and you pay premiums for decades before you might need coverage. Wait past 65 and premiums spike, or you may not qualify. Hybrid policies that combine life insurance with a long-term care rider give you a death benefit if you never need the care. Self-insuring works too, but requires a larger nest egg.