Retiring Before 65 in Central Florida: How to Bridge the Health Insurance Gap to Medicare

You have run the numbers, watched your retirement accounts grow, and started to imagine a life that begins before the traditional finish line. Then one question stops you cold. What do you do about health insurance until Medicare kicks in at 65? For many pre-retirees here in the Orlando area, this single issue is the difference between retiring at 62 and grinding it out for three more years they would rather spend with grandchildren, on the golf course, or traveling.

The good news is that the health insurance gap between early retirement and Medicare is a solvable planning problem. The harder truth is that 2026 made it more expensive and less forgiving than it was even a year ago. The rules changed at the end of 2025, and the strategy that worked for early retirees during the past few years no longer applies the same way. This guide walks you through every realistic option, the income planning that now sits at the center of the decision, and the mistakes that quietly cost people thousands of dollars during these bridge years.

At Roger Fishel Financial, retirement income planning is what we do every day for pre-retirees and retirees across Winter Park, Lake Mary, Lake Nona, Oviedo, Clermont, Winter Garden, Kissimmee, and nationwide by video. Bridging to Medicare is one of the most common reasons people first reach out. Let us get into it.

Why Age 65 Is the Wall Every Early Retiree Runs Into

Medicare eligibility begins at 65 for the vast majority of Americans. There are narrow exceptions for certain disabilities and specific conditions, but for a healthy person planning a voluntary early retirement, 65 is the number that matters. If you leave your job at 62, you are looking at roughly three years with no automatic path to affordable group coverage. Retire at 60 and the gap stretches to five years.

That gap is dangerous for two reasons. The first is obvious. A serious medical event with no coverage can erase a lifetime of savings in a matter of weeks. The second reason is quieter and catches careful planners off guard. The cost of covering that gap is often large enough to change whether early retirement is affordable at all. People will model their withdrawal rate, their Social Security timing, and their tax picture down to the dollar, then treat health insurance as a footnote. It is not a footnote. For a couple in their early sixties, health coverage before Medicare can easily run 20,000 to 35,000 dollars per year at full price, and in some cases more.

This is why the bridge to Medicare deserves its own line in your plan, its own funding source, and its own income strategy. Treat it as seriously as you treat your withdrawal rate, because in the years before 65 it may matter just as much.

What Changed for 2026, and Why It Matters More Than Ever

If you researched early retirement health coverage during the past few years, you probably came across a comforting story. Thanks to enhanced federal subsidies, a couple could retire early, keep their taxable income modest, and buy a marketplace plan for a surprisingly low premium. Some households paid very little. That era ended on December 31, 2025.

The enhanced premium tax credits created by pandemic-era legislation were extended through the end of 2025 and then allowed to expire. Starting with the 2026 plan year, marketplace subsidies reverted to their older, less generous structure. The Kaiser Family Foundation estimated that the average subsidized enrollee would see their premium payments rise by roughly 114 percent, which for many households means paying about 1,000 dollars more per year, and for older pre-retirees often far more than that.

Two changes matter most for early retirees:

• The subsidy cliff returned. From 2021 through 2025, there was no hard income ceiling on premium tax credits. Households above the old limit could still receive help if premiums exceeded a set share of income. That cushion is gone. For 2026, if your household income lands even one dollar above 400 percent of the federal poverty level, you receive zero premium assistance.
• Subsidies shrank across the board. Even below the cliff, the percentage of income you are expected to pay toward a benchmark plan went back up. The same income that qualified you for a generous credit in 2025 qualifies you for a smaller one in 2026.

Here is what the 400 percent cliff looks like in real dollars for 2026. For a single person, the ceiling sits at roughly 62,600 dollars of income. For a two-person household, it is about 84,600 dollars. For a family of four, roughly 128,600 dollars. Earn one dollar over your household’s number and you lose every penny of subsidy, and if you received advance credits during the year based on a lower estimate, you may have to pay them all back at tax time.

Why this reshapes the whole plan

When there was no cliff, income planning during the bridge years was helpful but forgiving. Now it is the whole game. A retiree who accidentally crosses the 400 percent line by taking one extra IRA distribution or realizing one large capital gain can turn an affordable premium into a full-price premium plus a subsidy repayment. Precision matters in a way it simply did not before.

