How to Handle Health Insurance After You Quit

The Elephant in the Room

You've run the numbers. Your Quit Number is within reach. You can see the finish line. And then the question hits: "What about health insurance?"

In the U.S., employer-sponsored health insurance is the single biggest golden handcuff keeping people in jobs they'd otherwise leave. It's also the most solvable problem in early retirement — once you know your options.

Option 1: ACA Marketplace Plans

The Affordable Care Act (ACA) marketplace is the most common solution for early retirees. Anyone can buy a plan regardless of employment status or pre-existing conditions.

How it works for early retirees

Here's the part most people miss: ACA subsidies are based on your Modified Adjusted Gross Income (MAGI), not your net worth. An early retiree with $2 million invested but only $50,000 in annual withdrawals has a MAGI of roughly $50,000 — which qualifies for significant premium subsidies.

By managing your withdrawals strategically (drawing from Roth accounts, which don't count as income, or keeping capital gains low), many early retirees qualify for silver plans at $200-400/month for an individual or $500-800/month for a family.

The key strategy

Keep your MAGI between 100% and 400% of the Federal Poverty Level for maximum subsidies. For a single person in 2024, that's roughly $14,580 to $58,320. For a family of four: $30,000 to $120,000.

Costs

Without subsidies: $400-800/month for individuals, $1,200-2,500/month for families. With subsidies: $100-400/month for individuals, $300-800/month for families. Your actual cost depends on your state, age, income, and plan level.

Option 2: COBRA (Short-Term Bridge)

COBRA lets you continue your employer's health plan for up to 18 months after leaving. You pay the full premium (employer + employee share) plus a 2% admin fee.

When it makes sense

COBRA is expensive (often $600-2,000/month) but useful as a bridge if you quit mid-year and want to keep your current plan through December, then switch to an ACA plan during open enrollment.

When it doesn't

For most early retirees, ACA plans are cheaper than COBRA from day one. Compare prices before defaulting to COBRA.

Option 3: Health Care Sharing Ministries

Health care sharing ministries (HCSMs) are member organizations where participants share medical costs. They're not insurance — they're voluntary cost-sharing arrangements.

Costs

Typically $200-500/month for families. Significantly cheaper than traditional insurance.

Trade-offs

HCSMs can deny claims for pre-existing conditions, have annual or lifetime sharing limits, and aren't regulated like insurance. They work well for healthy people who want catastrophic coverage at a low cost, but they're not for everyone.

Option 4: Spouse's Employer Plan

If your spouse continues working (even part-time), their employer plan may cover both of you. Some early retirees use a Barista FIRE approach specifically for this: one partner works part-time at a company with good benefits while the other is fully retired.

Best for

Couples where one partner reaches FIRE first, or where one partner enjoys low-stress part-time work.

Option 5: Part-Time Work with Benefits

Some employers offer health insurance to part-time workers. Working 20-25 hours per week at one of these employers gives you coverage while maintaining most of your freedom.

Common employers with part-time benefits

Starbucks, Costco, UPS, REI, and many school districts offer benefits to part-time employees. This is literally where the term "Barista FIRE" comes from.

What Most Early Retirees Actually Do

Surveying FIRE communities, the breakdown is roughly:

• 60% use ACA marketplace plans with subsidies
• 15% use a spouse's employer plan
• 10% use health care sharing ministries
• 10% use part-time work with benefits
• 5% use other arrangements (international living, VA benefits, etc.)

How to Budget for Health Insurance

Include health insurance in your monthly expenses when calculating your Quit Number. A reasonable estimate for budget planning:

• Individual: $300-500/month ($3,600-6,000/year)
• Family: $800-1,500/month ($9,600-18,000/year)

This accounts for premiums, deductibles, and out-of-pocket costs. If you're currently on an employer plan, these numbers might seem high — but remember, your employer was covering 50-80% of the actual cost.

Don't Let Insurance Stop You

Health insurance is a solvable problem, not a reason to stay in a job for 20 extra years. The ACA marketplace guarantees you can buy coverage regardless of employment status. The cost is real but manageable — especially when you've already planned for it in your Quit Number.

Calculate your Quit Number with health insurance costs included in your monthly expenses. That's the number that gives you true freedom — income replacement, healthcare, and all.