If you’re ready to retire early, one overlooked expense could determine whether you can actually afford to leave work. Here is an example of a 59-year-old with $1.3 million in savings who thought retirement was within reach until this expense changed the math.
The 6-Year Gap Between Your Last Paycheck and Medicare
The expense that changed everything was health insurance. For many people, Medicare doesn’t begin until age 65. So, if you retire at 59, that leaves six years when you’ll likely need to buy health insurance on your own. And without an employer helping to pay the premiums, healthcare can become one of the largest expenses in an early retirement budget.
The costs can add up quickly: According to the nonpartisan health policy organization KFF, the average monthly premium for a midlevel health insurance plan offered through the Affordable Care Act (ACA) Marketplace was $625 in 2026. 1 That estimate is based on a 40-year-old before premium tax credits. Average premiums also varied widely by state, ranging from $401 in New Hampshire to $1,299 in Vermont.
Because Marketplace premiums generally increase with age, people retiring in their late 50s or early 60s may face even higher costs. Paying for health insurance until Medicare begins at age 65 could add up to tens of thousands of dollars, enough to affect when you retire or how much you can afford to spend each year.
The good news is that your premiums aren’t based on age alone. Your income also plays a role, which means that one retirement decision could have a much bigger impact on your healthcare costs than you might expect.
Why Your Withdrawal Strategy Sets Your Premium
Health insurance premiums are generally based on your reported income, not your net worth. The size of a $1.3 million portfolio does not determine what you’ll pay. Instead, the amount of income you report each year helps determine whether you qualify for premium tax credits and how much assistance you receive.
That means two early retirees with identical savings can end up paying very different amounts for health insurance. Withdrawals from a traditional IRA or 401(k) generally increase reported income, while cash savings, Roth accounts and other lower-tax income sources may have less impact. As a result, where your retirement income comes from can influence both your premium tax credits and your monthly healthcare costs.
If you’re planning to retire before Medicare begins, compare different withdrawal strategies as you prepare to leave your job. A financial advisor can model different withdrawal strategies and estimate how each one affects your tax bill and health insurance costs.
What It Changes in the “Can I Afford It” Math
For a 59-year-old with $1.3 million, the question is not just whether the savings are sufficient. It is whether those savings can support six years of health insurance without putting unnecessary pressure on the portfolio.
Higher healthcare costs do more than increase your monthly expenses. They require larger withdrawals, leaving less of your portfolio invested to continue compounding. So managing those costs can give more of your money time to grow.
If you’re thinking about retiring early, a financial advisor can help you map out the cost of the years before Medicare and build an income plan to cover them.
Photo credit: ©iStock.com/PIKSEL, ©iStock.com/LordHenriVoton
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