Your Coverage Options for the Bridge Years

There is no single right answer for bridging to Medicare. The best choice depends on your age at retirement, your health, your household income, whether a spouse still works, and how much control you have over your taxable income. Here are the realistic options, with the honest tradeoffs of each.

1. COBRA Continuation Coverage

COBRA lets you keep your former employer’s group health plan after you leave, usually for up to 18 months, and in some situations up to 36 months. You keep the same doctors, the same network, and the same coverage you already understand. For someone who retires close enough to 65 that 18 months carries them across the finish line, COBRA can be the cleanest bridge available. Retire at 63 and a half, and COBRA alone may get you to Medicare with no gaps and no plan changes.

The catch is cost. On COBRA you pay the full premium, both your share and the share your employer used to cover, plus a small administrative fee. Coverage that felt affordable as an employee can more than double or triple in price once you are paying the whole thing. COBRA also does nothing to help you manage income for subsidies, because it is not a marketplace plan. And the 18-month clock is a hard limit for most people, so if you retire at 60, COBRA cannot carry you all the way to 65 on its own. Many people use COBRA as a first bridge and then move to a marketplace plan, or the reverse.

2. The ACA Marketplace (Healthcare.gov in Florida)

Florida uses the federal marketplace at Healthcare.gov, and for a large share of early retirees this is the workhorse solution. You can buy comprehensive, guaranteed-issue coverage regardless of health history, and no one can turn you down or charge you more for a pre-existing condition. Plans come in metal tiers, from Bronze with lower premiums and higher out-of-pocket costs, up through Silver, Gold, and in some areas Platinum.

The marketplace is also where income planning meets health planning, because premium tax credits are tied directly to your household income. In the post-2025 world, this cuts both ways. If you can keep your income comfortably under the 400 percent cliff, a marketplace plan with a partial subsidy can still be the most cost-effective bridge available. If your income runs high, whether from pensions, large required withdrawals, rental income, or investment gains, you may find yourself paying full retail for a marketplace plan, and at that point other options deserve a hard look. We will spend real time on income planning below, because for marketplace shoppers it is now the central lever.

3. A Spouse’s Employer Plan

If one spouse plans to keep working while the other retires early, the working spouse’s employer plan is often the single best bridge, and it is frequently overlooked. Adding a retired spouse to an existing group plan is usually far cheaper than a full-price individual policy, and the coverage is typically strong. Leaving the workforce in a staggered way, where one spouse retires first and the other keeps a job partly for the benefits, is a deliberate and completely legitimate strategy. If your household has this option, price it out before you assume you need the marketplace at all.

4. Part-Time or Bridge Work With Benefits

Some early retirees are not ready to stop working entirely, and a part-time role that offers health benefits can solve the coverage problem while adding a little income and structure. Certain large employers offer health coverage to part-time workers at surprisingly low hour thresholds. This will not appeal to everyone, and it is not truly full retirement, but for someone who enjoys staying lightly engaged, a benefits-eligible part-time job can be a smart and even pleasant bridge to 65.

5. Health Care Sharing Ministries

Health care sharing ministries are membership organizations, often faith-based, whose members share one another’s medical costs. Monthly costs can look attractive compared with full-price insurance. The tradeoff is significant, and you need to understand it clearly. These are not insurance. They are not regulated like insurance, they are not guaranteed to pay, and they often exclude or limit coverage for pre-existing conditions and certain categories of care. For a healthy person with a strong emergency fund who understands the risk, a sharing ministry can be one piece of a bridge plan. For someone with ongoing health needs or a low tolerance for financial surprise, the gaps can be dangerous. Read the fine print twice before you rely on one.

6. Short-Term and Private Plans

Short-term health plans and other private policies exist and are sometimes marketed aggressively to early retirees. They can be inexpensive, but that low price usually reflects thin coverage, coverage caps, exclusions for pre-existing conditions, and the ability to deny claims in ways marketplace plans cannot. For most people bridging to Medicare, these should be a last resort or a very short stopgap, not a primary plan. If someone pitches you a plan that sounds dramatically cheaper than everything else, that is your signal to slow down and read exactly what it does and does not cover.

