Can You Use the ACA to Retire Early in 2026?

Posted On January 5, 2026 By Scott Stratton, CFP(R), CFA In Retirement Planning /

You can sometimes retire before age 65 if you smartly plan your health coverage and income — but 2026 brings important changes to ACA marketplace subsidies you need to understand.
For many early retirees with $500,000–$5 million in investable assets, avoiding surprise medical costs is essential to making a retirement plan work.

How ACA Premium Tax Credits Work (2026)

In 2026, the Affordable Care Act (ACA) still offers Premium Tax Credits (PTCs) to help reduce the cost of health insurance — but the enhanced subsidies that made them extremely generous during 2021-2025 have expired.
Under the basic ACA rules:

Premium tax credits are available for households with incomes between 100% and 400% of the Federal Poverty Level (FPL), adjusted for household size.
For 2026 coverage (based on 2025 poverty guidelines), the 100–400% FPL income ranges are approximately:

Household Size	100% FPL	400% FPL
1 person	$15,650	$62,600
2 people	$21,150	$84,600
3 people	$26,650	$106,600
4 people	$32,150	$128,600

The Premium tax credits are based on a sliding scale of expected premium contributions as a percentage of income. The lower your income, the higher your credit.

Important change for 2026:
The enhanced subsidies that lowered required contributions and removed the 400% income eligibility cap expired on December 31, 2025. This means ACA premiums are generally less subsidized in 2026 than they were in 2021-2025, and many early retirees who expected very low premiums are seeing higher premiums in 2026.

What the Subsidy Changes Mean in Practice

Higher Premiums Unless Expected Income Is Low

The enhanced tax credits made ACA plans very affordable in recent years, sometimes resulting in zero premiums for middle-income households. Those enhancements are no longer in effect for 2026 coverage unless Congress renews them.

Without enhancements, a household above 400% of FPL (~$84,600 for two people) typically does not qualify at all for premium tax credits. This means early retirees who once qualified for substantial subsidies may now face steeper costs in 2026 — a factor you must include in retirement income planning.

Managing income during early retirement requires careful coordination, which is why ACA planning fits naturally into a broader retirement income planning framework.

How ACA Coverage Can Still Support Early Retirement

Even with subsidy changes, the ACA can be part of an early retirement transition if you strategically manage your income until after the year you turn 65. Even though the credits end the month you turn 65 and enroll in Medicare, the PTCs are based on your full year household income.

1. Control Your Modified Adjusted Gross Income (MAGI)

Premium Tax Credits are based on MAGI. To maximize your credit, you have to minimize your MAGI. What counts towards your MAGI?

Income from wages, Social Security, and pensions
Interest and Capital Gains
IRA and 401(k) Distributions
Roth Conversions

What does not count towards your MAGI? Where can you access money for expenses?

Roth IRA and Roth 401(k) Distributions are non-taxable
You can use Health Savings Account (HSA) withdrawals to pay for deductibles and out of pocket expenses. It’s a great idea to build up an HSA in advance of retirement. You cannot, however, use an HSA to pay for insurance premiums, except while you are receiving unemployment benefits.
Build up cash reserves in a taxable account to avoid taking taxable distributions or starting SS or Pensions.

2. Delay Higher Income Events Where Possible

If possible:

Postpone Social Security until benefits are higher later
Delay large Traditional IRA withdrawals until after age 65
Manage capital gains timing

These steps may keep you within ACA income eligibility in the early years of retirement. It is important, however, that your income is not Zero – if your income is below 100% of the Poverty Level, you are eligible for Medicaid, but not a Premium Tax Credit.

Beware of Premium Increases

According to recent estimates, ACA marketplace premiums could climb substantially in 2026 as insurers adjust to the expiration of enhanced credits, with some plans more than doubling in net cost for enrollees who no longer receive enhanced subsidies.

What This Means for Early Retirement Planning

You should never assume ACA coverage will be inexpensive without modeling the impacts of subsidy changes, premium costs, and your projected income.
A retirement plan that works on paper without considering healthcare costs may fall short if ACA premiums rise faster than expected.

Because healthcare costs can be a substantial expense, many early retirees integrate ACA planning with:

Roth conversion strategies
Tax-efficient retirement income sequencing
Social Security optimization
Medicare transition timing
Long-term care planning

This holistic view ensures you’re not derailed by unexpected healthcare expenses. Early retirement income planning requires careful coordination between healthcare subsidies, taxes, and withdrawals.

How a Fiduciary Advisor Helps

At Good Life Wealth Management, we integrate ACA health cost planning into your broader retirement strategy. That means:

Considering ACA premiums based on your projected MAGI
Incorporating subsidy eligibility changes under current law
Coordinating retirement income sources with health coverage needs

We work with pre-retirees and retirees with $500,000–$5 million, nationwide and remotely, so you can build a plan that realistically supports early retirement. You might also find our Who We Help and Questions to Ask a Financial Advisor pages helpful if you’re evaluating guidance options.

This topic is often part of a broader retirement or tax planning conversation. If you’d like help applying these ideas to your own situation, you can request an introductory conversation here.

