ACA Subsidies for Early Retirees: What Income Counts in 2026 and 2027

If you retire before 65, you need health insurance until Medicare starts. For most early retirees that means a Marketplace plan, and the premium tax credit can cover most of its cost. The credit depends on your modified adjusted gross income (MAGI), and in retirement you choose much of that number yourself: which account you draw from, when you sell investments, and whether you convert to a Roth IRA.

This guide shows which retirement income counts toward ACA subsidies, the income range to aim for in 2026 and 2027, and a worked example for a couple aged 62. Calcvera’s ACA subsidy calculator runs the same math for your household.

Who can get ACA subsidies before 65?

You can get the premium tax credit for a month when all of these are true:

• You’re not eligible for Medicare and not enrolled in Medicaid.
• You’re not enrolled in employer coverage, including COBRA or a former employer’s retiree plan. Being offered COBRA or retiree coverage doesn’t block the credit if you turn it down.
• Your household MAGI is between 100% and 400% of the federal poverty line for the coverage year.
• You file a joint return if you’re married (with narrow exceptions).

For 2027 coverage you pay from 2.15% to 10.22% of your MAGI for the benchmark silver plan, set by IRS Rev. Proc. 2026-26. The credit covers the rest. Benchmark premiums rise with age, so they’re highest for people in their early 60s, and that’s when the credit is worth the most.

What retirement income counts for ACA subsidies?

ACA MAGI is your adjusted gross income plus tax-exempt interest, the untaxed part of Social Security benefits and excluded foreign income (IRS Publication 974). Here’s how common sources of retirement money are treated, based on HealthCare.gov’s income rules:

The pattern is simple: money that’s taxed, or that the law adds back, counts. Money you’ve already paid tax on doesn’t. That’s why early retirees with cash, a taxable brokerage account and Roth contributions have the most control.

What’s the income range for 2026 and 2027?

The credit runs from 100% to 400% of the poverty line. Each coverage year uses the previous year’s HHS poverty guidelines, so 2027 coverage uses the 2026 guidelines:

These are for the 48 contiguous states and Washington, D.C.; Alaska and Hawaii have higher limits. See every household size in our ACA income limits table. Above 400%, the credit doesn’t shrink. It stops, which is the subsidy cliff.

What if your income is too low?

This catches early retirees who live on savings. If your MAGI is low, the credit can disappear at the bottom of the range too:

• In states that expanded Medicaid, adults under 65 with income up to 138% of the poverty line qualify for Medicaid instead of the credit (HealthCare.gov). Expansion Medicaid doesn’t count savings or other assets, so a retiree with a large portfolio and little income can qualify. It’s full coverage, but doctor networks differ from Marketplace plans. States must also seek repayment of long-term care costs from the estates of people who got Medicaid at 55 or older, and some recover other costs too (Medicaid.gov).
• In states that haven’t expanded Medicaid, MAGI under 100% means no credit and, for most adults, no Medicaid either.

One rule helps: if you enroll with an honest estimate of at least 100% and receive advance credits, you keep the credit even if your actual income ends the year below 100% (26 CFR 1.36B-2). The estimate can’t be made with reckless disregard for the facts.

Worked example: a couple aged 62

A married couple, 62 and 61, retires in a state that expanded Medicaid. Their benchmark silver plan for 2027 costs $2,000 a month ($24,000 a year). They spend $72,000 a year and receive $4,000 of interest and dividends. They have cash savings, a taxable brokerage account, traditional IRAs and Roth IRAs.

What the table shows:

• Plan C is the trap. A $12,000 gain costs them $16,233 of credit.
• Plan E turns low income into an advantage. The Roth conversion lifts them into the credit range, and with 2026’s $32,200 standard deduction for married couples, $32,000 of income would owe no federal income tax. The IRS sets the 2027 deduction this fall.
• Plan B keeps more credit now, but it leaves more money in the IRAs to be taxed later, including through required minimum distributions from age 75 for people born in 1960 or later.

There’s no single right answer. The best mix depends on your tax bracket now and later, your savings and your state.

How do Roth conversions and capital gains fit in?

Inside the range, extra income doesn’t cost the whole credit, but it costs more than the tax alone:

• Between 300% and 400% of the poverty line, each extra $1,000 of MAGI reduces the credit by $102 (10.22% for 2027).
• Between 200% and 300%, the percentage you pay also rises with income, so each extra $1,000 costs more: about $180 for the couple above at $60,000 of MAGI.

Add your income tax rate to see the true cost of a Roth conversion or a capital gain. Many early retirees pick a MAGI target each year, then fill it with conversions or gains in December, when they know the rest of their income. Our Roth conversion calculator shows the tax side.

Does Social Security count for ACA subsidies?

Yes, all of it. The untaxed part of your benefit is added back, so claiming Social Security at 62 adds every dollar of benefit to your MAGI. A $2,000 monthly benefit adds $24,000 a year. Waiting to claim keeps your MAGI flexible until Medicare starts, and it also raises the benefit you’ll get for life.

COBRA or the Marketplace?

If you leave a job with health coverage, you can usually keep it through COBRA for up to 18 months, at up to 102% of the full cost. You can’t get the premium tax credit while you’re on COBRA (HealthCare.gov). Two timing rules matter:

• Losing job-based coverage opens a 60-day special enrollment period for the Marketplace, even if you’re offered COBRA.
• If you choose COBRA and drop it voluntarily later, you have to wait for open enrollment to switch.

An HSA can help here: HSA money can pay COBRA premiums tax-free, and Medicare premiums after 65, but generally not Marketplace premiums (IRS Publication 969).

Your income at 63 sets your Medicare premium at 65

Medicare’s IRMAA surcharges use your tax return from two years earlier. For 2026, they start above $109,000 of MAGI for a single person and $218,000 for a couple (SSA). So a large Roth conversion at 63 can raise your Medicare premiums at 65. Check the brackets with our IRMAA calculator before you convert in the years just before Medicare.

When to enroll and how to keep the credit

• Open enrollment for 2027 plans runs November 1, 2026 to January 15, 2027 on HealthCare.gov. Enroll by December 15 for coverage that starts January 1 (HealthCare.gov dates). State exchanges set their own deadlines.
• Estimate your MAGI carefully, and update the Marketplace if it changes during the year.
• Starting with 2026 tax returns, there’s no cap on repaying excess advance credits. If your income comes in higher than you estimated, you pay back the full difference on Form 8962.

The figures above are for 2026 and 2027 coverage under current law. If Congress restores the enhanced credits, we’ll update this guide and the ACA subsidy calculator. For a large conversion or sale, ask a tax professional about your situation.

Sources:

• IRS Rev. Proc. 2026-26 (2027 applicable percentages)
• HHS poverty guidelines
• IRS Publication 974, Premium Tax Credit
• 26 CFR 1.36B-2 (eligibility and the estimate rule)
• HealthCare.gov: what to include as income
• HealthCare.gov: Medicaid expansion and you
• Medicaid.gov: estate recovery
• HealthCare.gov: COBRA coverage and the Marketplace
• HealthCare.gov: dates and deadlines
• IRS Publication 969, Health Savings Accounts
• SSA: Medicare premiums for higher-income beneficiaries

Key terms

• Federal poverty level (FPL)
• Modified adjusted gross income (MAGI)
• Premium tax credit
• Roth conversion

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