7. Retiree Medical Benefits

A shrinking number of employers, along with some government and union positions, still offer retiree medical coverage that bridges to Medicare. If you have spent a career somewhere that provides this, it may be the best option on the table and it may shape your entire retirement date. Check your benefits summary and talk to your human resources department before you assume you are on your own. This benefit is rare enough now that many people do not realize they have it.

The Subsidy Cliff and Why Income Planning Is Now the Whole Game

For anyone leaning on the marketplace, the return of the subsidy cliff means your taxable income is no longer just a tax issue. It is a health insurance issue. The dollars you pull from which accounts, in which order, in which year, can swing your premium by many thousands of dollars. This is where thoughtful retirement income planning earns its keep.

The figure that matters for marketplace subsidies is your modified adjusted gross income, or MAGI. For most households it is close to your adjusted gross income with a few items added back. What counts toward it includes traditional IRA and 401(k) withdrawals, pension income, taxable interest and dividends, realized capital gains, rental income, and the taxable portion of Social Security. What does not count includes qualified withdrawals from a Roth account and, importantly, money you simply move out of a savings or brokerage account that was already taxed.

That distinction is the heart of bridge-year income planning. Two retirees can spend the exact same amount of money in a year and report wildly different incomes to the marketplace, depending entirely on where their spending money comes from. The retiree who pulls 60,000 dollars from a traditional IRA reports 60,000 dollars of income. The retiree who pulls 30,000 dollars from a Roth and 30,000 dollars from a taxed brokerage account or cash reserve may report almost nothing. Same lifestyle, very different premium.

How to Manage Your Income Under the Cliff

The goal during the bridge years, for marketplace shoppers, is to fund the lifestyle you want while keeping reported income where you want it, ideally under the 400 percent cliff if a subsidy is within reach. Here are the levers that actually move the needle.

Build and use a dedicated cash bridge

The single most powerful tool is having already-taxed money to live on. Cash reserves, short-term bonds, or a taxable brokerage account with a low cost basis let you spend without generating much reportable income. Many people who retire early on purpose spend two or three years before retirement building a dedicated bridge account, sometimes called a cash bridge, specifically so their first years of retirement can show low income. If you are still working and eyeing an early exit, this is one of the highest-value moves you can make right now.

Draw from Roth accounts strategically

Qualified Roth withdrawals do not count toward MAGI, which makes Roth balances extraordinarily valuable during the bridge years. If you have been building Roth money, these are the years it can shine. This is also why so many people do Roth conversion strategy in their working years or in low-income early retirement, so they have a pool of tax-free, subsidy-friendly money to draw on later. There is real tension here, though, and it is worth naming plainly. A Roth conversion adds to your income in the year you do it, which can push you over the subsidy cliff during a bridge year. Converting and subsidizing rarely mix well in the same year. Many households do their conversions after 65, once they are on Medicare and no longer chasing a marketplace subsidy, though that choice interacts with Medicare surcharges, which we cover below.

Be deliberate about capital gains

Selling appreciated investments generates income the moment you realize the gain. During bridge years, an unplanned sale can quietly blow through the cliff. If you need to raise cash from a brokerage account, favor selling positions with little or no gain, harvest gains only in years when you are already over the cliff anyway, and coordinate any large sale with your tax picture for the whole year rather than treating it as an isolated transaction.

Coordinate Social Security timing

Claiming Social Security early adds taxable income at exactly the time you may be trying to keep income low for a subsidy. For some households, delaying Social Security through the bridge years serves two purposes at once. It keeps reported income down while you need a marketplace subsidy, and it grows your eventual benefit. This is not universal advice, because delaying is not right for everyone, but it is a coordination point people miss. Our guide to Social Security claiming mistakes goes deeper on the timing decision itself.

Mind the lower edge, not just the cliff

There is a floor as well as a ceiling. If your reported income falls below the marketplace’s lower threshold, roughly 100 percent of the federal poverty level, you can fall out of premium tax credit eligibility from the bottom in states like Florida that did not expand Medicaid. The target is a window, not simply as low as possible. A good plan usually aims to land income in a deliberate band, high enough to qualify for marketplace help and low enough to stay under the cliff, rather than reflexively minimizing it.

