If you’re planning to retire before age 65, health insurance is probably the single biggest wildcard in your plan. Medicare doesn’t start until 65, so you need a strategy to cover the gap, and that gap has gotten more expensive and more complicated in the last year.
For Colorado retirees, the calculation changed meaningfully in 2026. The enhanced federal subsidies that made ACA marketplace coverage affordable for a much wider range of incomes expired at the end of 2025. Colorado stepped in with a new state program to soften the blow, but the math is still different than it was even a year ago. Here’s what you need to know if you’re building a retirement plan that includes an early exit from full time work, and why this is exactly the kind of decision worth reviewing with a fiduciary financial advisor before you finalize a retirement date.
The core problem: the Medicare gap
Medicare eligibility starts at 65. If you retire at 60, 62, or even 64, you have a coverage gap of one to five years to fill on your own. For a couple retiring together, that can mean covering two people’s health insurance out of pocket during some of the years your income is lowest and your portfolio is most exposed to sequence of return risk.
There are four main ways to bridge that gap:
- COBRA continuation of your employer plan
- An ACA marketplace plan through Connect for Health Colorado
- A spouse’s employer plan, if one of you is still working
- Part time work that comes with health benefits
Each has tradeoffs, and the right answer usually depends on your income level, your health needs, and how precisely you can control your reported income in the years before Medicare.
COBRA: expensive, but simple
COBRA lets you stay on your former employer’s group health plan for up to 18 months, longer in some circumstances like disability. The tradeoff is cost. You pay the full premium yourself, typically the entire group rate plus a 2% administrative fee, since your employer is no longer subsidizing any part of it. For most people, COBRA ends up being the most expensive option per month, but it also means no disruption in your provider network or plan design at a moment when you may not want to deal with either.
COBRA tends to make the most sense as a short bridge, for example if you’re retiring 12 to 18 months before your 65th birthday and want to avoid switching plans twice.
Connect for Health Colorado: the bigger piece of the puzzle for most retirees
For longer gaps, most Colorado retirees end up on a marketplace plan through Connect for Health Colorado, the state’s ACA exchange. This is where the 2026 changes matter most.
From 2021 through 2025, enhanced federal subsidies removed the income cap on premium tax credits and capped the cost of a benchmark plan at 8.5% of household income for everyone, regardless of how much they earned. Those enhancements expired at the end of 2025 and were not renewed by Congress. The subsidy cliff is back: if your household income comes in above 400% of the federal poverty level, roughly $63,000 for an individual or about $129,000 for a family of four in 2026, you get no federal premium tax credit at all. Below that line, you can still qualify, but the percentage of income you’re expected to contribute toward a benchmark plan is higher than it was during the enhanced years.
Colorado created its own program, Colorado Premium Assistance, to help offset some of this loss. It layers on top of any remaining federal tax credit and provides a set monthly discount, based on household size, for people who qualify. It’s a meaningful help for households under the 400% threshold, but it does not solve the cliff itself. If your income lands above that line, whether from portfolio withdrawals, Roth conversions, RSU vesting, or a large one time capital gain, you could be looking at the full, unsubsidized premium.
This is exactly where the planning conversation matters most, and it’s a good example of why a tax-efficient retirement income strategy starts with the tax return, not just the portfolio. The income you report to the marketplace in a given year, your modified adjusted gross income, is something you often have real control over as a retiree. Timing of Roth conversions, which accounts you draw from, how you realize capital gains, and whether you accelerate or defer certain income can all move you above or below that 400% line. A well designed bridge year strategy can be the difference between a subsidized premium and a five figure annual bill for the same coverage.
Using a spouse’s employer coverage
If one spouse is retiring early and the other is still working, staying on the working spouse’s employer plan is often the simplest and cheapest option, assuming the employer offers coverage and the cost of adding a spouse isn’t prohibitive. This is worth mapping out early, since it can significantly change the retirement timing decision for the spouse who wants to stop working first.
Part time or bridge employment for benefits
Some retirees take part time or consulting work specifically because it comes with group health coverage, even if the pay itself isn’t a major factor in the retirement plan. This is worth exploring if full retirement feels premature or if the marketplace numbers for your income level look unfavorable. It’s also a natural option for retirees who want to ease out of full time work rather than stop entirely on a single date.