Frequently Asked Questions

Can I still get ACA subsidies if I retire before age 65?
Yes — if your income falls between 100% and 400% of the Federal Poverty Level, you can still qualify for premium tax credits under the ACA in 2026, though benefits may be smaller than they were with enhanced subsidies.

What counts as income for ACA eligibility?
Income for ACA subsidies is your modified adjusted gross income (MAGI) — including traditional IRA/401(k) distributions, but excluding Roth IRA withdrawals if qualified and certain other tax-free sources. Good Life Wealth Management

Retirement Withdrawals Without Penalty

Posted On September 16, 2020 By Scott Stratton, CFP(R), CFA In Retirement Planning /

If you have multiple retirement accounts, when can you start withdrawals without penalty? This is very important if you want to retire before age 59 ½ and be able to access your money. The rules vary by the type of account, so advance preparation can make it easier to plan your withdrawals.

In our retirement income planning, we carefully choose the order of withdrawals. This can make a big difference in your tax bills. It’s also helpful to have multiple types of accounts so you can select from capital gains, tax-deferred accounts, and tax-free accounts. Let’s start with the early retirement penalties, by account type.

Five Retirement Plans with Different Rules

401(k) and 403(b): 10% penalty on distributions prior to age 59 ½.
A 457 Plan can be accessed after you retire without penalty, regardless of your age. This is the easiest plan for accessing your money.
Traditional IRA: 10% penalty for distributions prior to age 59 ½. This also applies to a SEP-IRA.
SIMPLE IRA: 10% penalty prior to age 59 ½. Additionally, any distributions within the first two year of participation are subject to a 25% Penalty. Ouch. Don’t do that.
Roth IRA. 10% penalty on earnings before age 59 ½, AND the five-year rule. You must have had a Roth open for five years before taking penalty-free withdrawals. So, if you open your first Roth at age 57, you’d have to wait until age 62 to get the tax-free benefit. However, you can access your principal at any time without tax or penalty. It is only when you start drawing down your earnings that the tax and penalty might apply. To withdraw tax-free and penalty-free, you must be over 59 ½ and have had a Roth for at least five years.

Exceptions to the Penalty

For 401(k) and 403(b) Plans: if you are at least age 55 and have separated from service, the penalty is waived. This means that if you retire between 55 and 59 ½, you can access your account without penalty. You would lose this exception if you roll your money into an IRA.
72(t) / Substantially Equal Periodic Payments (SEPP). If you are before age 55 and want to access your 401(k), 403(b), or Traditional IRA, you can take Substantially Equal Periodic Payments and waive the penalty. This means that you commit to taking the same amount from your account, annually, for at least five years or until age 59 ½, whichever is longer. Even if you later don’t want or need the distribution, you must continue to withdraw the same amount.
You may be able to avoid the 10% Penalty on an IRA or 401(k)/403(b) distribution if you qualify for these exceptions:
- Total and Permanent Disability
- An IRS Levy
- Unreimbursed Medical Expenses in excess of 10% of AGI
- Qualified Military Reservists called to Active Duty
There are some exceptions which are available to IRAs (including SEP and SIMPLE), but not allowed from a 401(k) or 403(b). For these exceptions, you may want to roll your 401(k) into an IRA to qualify.
- Qualified higher educational expenses
- Qualified first-time homebuyers, up to $10,000
- Health insurance premiums paid while unemployed

Full List from IRS: Exceptions to Tax on Early Distributions

Using Exceptions and Planning Your Income

I’m happy to let people know about these exceptions for retirement withdrawals without penalty before age 59 1/2. However, you should be very careful about tapping into your retirement accounts in your 30’s, 40’s or 50’s. This money needs to last a lifetime. I sometimes hear of people who take from their 401(k) accounts to buy a car or build a pool. And they have no idea that taking $50,000 now is stealing $400,000 from their future. Here’s the math: At 8%, your money will double every 9 years. That’s the Rule of 72. $50k will become $100k in 9 years, then $200k in 18 years, and $400k in 27 years. (Yes, this is a hypothetical rate of return, not a guarantee.)

The order of withdrawals does matter when planning your retirement income. While we can work to avoid the 10% penalty before age 59 ½, distributions from “Traditional” retirement accounts are still taxable as ordinary income. It’s often better to access your taxable accounts first. When eligible for long-term capital gains rate, that will be lower than IRA distributions which are taxed as ordinary income. And you have a cost basis on a taxable position, so only a portion of your sale ends up as a taxable gain.

Many retirees avoid touching their retirement accounts until they have to take Required Minimum Distributions. RMDs used to be at age 70 ½, but now are age 72. If there are years when you are in a low tax bracket (sabbatical, retired, year off, etc.), it may make sense to do a partial Roth Conversion. Start shifting money from a tax-deferred account into a tax-free account and save yourself on future taxes.

Once you reach age 72, you could be subject to a lot of taxes from RMDs. That’s the problem with being too good at waiting to start distributions from your retirement accounts. You’re creating a bigger tax bill for yourself later. While you are accumulating assets, it pays to plan ahead and know when and how you will be able to actually access your accounts. Have a question about retirement withdrawals without penalty? Let me know how I can help.

