“I Have No Preexisting Conditions”: I’m 56, Earn $198,000, and Want to Retire Early. Can I Afford Private Healthcare?

Thinking about retiring early is exciting, especially after years of grinding away and building up some solid savings. But one big question always pops up: how do you handle healthcare? It’s not just about paying the premiums—it’s about the curveballs life might throw your way. A sudden health emergency can seriously shake up even the best retirement plans.

Let’s take a closer look at what this really means for someone like my client Jack, who’s 56, raking in just under $200k a year, and wants to know if private health insurance can cover him until he qualifies for Medicare at 65.

At First, The Income Looks Comfortable

Making $198,000 a year definitely puts you in a good spot financially. Naturally, you might assume private healthcare is manageable—especially if you’re healthy and don’t have any preexisting conditions.

But here’s the kicker: healthcare costs can be complicated and unpredictable. Financial planners I’ve worked with often tell me that estimating these expenses is one of the trickiest parts of retirement planning. Costs shift a lot depending on where you live, the type of plan you pick, and any changes in your health down the line.

For example, if you’re 56 and shopping for a silver plan on the ACA marketplace, you might expect to pay around $700 a month in premiums. Sometimes it’s a bit less, sometimes more. But that’s just the start. Add deductibles, copays, and out-of-pocket maximums, and suddenly your yearly costs can easily hit $10,000 to $15,000 before even using your Health Savings Account (HSA).

Why Private Insurance Is Such a Wallet-Buster

Two big reasons make private insurance pricey for early retirees. First, once you leave your employer, you lose the magic of group rates and employer subsidies. Second, insurance companies see people in their 50s as a higher risk, even if you feel great.

Insurance premiums aren’t just about your current health—they’re about the chance something might happen. So, even if you’re in perfect shape, you’re paying for the risk the insurer takes on for everyone in your age group.

And if you retire before 65, that gap where you don’t have Medicare can stretch up to a decade. That’s a long time to deal with rising premiums and big out-of-pocket costs.

Tax Credits? Not So Much for High Earners

The Affordable Care Act has subsidies that help lower-income folks afford insurance. But once you hit a certain income, those credits quickly disappear.

At $198k, you’re almost certainly paying full price for your insurance. This shock hits a lot of new retirees hard—especially when they’re used to their companies chipping in.

Some people try to get around this by lowering their taxable income strategically—through Roth conversions, delaying Social Security, or tax-loss harvesting—to squeeze under the subsidy cutoff. But for most folks with good incomes, that’s not a practical strategy without a significant nest egg to rely on.

The Hidden Bills You’ll Want to Watch Out For

Premiums are just the tip of the iceberg. Deductibles, copays, coinsurance, and services insurance won’t cover can add up fast. Lately, I’ve noticed that plans with lower premiums often come with sky-high deductibles—sometimes $8,000 or more per person.

Don’t forget about meds, specialists, and routine care either. Plus, vision and dental usually aren’t covered in these plans, meaning extra out-of-pocket expenses.

It’s tough to nail down what a “normal” year will cost, let alone a year when something unexpected happens.

Looking at Other Options: COBRA, Short-Term Plans, and Health Sharing

If you want to hold onto your employer plan, COBRA lets you do that for up to 18 months—but it’s expensive since you pay 100% of the premium plus a small fee. It can be a good short-term fix, especially if you’re in the middle of ongoing treatment.

Short-term health plans might seem tempting, but they usually don’t cover preexisting conditions, preventive care, or prescriptions. For peace of mind, I don’t often recommend them as a long-term solution.

Health sharing ministries are another buzzword these days. They’re not traditional insurance, and the fine print often excludes coverage for common chronic health issues. Plus, there’s no guarantee they’ll cover your bills when you need them.

Why Health Savings Accounts Are Your Best Friend

If you’ve been regularly contributing to an HSA, that’s a big leg up. HSAs offer a triple tax benefit: money goes in tax-deductible, grows tax-free, and you can withdraw tax-free for qualified medical expenses.

Many retirees treat their HSAs like a dedicated healthcare stash, letting it grow until they really need it. That’s a lifesaver if you’ve built up a big balance. But for most people, HSAs help cover some costs—they don’t replace budgeting for premiums and out-of-pocket expenses.

Two Big Realities to Keep in Mind

Let’s be real—private insurance isn’t a cure-all.

• Chronic illness risk: If something serious crops up after retirement, your out-of-pocket costs can skyrocket. For 2024, the out-of-pocket max on marketplace plans is over $9,450 for individuals, and double that for couples. That can drain savings fast.
• Changing plans and prices: If you rely on ACA marketplace plans, expect annual premium increases, possible plan cancellations, and network changes. I’ve seen clients forced to switch doctors or scramble for medications when insurers jump ship.

When Private Healthcare Just Doesn’t Work

Sometimes, even making good money isn’t enough. If you live in a high-cost state like New York or California, premiums and deductibles climb way above average. I’ve known clients who relocated just to manage their healthcare expenses.

And if you’re covering family—say a spouse under 65 or kids under 26—the costs multiply quickly. Family plans can easily run over $2,000 a month before you even see a doctor.

So, Can You Retire Early With Private Healthcare at 56?

If you’re earning around $198k with no preexisting conditions, retiring early is definitely possible. But healthcare will be one of your biggest ongoing expenses and it needs to be planned for carefully.

If you’re okay budgeting between $12,000 and $20,000 a year for premiums and out-of-pocket costs — and can handle the risk of rising prices — you can probably cover the gap until Medicare kicks in. Just know it’s not a walk in the park, and you need to be prepared for surprises.

My advice? Work with a fee-only financial planner who really gets healthcare. The folks who succeed in early retirement don’t just hope everything goes smoothly—they prepare for the worst.

Wrapping It Up

Healthcare is the wild card in early retirement. Even if you’re healthy, you’re paying for access and for the risk insurance companies take on the whole group. For higher earners, the lack of subsidies really hurts.

If you’re serious about retiring early, don’t just ask, “Can I afford private healthcare?” Ask yourself, “Can I handle the worst-case scenario?” That’s the key to true peace of mind.