The gap years, 55 to 65

Every year between leaving work and turning 65 has to be bought, and the market prices those years higher than any other. Under the federal age curve a 64-year-old pays exactly three times what a 21-year-old pays for the identical plan. That is not a penalty for being unhealthy; it applies regardless.

What age does to the price

The multiplier applied to the same plan, at the national 2026 average.

Your advantage: you choose your income

A salaried household cannot easily decide what it earns. A retired household largely can, because modified adjusted gross income depends on which accounts you draw from.

• Traditional IRA and 401(k) withdrawals count in full. These are the lever that pushes you over.
• Roth withdrawals do not count at all, which makes a Roth balance extraordinarily useful in exactly these years.
• Cash savings are not income. Spending down a taxable cash reserve funds a year of living without adding a dollar of countable income.
• Capital gains count, but you decide when to realise them, and losses can offset them.
• Social Security counts toward modified adjusted gross income even when it is not federally taxable, which surprises people. Claiming early can push a household over the cliff.

The Roth conversion tension

Conventional planning says the gap years are ideal for Roth conversions, because income is low and the tax cost is small. That advice was written when the cliff did not exist. A conversion adds to modified adjusted gross income, so a conversion that saves $8,000 of future tax while costing a $20,000 credit is a bad trade in the year you make it.

The two goals genuinely conflict, and which one wins depends on the numbers. This is a case for modelling both paths with a tax professional rather than following a rule of thumb from either camp.

Bridging the gap, in rough order of preference

• Retiree coverage from a former employer, if it exists. Increasingly rare, and worth confirming rather than assuming it does not.
• A spouse’s employer plan. If one of you is still working, this usually beats everything else available.
• COBRA, for up to 18 months. Group rates are not age-rated, so it is worth pricing before dismissing.
• A Marketplace plan with income managed under the cliff. For many early retirees this is the whole strategy, and it works well when the account mix allows it.
• A Marketplace plan at full price, when income cannot be managed down. Then it becomes a straightforward shopping exercise. See paying full price.

Do not skip cost-sharing reductions

If your managed income lands under 250% of the federal poverty level, you also qualify for cost-sharing reductions, which cut your deductible and out-of-pocket maximum sharply. They only attach to silver plans. For someone in their sixties who is statistically more likely to use care, this is worth more than a lower bronze premium.