Retiring at 62 in Northeast Florida: Covering the Three Years Before Medicare

“I plan to retire at age 62 (next year) and people are warning me about $2000 a month individual health insurance policies until I am Medicare eligible.” That is a real person, posting publicly under the name “Going on SS” on a city-data.com health insurance forum. In the same thread a user posting as “littlebebe” wrote: “We are paying 1757.00 month for two people with 6500 deductible each. Age 61 and 56. This is under the Obama care with no subsidies.” A third, posting as “borninsac”, described “$1,464 per month ACA Bronze EPO-type plan (used to be a PPO) with $4,800 annual deductible for wife and me (I’m 62 and she’s 63), Northern California.”

Read those as what they are. They are three individual reports from three specific households in three specific places, written in their own words on a public forum. They are not published averages, they are not quotes, and none of them tells you what your own coverage would cost in St. Johns or Nassau County. What they do tell you is the thing that keeps people working three years longer than they wanted to: the number is unknown, it feels enormous, and nobody has explained where it comes from.

Here is where it comes from. Retiring before 65 means you leave a group health plan and buy an individual policy on the Marketplace, and how much help you get with the premium depends entirely on one number on your tax return. After 31 December 2025 that rule tightened. The rest of this article is about the tightening, what it does to somebody with a pension and a brokerage account, and the exact date your bridge lands.

What actually changed on 1 January 2026?

The premium tax credit itself did not go away. The temporary expansion of it did. The American Rescue Plan Act of 2021 expanded both who qualified and how much they got for tax years 2021 and 2022, and the Inflation Reduction Act extended that expansion through 2025. The Congressional Research Service, in report R48290 updated on 10 December 2025, is explicit that the credit “will continue after 2025” and that “there is no sunset provision applicable to authorization for the credit itself.”

What expired was the part that mattered most to higher-income early retirees. The same CRS report states that the enhanced provision “eliminated the maximum income limit (400% of FPL) for PTC eligibility purposes, leaving only the minimum income threshold (100% of FPL),” and that without an extension “the maximum income limit of 400% of the FPL would be reinstated and the applicable percentages would revert to higher levels resulting in lower subsidy amounts.” No extension passed. HealthCare.gov now says it plainly on its own savings page: “The additional savings available because of the COVID pandemic ended on December 31, 2025. If you qualify for savings in 2026, you’ll likely pay more for your Marketplace plan premium.”

For four plan years there was no upper income limit on Marketplace help. A 63-year-old with a $120,000 pension could still receive a credit, because the rule capped what you paid as a share of income rather than cutting you off. That is over. We wrote about the transition in more detail in our post on the enhanced subsidies expiring in Florida, and the household-level arithmetic sits in our 2026 Florida subsidy guide.

Where the 2026 cliff sits for your household

2026 Marketplace eligibility runs on the 2025 poverty guidelines, not the 2026 ones, because the Marketplace uses the guidelines in effect when open enrollment opens. That is a small technical point with a large practical consequence: the line you have to stay under for 2026 coverage was set in early 2025 and it does not move because inflation did.

A cliff is not a taper. A single filer in Jacksonville Beach with modified adjusted gross income of $62,599 qualifies for a credit in 2026; the same person at $62,601 qualifies for nothing. There is no partial credit above the line and no phase-out zone to soften the edge. Two dollars of income can be worth thousands of dollars of assistance, which is a strange sentence to write and a stranger one to live through at tax time.

What you actually pay below the line

Below 400%, the credit works by capping what you contribute toward a benchmark silver plan at a set percentage of your income. IRS Rev. Proc. 2025-25 publishes that table for taxable years beginning in calendar year 2026. The percentages rise as income rises, and then the table ends.

Read the bottom row carefully, because it is the whole story. The IRS does not publish a percentage above 400% for 2026. There is no bracket, because there is no credit. Everything you have heard about a cap on what a Marketplace plan can cost you as a share of your income applies only inside that table.

Why does an early retiree have more control than an employee?

Because most of your income becomes elective the day you stop drawing a salary. A person still working has wages, and wages arrive when the employer says they arrive. A person who retired at 62 in Fernandina Beach usually has a set of levers instead: when the pension starts, whether to convert traditional retirement money to a Roth this year or in four years, which lots to sell out of a brokerage account and when, whether to claim Social Security at 62 or wait, and whether to draw living expenses from taxable savings, from a Roth, or from an ordinary IRA.