HSAs as a bridge planning tool
If you have access to a health savings account before you retire, front loading contributions in your final working years can pay off during the bridge period. HSA funds can be used tax free for qualified medical expenses at any age, including COBRA premiums and many marketplace plan costs, and unlike an FSA, the balance carries over with no expiration. For 2026, the contribution limits are $4,400 for self only coverage and $8,750 for family coverage, with an additional $1,000 catch up contribution available if you’re 55 or older and not yet enrolled in Medicare. A couple who are both 55 or older and both HSA eligible can each claim the catch up amount, though it has to go into separate HSAs.
Building the bridge into your retirement plan
The right strategy almost always depends on the specific numbers: your expected income in the bridge years, whether you’re close to the 400% FPL line, whether a spouse’s coverage is available, and how much flexibility you have in timing withdrawals and conversions. Retiring at 62 with a paid off mortgage and modest reportable income looks very different from retiring at 60 with a large severance package or RSU vesting schedule that pushes your income well above the subsidy cliff in year one.
This is also an area where the healthcare decision and the tax decision are the same decision. The income level that qualifies you for the best marketplace subsidy is often not the same income level that makes the most sense for Roth conversions or capital gains harvesting. Building a bridge year plan means looking at both at once, not managing them separately.
If you’re a few years out from retirement and want to see how the healthcare gap fits into your overall plan, that’s exactly the kind of scenario planning we do for clients at Inclinevest. As a fee-only fiduciary financial advisor based in the Denver metro area, serving clients throughout Denver, Parker, Centennial, Greenwood Village, Highlands Ranch, Lone Tree, Littleton, and Castle Rock, Gabriel Motta, CFP® helps pre-retirees and retirees map out a bridge strategy alongside the rest of their retirement income plan, not as an afterthought. You can review our services and fee structure, learn more about why we work on a fee-only basis, or schedule a call to talk through your own timeline.
About Gabriel Motta, CFP®
Gabriel Motta is the founder of Inclinevest LLC, a fee-only fiduciary financial advisor firm based in Greenwood Village, Colorado, serving clients across Denver, Parker, Centennial, Greenwood Village, Highlands Ranch, Lone Tree, Littleton, and Castle Rock, as well as clients nationwide. Gabriel holds the CFP® and MBA designations and works with pre-retirees and retirees, with particular experience in tech and defense equity compensation. As a fee-only advisor, Inclinevest never earns commissions and has a fiduciary duty to act in your best interest at all times. If you’re searching for a fiduciary financial advisor near me and want a second opinion on your retirement plan, contact Inclinevest to schedule a conversation.
Sources
- KFF, “What We Know So Far About 2026 ACA Marketplace Enrollment, Premiums, and Deductibles,” https://www.kff.org/affordable-care-act/what-we-know-so-far-about-2026-aca-marketplace-enrollment-premiums-and-deductibles/
- KFF, “How Will the Loss of Enhanced Premium Tax Credits Affect Older Adults?,” https://www.kff.org/affordable-care-act/how-will-the-loss-of-enhanced-premium-tax-credits-affect-older-adults/
- Connect for Health Colorado, “Colorado Premium Assistance,” https://connectforhealthco.com/financial-help/colorado-premium-assistance/
- HealthInsurance.org, “Colorado Health Insurance Marketplace: 2026 ACA Coverage Guide,” https://www.healthinsurance.org/aca-marketplace/colorado/
- Fidelity, “What to do after ACA premiums go up,” https://www.fidelity.com/learning-center/personal-finance/reduce-health-care-costs-aca-subsidies
- Colorado Department of Health Care Policy and Financing, “Information About Buying Health Insurance,” https://hcpf.colorado.gov/information-about-buying-health-insurance
This article is for general informational and educational purposes only. It isn’t personalized investment, tax, or legal advice, and it shouldn’t be relied on as a substitute for guidance specific to your situation. Inclinevest LLC is a registered investment adviser. Please consult a qualified professional before making decisions about your own financial circumstances.
