Health insurance when you retire early

Let’s talk about how to keep health insurance when you retire early. For this post, I’m going to assume you are an American. Otherwise, you probably have a million better options! It’s likely safe to assume you are under 65, have been saving for a bit, and are interested in retiring early. We have the 4% rule to let us know when we’ve invested enough to live on the interest, but what do we do about health insurance?

Do you really need health insurance?

For years, the Affordable Care Act or ACA required all citizens to have health care at the Federal level. That meant that if you went a year without any form of health care, you’d get fined when you filed your taxes! The federal mandate is gone, so this is no longer the case.

While the ACA no longer requires healthcare at a federal level, five states and the District of Columbia still mandate that all individuals have health care. They are:

  • California
  • District of Columbia (Washington D.C.)
  • Massachusetts
  • New Jersey
  • Rhode Island
  • Vermont

If you live in one of the above areas, you still have to be insured or face a penalty. If not, you can opt-out of health insurance.

Personally, I’m too risk-averse ever to do this. I think the stress alone of not having health care would be bad for my health! However, it’s a substantial amount of money, and other FIRE folks like Mr. Money Mustache have stopped paying for health insurance entirely!

If you do this, it’s essential to set aside a decent chunk of your premium savings just in case something happens!

Alternative Options

As mentioned in the post above, Direct Primary Care might also be a good option! Direct Primary Care (DPC) is a relatively new type of care. A patient and a doctor make a financial arrangement directly—cutting out the need for a middleman insurance company!

Use a health insurance calculator

A form on the KFF calculator filled in for 1 American with no children making $48,000 per year in an average state.

Head over to and fill in their calculator to get an estimate of health care costs for your income and area. I filled one in for “U.S. average” state and $48,000 per year (a typical FIRE number) and got the following results:

You are likely eligible for financial help

Based on the information you provided, your income is equal to 376% of the poverty level. This means you are likely eligible for financial help through the Health Insurance Marketplace. An estimate of your cost for coverage and the amount of financial help in 2021 are provided below. To find out your actual amount of financial help and to get coverage, you must go to or your state’s Health Insurance Marketplace.

Estimated financial help: $314 per month ($3,768 per year) as a premium tax credit. This covers 50% of the monthly costs.

Your cost for a silver plan: $316 per month ($3,792 per year) in premiums (which equals 7.9% of your household income).

The most you have to pay for a silver plan: 7.9% of income for the second-lowest-cost silver plan.

Without financial help, your silver plan would cost: $630 per month ($7,560 per year)

So, with no financial help, you may be on the hook for an additional $630 per month or $7560 per year!

Adding it all up

Let’s play a hypothetical game. Let’s say my FIRE number is $48,000. And let’s also say that $48,000 per year is what I need to live not including healthcare. That means I’ve been saving under the assumption that I’ll need $1,200,000 invested to retire. $1,200,000 in the market withdrawing 4% per year gives us the $48k we need! But now we have a new cost. The worst-case scenario from the calculator leaves us on the hook for $7560 per year in health care costs. To generate an additional $7560, we’d need an additional $189,000 invested ($189,000 * 0.04 = $7560).

Subsidies can significantly offset this cost, and you can likely find a much cheaper approach via DPC! Another thing to consider is that at 65, you can apply for medicare which will be a lot cheaper!


I hope you all have the best of luck on your FIRE journey! If you live in America, I don’t want you to forget about health insurance and then, boom, a big surprise! The worst-case scenario is that your FIRE number might have just gone up by a bit. It’s also absolutely worth researching DCP and seeing how much subsidy assistance you’d qualify for. Those can help bring your FIRE number back down!

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