Health Insurance Before Medicare: How ACA Subsidies Work From 62 to 64
If you retire before 65, you need coverage until Medicare starts. For most people that means a Marketplace plan. Here is how the subsidy is worked out for 2027, why the income cliff matters again, and what to do when you turn 65.
Between retirement and 65, most people buy health insurance through the ACA Marketplace (HealthCare.gov or a state exchange). A premium tax credit lowers the monthly cost, based on your household income compared with the federal poverty line. For 2027 coverage there is no credit at all if your income is above 400% of the poverty line: $63,840 for one person or $86,560 for a couple. All of your Social Security counts toward that income, including the part that is not taxed. When you become eligible for Medicare, end the Marketplace plan, because the credit stops.
Medicare starts at 65 for most people, no matter when you stop working. Retire at 62 and you have up to three years to cover yourself. Premiums at this age are among the highest on the Marketplace, because insurers can charge older adults up to three times what they charge the youngest adults. That is also why the subsidy, when you qualify, can be large. Open Enrollment for 2027 plans starts November 1, 2026, so this guide uses the 2027 rules.
Your options before 65
- Retiree coverage or a spouse's job-based plan. If either is available, compare it first. Ask what it costs and when it ends.
- COBRA. You can keep your former employer's plan for a limited time, usually up to 18 months. You pay the full premium, including the part your employer used to pay, plus a small fee. There is no subsidy.
- A Marketplace plan. Available to anyone not eligible for Medicare. Depending on income, you may get a premium tax credit, and at lower incomes extra help with deductibles and copays on Silver plans.
- Medicaid. If your income is low, you may qualify. In states that expanded Medicaid, adults with income up to 138% of the poverty line generally qualify. You can apply any time.
One application at HealthCare.gov or your state exchange tells you whether you qualify for a subsidized plan or for Medicaid.
What changed for 2026 and 2027
From 2021 through 2025, temporary rules removed the income cap on subsidies and lowered what households had to pay. Those enhanced subsidies ended after 2025. The House of Representatives passed a three-year extension in January 2026, but as of late October 2026 the Senate has not passed it and nothing has become law. So the original rules apply to 2027 coverage:
- No premium tax credit above 400% of the poverty line.
- Below that, you are expected to pay between 2.15% and 10.22% of your income toward a benchmark plan, depending on where your income falls.
If Congress does act, the numbers in this guide will change. HealthCare.gov will show the current rules when you apply.
How the 2027 subsidy is worked out
There are three steps:
- Your income as a share of the poverty line. 2027 coverage uses the 2026 HHS poverty guidelines: $15,960 for one person and $21,640 for two (higher in Alaska and Hawaii).
- Your expected contribution. An IRS table sets the share of income you are expected to pay toward a benchmark plan, the second-lowest-cost Silver plan where you live.
- The credit is the benchmark plan's price minus your expected contribution. You can use it on any metal level. A cheaper plan costs you less; a Gold plan costs you more.
| Income as % of poverty line | Single income (2027 coverage) | Share of income you pay toward the benchmark plan |
|---|---|---|
| 100% to 133% | $15,960 to $21,227 | 2.15% |
| 133% to 150% | $21,227 to $23,940 | 3.23% rising to 4.30% |
| 150% to 200% | $23,940 to $31,920 | 4.30% rising to 6.78% |
| 200% to 250% | $31,920 to $39,900 | 6.78% rising to 8.66% |
| 250% to 300% | $39,900 to $47,880 | 8.66% rising to 10.22% |
| 300% to 400% | $47,880 to $63,840 | 10.22% |
| Above 400% | Above $63,840 | No credit |
For a couple, the 400% line is $86,560. Our ACA subsidy calculator for ages 62 to 64 runs these steps for your household.
Three worked examples
The benchmark premiums below are illustrations, not real quotes. Real prices depend on your age and ZIP code. The math is the 2027 IRS formula.
| Single, $40,000 | Single, $63,840 | Single, $63,841 | |
|---|---|---|---|
| Income as % of poverty line | 251% | 400% | Just over 400% |
| Expected share of income | About 8.68% | 10.22% | No credit |
| You pay toward the benchmark, per month | $289.32 | $543.70 | Full price |
| Benchmark premium (illustration) | $1,000 | $1,000 | $1,000 |
| Monthly premium tax credit | $710.68 | $456.30 | $0 |
The last two columns show the cliff. One extra dollar of income moves this person from a $456.30 monthly credit to nothing, which is about $5,476 over a year. For a couple with income of $80,000 (370% of the poverty line), the expected payment is 10.22% of income, or $681.33 a month. Against an illustrative $2,000 benchmark for two, the credit would be $1,318.67 a month.
