If you retire before 65 in Florida, your health insurance cost for 2027 depends heavily on your modified adjusted gross income (MAGI). With the 400% FPL subsidy cliff back, a married couple with MAGI of about $86,560 may qualify for a premium tax credit, while one dollar over gets nothing. Planning which accounts you draw from can mean the difference between a subsidized plan and paying full price.
Educational content only. This article explains general federal rules and is not individualized tax, legal, or investment advice. Tax outcomes depend on your full situation, so consult your CPA or tax advisor before acting.
Key takeaways
- The cliff is back: enhanced subsidies expired after 2025. For 2027 coverage, households above 400% FPL get no premium tax credit (about $63,840 single, $86,560 couple).
- MAGI is broader than taxable income: it includes all Social Security, most IRA withdrawals, capital gains, and taxable Roth conversions.
- Your withdrawal mix matters: Roth distributions, return of brokerage basis, and HSA withdrawals for medical bills generally don’t add to MAGI.
- No repayment cap: starting with tax year 2026, you repay every dollar of excess advance credit, so estimate carefully.
- Medicare ends the strategy: Marketplace savings stop once you’re eligible for premium-free Part A.
Why MAGI management matters again
The enhanced premium tax credits expired at the end of 2025, and Congress did not extend them. For 2026 and 2027, households above 400% of the federal poverty level get no help at all. Florida’s 2027 proposed individual rates average +15.3%, so people above the cliff absorb the whole increase. Early retirees often control their income by choosing what to withdraw. Our guide to lowering premiums when you earn too much for a subsidy covers options above the line.
| Household size | 100% FPL | 250% FPL (CSR limit) | 400% FPL (subsidy cliff) |
|---|---|---|---|
| 1 person | $15,960 | $39,900 | $63,840 |
| 2 people | $21,640 | $54,100 | $86,560 |
These figures use the 2026 HHS poverty guidelines, which apply to 2027 coverage. Florida has not expanded Medicaid, and premium tax credits generally require income of at least 100% FPL, so drawing income down too far can also backfire.
What counts in MAGI
HealthCare.gov’s income guide defines Marketplace MAGI as your adjusted gross income plus untaxed foreign income, non-taxable Social Security, and tax-exempt interest.
| Income source | Counts toward MAGI? |
|---|---|
| Social Security (taxable and non-taxable) | Yes, the full amount |
| Traditional IRA and 401(k) withdrawals | Yes, most withdrawals |
| Taxable amount of a Roth conversion | Yes, in the year you convert |
| Capital gains and dividends | Yes |
| Tax-exempt municipal bond interest | Yes |
| Qualified Roth distributions | No |
| Selling brokerage shares: return of your cost basis | No (only the gain counts) |
| HSA withdrawals for qualified medical expenses | No |
Strategies early retirees discuss with their CPA
Roth vs. traditional withdrawals
Mixing qualified Roth distributions with smaller traditional IRA withdrawals can keep MAGI under the cliff. The right mix depends on future brackets and required minimum distributions.
Timing Roth conversions
Conversions add to MAGI in the year you convert. Some retirees convert heavily in years they aren’t relying on a subsidy, such as a year covered by COBRA or after Medicare starts, and convert little or nothing in subsidy years. Your CPA can model the trade-off.
Spend taxable brokerage basis
When you sell shares in a taxable account, only the gain counts. Selling high-basis lots first can produce spending money with little MAGI.
Use your HSA
If you saved receipts, HSA reimbursements for qualified expenses are tax-free and don’t raise MAGI. If you’re still HSA-eligible, contributions are an above-the-line deduction that lowers AGI. Since 2026, Bronze Marketplace plans are HSA-compatible.
Cost-sharing reductions at lower incomes
If MAGI lands between 100% and 250% FPL, Silver plans include cost-sharing reductions that lower deductibles and copays. A couple below $54,100 may get far more value from Silver than Bronze.
