Health insurance subsidy changes - Goodwin Investment Advisory

If you’re planning to retire before age 65 (or already have), you’ve probably wondered how to handle health insurance until Medicare kicks in. For many of our clients the ACA Marketplace, sometimes called “Obamacare”, serves as that bridge between employer coverage and Medicare.

A new law called the One Big Beautiful Bill Act (OBBBA) brings some major updates starting in 2026. These changes could impact how much you pay for coverage and whether you still qualify for a premium subsidy. After the passage of the Bill, Congress has continued to debate the extension of the enhanced ACA premium credits, and there’s a possibility they could be reinstated. However, we believe it’s wise to plan as though these enhancements will not continue given the current legislative gridlock.

What’s Changing

Over the past few years, temporary COVID-era rules expanded ACA subsidies and helped many early retirees lower their monthly premiums – but those rules expire after 2025.

Here’s what that means:

The income limit for subsidies returns. If your Modified Adjusted Gross Income (MAGI) is above roughly 400% of the federal poverty level—about $84,600 for a couple, you may lose your eligibility.
The “subsidy cliff” also returns. Being just $1 over the limit could eliminate your entire tax credit.
Many early retirees who currently benefit from expanded subsidies will likely see higher premiums.
Expect tighter income verification and shorter enrollment deadlines. Planning ahead will really matter.

If you’d like to see how your subsidy could change, try the ACA comparison tool at https://www.kff.org/interactive/subsidy-calculator/ It’s a helpful way to visualize your options.

How We Can Help You Plan Ahead

These updates make income and tax planning more important than ever for anyone retiring before Medicare eligibility at age 65. Remember that what you pay for ACA coverage depends on your MAGI —not your total income or assets.

Here’s how we can help you stay strategic:

Coordinate your withdrawals. We can manage which accounts to draw from—like Roth vs. traditional IRAs—to help keep your MAGI lower.
Maximize pre-tax contributions. Contributing to retirement accounts or a Health Savings Account (HSA) can lower your reported income. This is especially useful if one spouse still works or if you’re self-employed.
Be smart with investment income. We can help you avoid large capital gains or time them strategically, and place income-producing assets in tax-sheltered accounts.
Use timing to your advantage. Sometimes simply shifting when you take income makes all the difference in subsidy eligibility.

The Bottom Line

Starting in 2026, ACA subsidies may be harder to qualify for, and therefore thoughtful tax planning could help you maximize your subsidy.

If you’re considering early retirement, now’s the perfect time to model what your health insurance could cost under the new rules. We’ll keep tracking these changes and help you adjust your plan so your health coverage and retirement strategy continue working together.

Because financial peace isn’t just about building wealth, it’s about keeping the freedom to live life on your terms.

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