Healthcare Cost Projections for FIRE Planning

Healthcare Cost Projections for FIRE Planning

Healthcare represents one of the most significant and uncertain expenses in any early retirement plan. Unlike housing or food costs that you can largely control, medical expenses depend on factors that are difficult to predict: your health trajectory, insurance market changes, and policy decisions that can shift the landscape overnight.

Building realistic healthcare projections into your FIRE number requires acknowledging this uncertainty while making reasonable assumptions you can update over time.

The Variables You Face

Healthcare costs in early retirement depend on several interconnected factors: the type of coverage you choose (marketplace, COBRA, health sharing, or spouse's employer plan), your household income and resulting subsidy eligibility, your current and projected health needs, and the prescription medications you require.

For 2026, ACA marketplace premiums have increased significantly, with many plans seeing 15% to 25% increases. Whether enhanced subsidies continue beyond current legislative extensions affects affordability dramatically.

Pre-Medicare Years (Before Age 65)

The years between early retirement and Medicare eligibility at 65 are typically the most expensive. You'll pay full premiums without employer subsidies, and premiums increase significantly with age.

For conservative planning, estimate $800 to $1,500 per month per person for marketplace coverage in your 50s and early 60s, depending on your location and income. High-cost areas and those without subsidy eligibility will be at the upper end or beyond.

Medicare Years (65+)

Medicare reduces but doesn't eliminate healthcare costs. For 2026, Medicare Part B premiums are $202.90 per month per person, deducted from Social Security benefits. Most people add supplemental coverage (Medigap) or choose Medicare Advantage plans, adding additional premium costs.

Plan for Part D prescription coverage costs, which vary based on your medications. Out-of-pocket maximums, dental, vision, and hearing care (not covered by traditional Medicare) add to total healthcare spending.

Strategies to Reduce Healthcare Costs

Income management can help qualify for ACA subsidies. Drawing from Roth accounts, which don't count as taxable income, can keep your modified adjusted gross income low. HSA funds can cover out-of-pocket expenses tax-free.

Geographic arbitrage works for healthcare too. Marketplace premiums and provider costs vary significantly by state and region. Some early retirees factor this into relocation decisions.

Building the Projection Into Your FIRE Number

Instead of a single healthcare number, consider running your FIRE calculations with low, medium, and high healthcare cost scenarios. This shows how sensitive your plan is to healthcare cost assumptions and helps you understand your risk exposure.

Healthcare costs and policies change frequently. Update your projections regularly and consult healthcare and financial professionals for guidance specific to your situation.