Each of those levers moves modified adjusted gross income, and modified adjusted gross income is the number the Marketplace uses. That means the same household, spending the same amount of money each month, can land on either side of $84,600 depending purely on which account the money comes out of. Very few people carrying a W-2 have that kind of control. You do, for about three years, and then Medicare takes over and the question changes shape.

The trap is that the levers point in opposite directions. Roth conversions in your early sixties are often a sound long-term move, because you are filling low tax brackets before required minimum distributions and Medicare income surcharges arrive. Those same conversions raise the income the Marketplace counts. Getting the ordering right is worth real money in both directions, and it cannot be worked out from a premium quote alone.

The conversation to have with your tax preparer, not with us

We are an insurance agency. We can tell you which plans exist at your address, what they cover, what the credit is worth at a given income, and where the line sits. We cannot tell you whether to convert $40,000 to a Roth in 2026, and we are not going to pretend otherwise. That is tax advice, it depends on your whole return, and it belongs with a CPA or an enrolled agent who has seen the return.

The useful version of this is a three-way conversation. Your tax professional models the income; we model the coverage at each income scenario; you decide. In practice that means bringing us two or three target income figures rather than one, and letting us show you what each one produces. The work takes an hour and it is the single highest-value hour in the whole retirement transition. If you want a second set of eyes on the numbers, that is what we are here for.

What does a Marketplace plan really cost you in 2026?

Two things move together and people usually only look at one. The premium is what you pay every month whether or not you see a doctor. The cost sharing is what you pay when you do. KFF, an independent health policy analyst organisation and not a government agency, published an analysis on 19 May 2026 finding that the average monthly premium payment among consumers net of tax credits “rose 58% from $113 to $178” between 2025 and 2026, and that average Marketplace deductibles have “grown by over a thousand dollars per person, a 37% increase, from $2,759 to $3,786.”

Those are national averages produced by an analyst, not figures for a specific plan in Duval County, and they should be read that way. They are useful for one purpose only: they tell you that the monthly number and the deductible number both moved in the same direction at the same time, which is exactly the situation in which shopping on premium alone goes wrong.

The outer boundary of your risk is the annual limit on cost sharing, and CMS sets it. For the 2026 benefit year, CMS and CCIIO put the maximum annual limitation on cost sharing at $10,150 for self-only coverage and $20,300 for other than self-only coverage. For the 2027 benefit year the same guidance sets it at $12,000 and $24,000.

That is an 18.2% increase in the self-only ceiling in a single year, and it is not a rounding artefact. Plan for the 2027 number before you get to 2027, particularly if one of you turns 65 partway through that year and the other does not.

The two out-of-pocket maximums people mix up

There are two different legal ceilings floating around, they are set by different statutes, and they are commonly quoted interchangeably by people who should know better. One governs what a Marketplace plan may charge you. The other defines what counts as a high-deductible health plan for the purpose of contributing to a health savings account. They are not the same number and a plan can sit inside one and outside the other.

The practical consequence: if somebody tells you a Marketplace plan is “HSA-eligible,” that is a specific claim about the deductible and the out-of-pocket maximum meeting the IRS definition, and it is checkable. Ask for it in writing before you contribute a dollar, because contributing to a health savings account while covered by a plan that does not qualify creates a tax problem rather than a tax benefit.

Should you plan the bridge around a health savings account?

For some early retirees, yes, and for a specific reason. An HSA-qualified plan usually carries a higher deductible and a lower premium, and the contribution is deductible, so it lowers the same modified adjusted gross income that decides whether you clear the 400% line. A $8,750 family contribution in 2026 is $8,750 less income counted, which for a household hovering near $84,600 can be the difference between a credit and no credit.

For others it is the wrong trade entirely. If you are 62 with a knee replacement scheduled and a specialty prescription, a high deductible means you pay that deductible in full in January, every year, until Medicare starts. The HSA tax benefit does not repay that. This is a judgment call that depends on your actual expected use of care, which is why we start with your prescriptions and your doctors rather than with a plan brochure.

One more piece of arithmetic: you cannot contribute to an HSA once you are enrolled in any part of Medicare. If you are planning to enrol at 65, the contribution stops, and the timing of that stop needs to line up with the month your Medicare starts rather than with the calendar year.

The twelve months before you hand in your notice

This is the part you can do yourself, and doing it a year early is what separates a clean transition from an expensive one. Work through it in order. Nothing here requires an agent, and if you would rather run it alone, run it alone.