What counts as income
The Marketplace uses modified adjusted gross income (MAGI) for the year you have coverage. It is your adjusted gross income from your tax return, plus three things that are normally left out: the untaxed part of your Social Security, tax-exempt interest, and foreign income excluded from tax.
| Counts toward MAGI | Does not count |
|---|---|
| Wages and self-employment income | Money you spend from savings or checking |
| All of your Social Security benefits | Qualified Roth IRA withdrawals |
| Traditional IRA and 401(k) withdrawals | Supplemental Security Income (SSI) |
| Roth conversions | Gifts and inheritances you receive |
| Pensions, interest, dividends and capital gains |
Why claiming Social Security at 62 can cost you
On your regular tax return, at most 85% of Social Security is taxed, and sometimes none. For Marketplace subsidies, 100% counts. A $24,000-a-year benefit adds $24,000 to MAGI. For a single person already at $40,000, that would move them past the 400% line and end the credit. Before you claim early, run your numbers with the Social Security break-even calculator and the subsidy calculator together.
Ways people keep income under control
- Choose which accounts to draw from. Spending cash savings or taking qualified Roth withdrawals does not raise MAGI. Traditional IRA withdrawals do.
- Time Roth conversions and large capital gains. Doing them in a year when you are not on a subsidized plan, or in smaller pieces, can keep you under the cliff.
- Watch one-off income. A severance payment, the sale of a rental property or a big year-end fund distribution all count.
- Remember RMDs come later. Required withdrawals don't start until 73 or 75, after Medicare begins.
These choices interact with taxes and future Medicare premiums, so go through big decisions with a tax preparer or planner first.
Report changes, or you may repay the whole credit
Most people take the credit in advance, based on the income they expect. When you file your tax return, the IRS compares that with your actual income on Form 8962. If you received too much, you pay back the difference. Starting with 2026 coverage, the old caps on how much you had to repay were removed. If your income ends up over the 400% line, you could owe back every dollar of credit you received for the year. Report income changes to the Marketplace as soon as they happen.
When you can sign up
- After losing job-based coverage: retiring and losing your employer plan gives you a Special Enrollment Period. You have 60 days from the loss of coverage to pick a Marketplace plan.
- If you took COBRA: you can switch when COBRA runs out, when your former employer stops contributing, or within 60 days of losing the job-based coverage. Dropping COBRA early by choice does not open a Special Enrollment Period.
- Open Enrollment: on HealthCare.gov, November 1, 2026 to January 15, 2027. Choose a plan by December 15 for coverage starting January 1. State exchanges can set different dates.
Switching to Medicare at 65
Your Marketplace plan does not end by itself when Medicare starts. Once you are eligible for premium-free Part A, you can no longer get a premium tax credit, and you would have to pay back any credit you keep using. Plan the handover:
- Sign up during your Initial Enrollment Period. It is the 7 months around your 65th birthday. Missing it can mean a late enrollment penalty for life. Check your dates with the Medicare enrollment period finder.
- Tell the Marketplace when Medicare starts. You can report your Medicare start date up to 3 months ahead, and the plan ends for the right month.
- Keep coverage for the rest of the household. A younger spouse can stay on the Marketplace plan. Their credit is recalculated for their coverage alone, but it still uses your household's income.
In the year you turn 65, the credit only covers the months you are on a Marketplace plan. Our guide to Medicare enrollment periods explains the timing in detail.
Frequently Asked Questions
Is there an ACA subsidy cliff in 2027?
Yes, under the law as it stands in October 2026. The temporary enhanced subsidies ended after 2025, so for 2027 coverage there is no premium tax credit when household income is above 400% of the federal poverty line: $63,840 for one person or $86,560 for a couple.
Does Social Security count as income for ACA subsidies?
Yes, all of it. The income used for Marketplace subsidies adds back the part of your Social Security that is not taxed, so 100% of your benefits count. Claiming Social Security at 62 can reduce or end your subsidy.
Can I get a Marketplace plan after I retire?
Yes. Losing job-based coverage when you retire gives you a Special Enrollment Period. You have 60 days from the loss of coverage to choose a Marketplace plan. You can also enroll during Open Enrollment, which for 2027 coverage runs November 1, 2026 to January 15, 2027 on HealthCare.gov.
Should I take COBRA or a Marketplace plan?
Compare both. COBRA keeps your current plan and doctors, but you pay the full premium plus a small fee, and there is no subsidy. A Marketplace plan can cost much less if you qualify for a premium tax credit. If you choose COBRA and later drop it on purpose, you usually have to wait for Open Enrollment to switch.
What happens to my Marketplace plan when I turn 65?
It does not end on its own. Once you are eligible for premium-free Medicare Part A, you can no longer get a premium tax credit, so sign up for Medicare during your Initial Enrollment Period and end the Marketplace plan for the month Medicare starts. If you keep using the credit after that, you will have to pay it back.
Do I have to pay back my subsidy if my income goes up?
You may. The credit paid in advance is checked against your actual income on your tax return. Starting with 2026 coverage, the old limits on how much you have to repay were removed, so you could owe back all of the excess. Report income changes to the Marketplace during the year to avoid a large bill.
This article explains federal Marketplace subsidy rules for 2027 coverage as they stand on October 30, 2026. Congress could still change them, and some states add their own help on top of the federal credit. It is general educational information, not tax, legal or insurance advice. See our disclaimer. Get your actual subsidy amount from HealthCare.gov or your state exchange when you apply.