If you're retiring before 65, you buy health insurance through the ACA marketplace (Obamacare). Through 2025, the government capped what you pay based on income. In 2026 that protection is gone: cross the income threshold and your premiums jump by $10,000 to $20,000 a year.
The good news: your ACA subsidy comes down to your MAGI — and that's under your control. Lumifin finds the withdrawal and Roth-conversion order that keeps your MAGI under the threshold, so you keep the subsidy.
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If you're retiring before 65, the ACA cliff can cost you tens of thousands — or you can plan around it.
In 2026, earning $1 over the income threshold means losing your entire subsidy. For a couple in their early 60s, that's a jump from ~$7,000/yr to ~$28,000/yr in premiums — about a $20,000 penalty.
Your Modified Adjusted Gross Income includes Roth conversions, capital gains, and Traditional IRA withdrawals. Choosing which accounts to draw from determines whether you stay under the cliff.
The right withdrawal strategy can save you $10,000 to $20,000 per year in healthcare costs. It's not about earning less — it's about knowing where your income comes from.
Learn which accounts raise your MAGI, which don't, and how to keep your health insurance subsidy. Includes a real example saving $135,000 over 8 years.
The calculator shows the problem. Lumifin shows the fix — the year-by-year withdrawal and Roth-conversion order that keeps your MAGI under the cliff, so you keep every dollar of subsidy through your gap years.
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The most common questions early retirees ask about ACA subsidies and the 2026 cliff.
The ACA subsidy cliff is the income point at which your premium tax credit drops to zero. Below the cliff, your subsidy phases out gradually as income rises. At the cliff, one extra dollar of income can cost a couple in their early 60s tens of thousands of dollars per year in lost subsidies. From 2021 through 2025, the cliff was temporarily suspended, so subsidies kept phasing out smoothly. Those enhanced subsidies expired after 2025, so in 2026 the cliff is back in effect.
A Roth conversion is added to your Modified Adjusted Gross Income (MAGI), which is what the ACA uses to size your subsidy. For a couple in their early 60s buying insurance on the exchange, a conversion that pushes MAGI past the cliff can wipe out $10,000 to $20,000 per year in subsidies, sometimes more in high-premium states. Many people do better converting smaller amounts each year while staying under the cliff.
In 2026, the standard subsidy phase-out tops out at 400% of the Federal Poverty Level. For a household of two, that is roughly the mid-$80,000s in MAGI, though the exact threshold depends on your state and that year's FPL update. Above that line, you pay the full unsubsidized premium with no help. The calculator on this page shows the exact threshold for your household size and what crossing it costs.
Yes, and this trips up a lot of early retirees. ACA MAGI includes the full amount of your Social Security benefits, even the portion that is not taxed federally. So a couple drawing $40,000 of Social Security has $40,000 counted toward ACA MAGI, even if only half ends up in their taxable income. This matters most for people deciding whether to claim Social Security before age 65.
You apply for subsidies based on projected income for the coming year. If your actual income comes in higher than estimated, you have to pay back the excess subsidies at tax time. There is a cap on the payback amount that depends on your income level. From 2026 on, if you cross the 400% FPL cliff, the payback is uncapped. This is why people in early retirement track every dollar of MAGI, since a late-year Roth conversion or capital gain can trigger a full repayment.
Yes. The ACA does not have an asset test. Eligibility is based on income (MAGI), not net worth. Someone with $2 million in retirement accounts who lives off Roth withdrawals plus a small brokerage drawdown can qualify for substantial subsidies, because Roth withdrawals do not count toward MAGI and capital gains can be managed carefully. This is one reason the order in which you draw from accounts matters so much before age 65.
Related: Roth Conversion Calculator