The Health Savings Account as a Bridge-Year Power Tool

If you pair a marketplace plan or other coverage with a qualifying high-deductible health plan, a health savings account, or HSA, becomes one of the most tax-efficient tools you have during the bridge years. Contributions are deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free. It is the rare account that is never taxed when used as intended, and medical costs are exactly the expense you are trying to cover.

For 2026 the contribution limits are 4,400 dollars for self-only coverage and 8,750 dollars for family coverage. If you are 55 or older, you can add a 1,000 dollar catch-up contribution, and if both spouses are 55 or older, each can make that catch-up as long as each has their own HSA. To contribute, your plan must be a qualifying high-deductible health plan, which for 2026 means a deductible of at least 1,700 dollars for self-only coverage or 3,400 dollars for family coverage. A recent law also made certain Bronze and Catastrophic marketplace plans HSA-eligible for the first time, which widens the options for early retirees who want to pair a lower-premium plan with an HSA.

An HSA also plays quietly well with subsidy planning. Contributions reduce your MAGI, which can help you stay under the cliff, and withdrawals for medical costs do not add to it. There is one hard rule to remember as you approach 65. Once you enroll in Medicare, you can no longer contribute to an HSA. You can still spend the balance tax-free on qualified costs, but new contributions must stop. People who plan to keep working past 65 or who delay Medicare need to time this carefully to avoid a tax penalty, so put it on your checklist for the year you turn 65.

How Much Should You Budget for Health Care Before 65?

Every household is different, but you deserve real numbers rather than vague reassurance. At full, unsubsidized price, a comprehensive marketplace plan for a couple in their early sixties in Central Florida can run somewhere in the range of 1,500 to 2,800 dollars per month in premiums alone, before deductibles and out-of-pocket costs. That is why the return of the subsidy cliff matters so much. The difference between a plan with a partial subsidy and the same plan at full price can be well over 15,000 dollars a year for a couple.

A sensible planning approach is to budget for a realistic worst case, full price coverage plus a healthy out-of-pocket buffer, and then treat any subsidy you qualify for as money that improves the picture rather than money you are counting on. Plans and prices also change every year, and the political fight over subsidies is far from settled, so build in flexibility. Assume your health coverage costs could shift meaningfully from one year to the next during the bridge, and keep your bridge account large enough to absorb a bad year.

Where Should the Bridge Money Come From?

Once you know roughly what the bridge will cost, the next question is which dollars pay for it. The order in which you draw from your accounts affects your taxes, your subsidy eligibility, and how long your money lasts. A thoughtful sequence often looks something like this, though the right answer for you depends on your full picture.

• First, already-taxed money. Cash reserves and low-basis brokerage funds cover living expenses while keeping reported income low, which protects any subsidy.
• Second, Roth dollars where helpful. Tax-free and subsidy-neutral, ideal for topping up spending without pushing income up.
• Third, traditional accounts in measured amounts. Pull from IRA and 401(k) balances deliberately, sized to stay under the cliff when a subsidy is in play, or filled up to the top of a low tax bracket when it is not.
• Throughout, the HSA for medical costs. Let it grow when you can, and use it tax-free for the health expenses these years are full of.

There is a risk hiding in these early years that deserves special attention. Withdrawing heavily from investments during a market downturn, right at the start of retirement, can do lasting damage to a portfolio. This is called sequence of returns risk, and the bridge years sit right in the danger zone. It is one more reason a cash bridge is so valuable. It lets you avoid selling stocks into a decline just to pay premiums. If protecting your nest egg through this window is on your mind, our discussion of protecting your 401(k) from a market crash walks through the mechanics, and our annuity vs. bond ladder comparison looks at how to structure reliable income for exactly these years.

Common Mistakes Early Retirees Make Bridging to Medicare

After years of guiding people through this transition, a handful of avoidable mistakes come up again and again. Knowing them in advance is half the battle.