Income Planning by Retirement Age

Posted On August 19, 2017 By Scott Stratton, CFP(R), CFA In Financial Planning /

What is often missing in most academic articles about retirement is a consideration of age at retirement. Most articles just assume that someone retires at 65 and has a 30 year time horizon. We know that is not always the case! If you retire early or later, how does that impact your retirement income strategy?

Let’s consider three age bands: early retirement, full retirement age, and longevity planning.

Early Retirement (age 50-64)

Fewer and fewer people are retiring early today. In fact, more than 70% of pre-retirees are planning to continue to work in retirement. Kind of makes you wonder what “retirement” even means today? However, I can see a lot of appeal to retiring early and there are plenty of people who could pull this off. Here are four considerations if you are thinking of retiring early:

Healthcare. Most people who want to retire before 65 abandon their plans once they realize how much it will cost to fund health insurance without Medicare. Let’s say you have a monthly premium of $1250 and a $5000 deductible. That means you have $20,000 a year in potential medical expenses, before your insurance even pays a penny! If you want to retire at 55, you might need to set aside an additional $200,000 just to cover your expenses to get you to Medicare at 65. It’s a huge hurdle.
If you have substantial assets, you will need to have both sufficient cash on hand for short-term needs (1-3 years), and equity investments for long-term growth. This is why time-segmentation strategies are popular with early retirees: setting aside buckets for short, medium, and long-term goals. While time segmentation does not actually protect you from market volatility or sequence of returns, there may be some benefit to a rising equity glide path, and it may be more realistic to recognize that spending in future decades will depend on equity performance, rather than assuming at 55 that your spending will be linear and tied to inflation.
For those who do retire early, taking withdrawals often makes them very nervous, especially after you realize that you must invest aggressively (see #2) to meet your needs that are decades away. If you have $1 million and want to take a 4% withdrawal, that works out to $3333 a month. Taking that much out of your account each month is more nerve wracking than having $3333 in guaranteed income, which leads us to…
A Pension. Most people I have met who retired in their fifties have a Pension. They worked for 20 or 30 years for a company, school district, municipality, branch of the military, etc. At 55 or so they realize they could collect 50% of their income for not working, which means that – in opportunity cost – if they continue to work it will only be for half the pay! It’s kind of a convoluted way of thinking, but the fact remains that a pension, combined with Social Security and Investments, is the strongest way to retire early.

Full Retirement Age (65-84)

The primary approach for retirees is to combine Social Security with a systematic withdrawal strategy from their retirement and investments accounts. We choose a target asset allocation and withdraw maybe 4% or so each year. We often set this up as monthly automatic distributions. We increase our cash target to 4% (from 1%) and reduce our investment grade bonds by the same amount. Dividends and Interest are not reinvested, and at the end of the year, we rebalance and replenish cash as needed. That’s the plan.
Depending on when you start retirement, I think you can adjust the withdrawal rate. The 4% rule assumes that you increase your withdrawals every year for inflation. It also assumes that you will never decrease your withdrawals in response to a bear market. What if we get rid of those two assumptions? In that case, I believe a 65 year old could aim for 5% withdrawals and a 75 year old for 6% withdrawals. This can work if you do not increase withdrawals unless the portfolio has increased. Also, a 75 year old will have a shorter withdrawal period, say 20 years versus 30 years for a 65 year old retiree.
Although retirement accounts are available after age 59 1/2, most clients don’t want to touch their IRAs – and create taxable distributions – until age 70 1/2 when they must begin Required Minimum Distributions (RMDs). Investors who are limiting their withdrawals to RMDs are following an “actuarial method”, which ties your income level to a life expectancy. This is a good alternative to a systematic withdrawal plan.

Longevity Planning (85+)

Many retirees today will live to age 90, 95, or longer. It is certainly prudent to start with this assumption, especially for couples.
Social Security is the best friend of longevity planning. It’s a guaranteed source of lifetime income and unlike most Pensions or Annuities, Social Security adjusts for inflation through Cost of Living Adjustments. Without COLAs, what may have seemed like a generous pension at age 60 will lose half of its purchasing power by age 84 with just 3% inflation. If you want to help put yourself in the best possible position for longevity, do not take early Social Security at age 62. Do not take benefits at Full Retirement Age. Wait for as long as possible – to age 70. Delaying from 62 to 70 results in a 76% increase in monthly benefits.
If you are concerned about living past 85 and would also like to reduce your Required Minimum Distributions at age 70 1/2, consider a Qualified Longevity Annuity Contract (QLAC). A QLAC will provide a guaranteed income stream that you cannot outlive. Details on a QLAC here.
While equities are probably the best investment for a 60 year old to get to 85 years old, once you are 85, you may want to make things much more simple. There is, unfortunately, a significant amount of Elder abuse and fraud, and frankly, many people over age 85 will have a cognitive decline to where managing their money, paying bills, or trying to manage an investment portfolio will be overwhelming. Professionals can help.

There is no one-size-fits-all approach to retirement income. We have spent a lot of time helping people like you evaluate your choices, weigh the pros and cons of each strategy, and implement the best solution for you.