1. Month 12 — write down your real retirement date and your real 65th birthdayBoth matter, and they are different problems. The retirement date starts the individual-coverage period. The 65th birthday ends it, and it sets an enrollment window that opens three months before the month you turn 65.
2. Month 11 — get a written estimate of your household income for each year of the bridgePension, any Social Security you plan to claim, interest and dividends, planned capital gains, and any Roth conversions. Ask your tax preparer for modified adjusted gross income specifically, not gross income and not taxable income.
3. Month 10 — compare each year against the cliff table aboveA household of two clears the line at $84,600 for 2026 coverage. Mark each bridge year as under, over, or borderline. Borderline is the one that needs work.
4. Month 9 — ask what your employer plan actually offers after you leaveGet the COBRA cost in writing, get the retiree-plan cost in writing if one exists, and get the end dates. COBRA is often the most expensive option and occasionally the least expensive one; you cannot know without the number.
5. Month 8 — list your doctors and your prescriptions with exact dosesNames, specialties, hospital affiliations, and every drug including the ones you take occasionally. This list is what you compare plans against. Premium is not what you compare plans against.
6. Month 6 — decide whether an HSA-qualified plan fits your expected use of careCheck the 2026 minimum deductible and maximum out-of-pocket in the table above against the plan documents, in writing, before you assume a plan qualifies.
7. Month 4 — set your income target and tell your tax preparer it is now a constraintIf you are staying under the cliff, the Roth conversion, the capital gain and the timing of any bonus or deferred compensation all become subordinate to that one number for the duration of the bridge.
8. Month 2 — enrol during open enrollment, and check the plan documents rather than the summaryConfirm the deductible, the in-network out-of-pocket maximum, the drug tier your prescriptions sit on, and whether your hospital is in network. Confirm all four before the plan starts, not after.
9. Month 0 and every year after — re-estimate income and re-shop the planDo not auto-renew. Report income changes to the Marketplace during the year rather than at tax time, and repeat the whole comparison each autumn until Medicare starts.

Where the bridge lands: your Medicare Initial Enrollment Period

The bridge has a fixed end, and it is worth knowing the shape of it before you start. Medicare.gov states that the Initial Enrollment Period “lasts for 7 months, starting 3 months before you turn 65, and ending 3 months after the month you turn 65.” That window is the reason retiring at 62 is a three-year problem rather than an open-ended one.

What lands at the end of it, for the 2026 plan year: the standard Part B premium is $202.90 a month, an increase of $17.90 from $185.00 in 2025, and the annual Part B deductible is $283. The Part A inpatient hospital deductible is $1,736 per benefit period. Part A itself is $0 for most people, because most people paid for it through payroll taxes during their working years. Original Medicare then leaves you paying roughly 20% of most Part B services with no annual cap, which is the gap that a supplement or a Medicare Advantage plan fills.

Notice how different that structure is from the Marketplace plan you have been holding. The Marketplace plan has a hard annual ceiling on in-network cost sharing. Original Medicare on its own does not. People arriving from three years of ACA coverage frequently assume the cap comes with them, and it does not. Our guide to the 2026 enrollment periods lays out every window in order.

What happens if you get the Medicare timing wrong?

It costs you for the rest of your life, which is why this section exists. Medicare.gov states the Part B rule directly: “You’ll pay an extra 10% for each year you could have signed up for Part B, but didn’t.” That surcharge is permanent for as long as you have Part B. It is not a one-off fee and it does not fall off after a few years.

Part D works on a different trigger and catches different people. The drug-coverage penalty is an extra 1% for each month, which is 12% a year, and it is set off by going 63 or more days without creditable prescription coverage. The relevant date is not your birthday. It is the day your last creditable drug coverage ended. Our Part B penalty article works through the arithmetic in detail.

Do not take our word for any of this for your own situation. Call 1-800-MEDICARE, or call Florida’s free counselling program, SHINE, on 1-800-963-5337. SHINE is run by the Florida Department of Elder Affairs through your local Area Agency on Aging, it costs nothing, and it sells nothing. Medicare.gov is the authoritative source for every figure in this section.

Is COBRA the same as still working?

No, and this is the single most expensive misunderstanding in the whole early-retirement transition. Active-employment group coverage through a current employer is treated one way for Part B timing. COBRA continuation coverage and retiree coverage are treated differently, even though all three feel like “I still have my company plan” from the inside.

People retire at 62, take COBRA for eighteen months, move to a Marketplace plan, turn 65, assume the same delay rules that protect someone still working apply to them, and discover a permanent surcharge. The insurance card looks identical. The Medicare rule is not. If you are on COBRA or a retiree plan anywhere near 65, confirm your own situation with 1-800-MEDICARE and with SHINE on 1-800-963-5337 before you rely on an assumption.