• Underestimating the cost. Treating health insurance as a minor line item, then discovering it is one of the largest expenses of early retirement. Build it into your plan from the start.
• Ignoring the cliff until tax time. Taking an extra withdrawal or realizing a gain in December, then learning in April that it pushed income over the 400 percent line and triggered a full subsidy repayment. Track income all year, not at the deadline.
• Converting and subsidizing in the same year. Doing a large Roth conversion during a year you also need a marketplace subsidy, and losing the subsidy in the process. Pick one goal per year.
• Overcontributing to an HSA near 65. Continuing HSA contributions after Medicare enrollment and owing a penalty. Stop contributions in time.
• Assuming COBRA is always too expensive, or always the answer. It is neither. Price it against a full-price or subsidized marketplace plan every time, because the winner depends on your numbers.
• Forgetting the two-year income shadow. Bridge-year income can raise your Medicare premiums later through income-related surcharges. More on that next.

The Handoff to Medicare at 65

The bridge has a destination, and the handoff to Medicare deserves as much care as the bridge itself. Your Initial Enrollment Period is a seven-month window that spans the three months before the month you turn 65, your birthday month, and the three months after. Missing it can trigger lifelong late-enrollment penalties and gaps in coverage, so mark it on your calendar well in advance. If you are still covered by active employer insurance through a working spouse at 65, the timing rules differ, and you will want to confirm exactly how your situation works before you make any move.

As you approach the handoff, you will face the choice between Original Medicare with a supplement and Medicare Advantage. That decision has real long-term consequences for cost and flexibility, and it deserves its own careful look. Our Medicare Supplement vs. Medicare Advantage guide breaks down the tradeoffs in plain language so you can choose with your eyes open.

There is one more connection between your bridge years and your Medicare years that surprises people. Medicare charges higher-income beneficiaries an income-related surcharge on their Part B and Part D premiums, and it looks back two years to decide who pays it. That means the income you report at 63 can raise your Medicare premiums at 65. A large Roth conversion or a big capital gain during the bridge, even one done for good reasons, can echo forward into higher Medicare costs. Our guide to the IRMAA Medicare surcharge explains how the surcharge works and how to plan around the two-year lookback so your bridge-year decisions do not create an avoidable Medicare bill.

Should the Bridge Change When You Retire?

Sometimes the smartest response to the health insurance gap is to adjust the retirement date itself, even by a few months. Because COBRA typically lasts up to 18 months, someone who is on the fence about leaving at 63 versus 63 and a half may find that the later date lets COBRA carry them cleanly to Medicare with no marketplace shopping at all. On the other end, a person set on retiring at 60 knows from the start that they are looking at a five-year bridge and can plan the funding accordingly rather than being surprised by it.

The bridge can also influence the shape of your final working years. Some couples deliberately stagger their retirements so one spouse keeps employer coverage for the household while the other steps away. Others take a benefits-eligible part-time role for a couple of years as a soft landing. None of this means you must work longer than you want to. It means the health coverage question is worth putting on the table early, while you still have the flexibility to shape your exit around it. The worst version of this decision is the one made in a panic three weeks before you had planned to give notice. The best version is the one you saw coming years out and built a plan around.

A Central Florida Case Study

Consider a hypothetical couple in Oviedo, both 61, who want to retire now rather than wait until 65. Between a traditional 401(k), a Roth IRA built over years of conversions, a taxable brokerage account, and a healthy cash reserve, they have options. Their goal is to spend about 90,000 dollars a year and keep their reported income low enough to qualify for marketplace help while staying safely under the 400 percent cliff for a two-person household.

Their plan draws most of their spending from the cash reserve and Roth accounts in the first years, keeping reported income modest and preserving a marketplace subsidy. They pull just enough from the traditional 401(k) to fill up a low tax bracket without crossing the cliff. They pair a qualifying high-deductible plan with an HSA, funding it fully while they still can and using it tax-free for their medical costs. They delay Social Security, which keeps income down now and grows their future benefit. They deliberately avoid large Roth conversions during these years to protect both the subsidy and their future Medicare premiums, planning to revisit conversions later. At 65, each enrolls in Medicare on time, chooses between a supplement and Advantage with a clear head, and watches their bridge-year income decisions for any surcharge effect two years out.