Hypothetical example (illustration only)
Hypothetical: Dan and Lisa, both 61, retired early in DeLand in Volusia County and need about $110,000 to live on in 2027. They aren’t claiming Social Security yet.
- Plan A: withdraw $110,000 from traditional IRAs. MAGI is about $110,000, above the $86,560 cliff, so they pay full price.
- Plan B: withdraw $50,000 from traditional IRAs, sell $40,000 of brokerage shares with $32,000 of basis ($8,000 gain), take $15,000 in qualified Roth distributions, and reimburse $5,000 of saved HSA receipts. Add $4,000 of dividends, and MAGI is about $62,000, under the cliff.
Plan B might qualify for a premium tax credit. The amount depends on the benchmark Silver premium in their area, which this example doesn’t estimate. This is not a recommendation; their CPA would weigh future taxes and RMDs.
Accurate projections: no repayment cap
Advance credits are based on your estimate. For tax years after 2025 there is no repayment cap, so an unexpected capital gain distribution or a December Roth conversion could mean repaying thousands of dollars at tax time. Project income conservatively and report changes to the Marketplace. CMS has also stepped up enforcement, removing about 760,000 enrollees in a fraud crackdown announced in October 2026, so keep your application accurate and up to date.
COBRA vs. the Marketplace
According to HealthCare.gov’s COBRA guidance, you have 60 days after losing job-based coverage to enroll in a Marketplace plan. Dropping COBRA voluntarily outside Open Enrollment doesn’t give you a Special Enrollment Period. COBRA keeps your current plan and doctors, but you usually pay the full premium yourself. A Marketplace plan, such as Florida Blue’s BlueOptions PPO for 2027 or an Oscar, Ambetter, or AvMed plan, may cost less if your MAGI qualifies. Our guide to health insurance when you retire walks through the choice.
The Medicare transition at 65
HealthCare.gov says Marketplace coverage doesn’t end automatically when Medicare starts. You can report your Medicare start date up to three months ahead, and savings stop once you’re eligible for premium-free Part A. A younger spouse can keep a Marketplace plan, and household MAGI rules still apply. Start comparing Medicare Supplement options several months before your 65th birthday, and see our Florida 2027 Open Enrollment guide for this year’s deadlines.
Frequently Asked Questions
Does Social Security count toward ACA income?
Yes. HealthCare.gov says to include both taxable and non-taxable Social Security benefits in the full amount before deductions. Delaying Social Security can help some early retirees keep MAGI lower before Medicare.
Do Roth IRA withdrawals count as income for ACA subsidies?
Qualified distributions from a Roth account are not included. The taxable amount of a Roth conversion is included in your income for the year you convert, so conversions can push you over the 400% FPL cliff.
What happens if my income ends up higher than I estimated?
For tax years after 2025 there is no repayment cap. If your actual income is higher than your estimate, you must repay all excess advance premium tax credits when you file. Update your Marketplace application promptly when income changes.
Should I take COBRA or a Marketplace plan when I retire early?
Compare both. COBRA keeps your current network but you usually pay the full premium. A Marketplace plan may qualify for a premium tax credit if your MAGI is at or below 400% FPL. You have 60 days after losing job-based coverage to enroll in the Marketplace, and voluntarily dropping COBRA outside Open Enrollment doesn’t qualify you for a Special Enrollment Period.
Plan your pre-Medicare coverage
We’ll compare Marketplace and off-exchange plans across Orlando, Tampa, Jacksonville, and Volusia County at the income figure you and your CPA settle on. Michael McAllister, owner of Choice Health Insurance Brokers in DeLand, is a licensed health insurance broker (NPN 18229135) with 10 years in business. He is appointed with 200 carriers and quotes on- and off-exchange, public and private plans. Call or text 321-230-9536 or visit choice.healthcare before the Dec. 15 deadline for Jan. 1 coverage. Tax planning decisions should be made with your CPA or tax advisor.