What this looks like in St. Johns and Nassau counties

The early-retiree profile is not evenly spread across Northeast Florida. St. Johns County reports a median household income of $106,169 and a poverty rate of 6.7% in the Census Bureau’s 2023 American Community Survey, with a median age of 44.0. Nassau County has the oldest median age in the five counties we serve most, at 46.3. Those two facts together describe a specific kind of household: older, higher-earning, and considerably more likely to be looking at the 400% line rather than at Medicaid eligibility.

Coverage follows income here with depressing regularity. St. Johns County reports 18,668 uninsured residents out of a coverage universe of 290,093, or 6.4%, the lowest of the counties we work in. It also has the highest routine-checkup rate of the five, at 77.3% to 80.7% depending on which CDC PLACES model estimate you use for 2023. People in St. Johns County are more likely to be insured and more likely to use the coverage, which means a coverage gap in the bridge years gets noticed and it gets expensive.

One local mechanic matters more than people expect. Florida Marketplace premiums are set by rating area rather than by county, so your ZIP code and not your county line determines the price you are quoted. Two households a few miles apart, with identical ages and identical incomes, can be shown different prices for the same plan. That is not an error and it is not something to argue with; it is how the rating works, and it is a reason to price your own address rather than to rely on what a neighbour paid.

Before and after: a Ponte Vedra example

Illustrative example only. Dale is 62 and Marguerite is 61. They live in Ponte Vedra Beach, both stopped working in the spring, and their planned income for the first bridge year was about $92,000 of modified adjusted gross income: a pension, some dividends, and a $30,000 Roth conversion their advisor had suggested to fill a low tax bracket. No carrier premium is quoted here, because a quote depends on the plan, the rating area and the underwriting rules that apply.

Before. At $92,000 they sit above the $84,600 cliff for a two-person household. For 2026 coverage that means no premium tax credit at all, and the full premium plus the full deductible on whatever plan they choose. Their planning had been done entirely on the tax side, and nobody had asked what the conversion did to their health insurance.

After. Their tax preparer moves the Roth conversion to the years after 65, when Marketplace eligibility no longer applies, and they draw the equivalent living expenses from an already-taxed brokerage account instead. Modified adjusted gross income lands near $80,000, under the line, and the premium tax credit applies for that year. The conversion still happens; it happens on a different calendar. That is the entire intervention, and it is not something an insurance agent can do alone or a tax preparer can do alone.

How we help

We do three concrete things. We price the actual plans available at your ZIP code, which in Florida means your rating area rather than your county. We run your named doctors and your exact prescription list against each plan before you enrol, rather than after. And we model the premium tax credit at two or three different income targets so you can take real numbers back to your tax professional instead of a guess.

Then we do it again every autumn, because the benchmark plan moves, your income changes, and auto-renewal is how people end up in a plan that no longer fits. We also sit down with you once more about eighteen months before you turn 65 to map the Medicare handover, so the Part B and Part D timing is settled long before the deadline arrives.

McDowell Business Resources is an independent agency, not an insurance carrier, and we are not affiliated with or endorsed by the U.S. government, the federal Medicare program or CMS. We do not offer every plan available in your area, and any information we provide is limited to those plans we do offer in your area. There is no cost and no pressure — book a free consultation and we will walk through it together.

The benefit of doing this a year early

The households who come through the bridge years without a bad surprise all did the same thing: they treated the year before retirement as a planning year rather than a countdown. They knew their income target, they knew which side of the cliff they were on, they had a written list of doctors and drugs, and they knew the month their Medicare would start before they handed in notice.

None of that requires expertise. It requires a calendar, a tax preparer who knows the constraint exists, and somebody who can price the plans at your address. Three years is long enough that a mistake compounds and short enough that it is completely manageable if you start early.

Where to check everything we just said

Every figure in this article carries a source, a URL and a plan year in the table below, and we would rather you checked them than took our word. For Marketplace rules and the premium tax credit, HealthCare.gov is the authority. For Medicare, use Medicare.gov or call 1-800-MEDICARE. For free, unbiased, one-to-one Medicare counselling in Florida, SHINE on 1-800-963-5337 costs nothing and sells nothing.

Whatever you decide, decide it on the numbers. If you want help getting to them, we do this every week for people in Jacksonville, Orange Park, St. Augustine and Fernandina Beach who are three years out from Medicare and tired of guessing.