The numbers here are illustrative, not a recommendation, and your plan should be built around your actual accounts, income, and health. The point is the shape of it. Every lever, coverage choice, withdrawal source, Social Security timing, HSA use, and Roth strategy, gets coordinated toward the same goal rather than decided in isolation. That coordination is what turns an anxious guess into a plan you can retire on.

Where This Fits in Your Larger Retirement Plan

Bridging to Medicare does not happen in a vacuum. The same income decisions that shape your health premiums also shape your tax bill, your Social Security taxation, and the long-term efficiency of your withdrawals. For married couples, there is a further reason to build tax-efficient income now. When one spouse passes, the survivor often files as a single taxpayer on similar income and can face a meaningfully higher tax rate, a situation we cover in our discussion of the widow’s tax trap. Roth balances built and used wisely during the bridge years help soften that future blow as well.

If you are relocating to Florida to retire, coordinating that move well also matters, and our guide to establishing Florida domicile covers the steps that protect you from a lingering tax claim by a former home state. And if a pension is part of your picture, how you take it interacts with everything above, which is why we wrote a full guide to pension lump sum vs. monthly payments. The theme throughout is the same. These pieces are connected, and the biggest wins come from planning them together.

Bringing It All Together

Retiring before 65 is absolutely achievable, and the health insurance gap is a problem you can plan your way through. But 2026 raised the stakes. With enhanced subsidies gone and the 400 percent cliff back in force, the margin for error is thinner and the value of careful income planning is higher than it has been in years. The households that retire early with confidence are the ones who treat the bridge as a real, funded, coordinated part of the plan, not an afterthought.

That means knowing your coverage options and pricing them honestly, building a cash bridge before you leave work, drawing income in a deliberate order, using Roth and HSA dollars where they help most, watching the cliff all year rather than at tax time, and planning the handoff to Medicare so bridge-year choices do not create surprise costs down the road. It is a lot of moving parts, and they all touch each other. That is exactly why it pays to plan them as one picture.

Ready to build your bridge to Medicare?

If you are thinking about retiring before 65 and want a clear, coordinated plan for the health insurance gap and everything it touches, let us talk. We help pre-retirees across Central Florida and nationwide turn this exact question into a confident plan. book a free retirement income review with Roger Fishel Financial. Plan. Protect. Prosper.

Frequently Asked Questions

Can I get Medicare before 65 if I retire early?

For most people, no. Medicare eligibility begins at 65 except in narrow cases involving certain disabilities or specific conditions. A healthy person taking a voluntary early retirement needs to bridge coverage until the month they turn 65.

What is the ACA subsidy cliff in 2026?

Starting with the 2026 plan year, if your household income exceeds 400 percent of the federal poverty level by even one dollar, you lose all marketplace premium assistance. For 2026 that ceiling is roughly 62,600 dollars for a single person and about 84,600 dollars for a two-person household. If you received advance credits and end the year over the line, you may have to repay them.

Is COBRA a good way to bridge to Medicare?

It depends on timing and cost. COBRA usually lasts up to 18 months, so it works well if you retire within about a year and a half of turning 65. You pay the full premium, which is often much higher than what you paid as an employee, so it should always be priced against a marketplace plan before you decide.

How does a Roth conversion affect my marketplace subsidy?

A Roth conversion adds to your income in the year you do it, which can push you over the subsidy cliff and cost you your premium tax credit. For that reason, large conversions and marketplace subsidies rarely belong in the same year. Many people do conversions after 65, though that choice interacts with Medicare income surcharges, so it should be coordinated.

Can I use a health savings account to pay for coverage before Medicare?

You can use HSA funds tax-free for qualified medical expenses, and if you pair a qualifying high-deductible plan with an HSA you can also contribute and deduct those contributions, which lowers the income that determines your subsidy. Once you enroll in Medicare you can no longer contribute, though you can still spend the balance.

How much does health insurance cost before Medicare for a couple in Central Florida? At full, unsubsidized price a comprehensive marketplace plan for a couple in their early sixties can run roughly 1,500 to 2,800 dollars per month in premiums alone, before deductibles and out-of-pocket costs. A partial subsidy can reduce that substantially if your income qualifies, which is why income planning matters so much now.