Worried about healthcare? Me too. The specter of healthcare as retirement obstacle for us 50+ year old Americans is inconceivable. The fact that healthcare costs so much is inconceivable. As of Dec 31, 2025, the federal subsidies have lapsed without a plan, also inconceivable. Perhaps I should stop using that word.
The Princess Bride was one of the first fantasy novels I ever read(shout out to Bob Kern at Ryan Junior High in Fairbanks, Alaska for the rec!), and it primed me for movie released some 7 years later. Today, that has me thinking of how the ACA cliff affects our generation like the Cliffs of Insanity loomed in the film.
In the US, pre-retiree healthcare is provided by companies as an employee benefit. As a result, retiring before Medicare age at 65 means we have to plan for our own healthcare after we leave employment. So we leave work to enter the fire swamp to buy our own plan through the ACA Marketplace. That coverage varies by state and by insurer. The prospect and complexity of this deters many. In one survey in 2026, 41% of workers said they were delaying retirement due to healthcare costs (Economist Enterprise).
What is the ACA Cliff?
A healthcare plan for a couple in the US can run thousands of dollars per month. This was the problem that Obamacare (ACA) sought to solve by providing subsidies to help those in the market with the high costs of insurance.
But that plan did have some burps of flaming gas. If you make too much income, your subsidies disappeared and you paid more. The ACA created subsidies precisely because the individual market, left alone, prices out the people who need it most — those too young for Medicare and too old to get cheap premiums.
Before 2021, earning more than 400% of the Federal Poverty Level meant your subsidy didn’t shrink — it disappeared
Since 2021, the enhanced premium tax credits from the American Rescue Plan and Inflation Reduction Act replaced a hard income cliff with a gradual slope. These enhanced credits capped premium contributions at a percentage of income instead, with no income ceiling.
Most recently, an ineffective legislative branch of our government somehow took their own poison, the odorless iocane powder that the Sicilian Vizzini took in his wine, and those credits expired December 31, 2025. Additional efforts expired more slowly, like Andre the Giant’s Fezzik being choked out.
Nothing has revived it since, and as of late-June 2026 there’s no live legislative plan to bring them back.
The ACA cliff is at 400% of Federal Poverty level (FPL), where subsidies disappear. That’s making more than
- $62,600 single or
- $84,600 as a couple
If you earn more than that from all sources, you pay more for healthcare – often by a lot.
Inconceivable, you might say, that Congress would let a benefit affecting 22 million people just lapse.
I don’t think that word means what you think it means.
The math of over 400% of FPL
This hits the retire-before-Medicare crowd specifically and unkindly. KFF estimates a 64-year-old’s unsubsidized annual cost could more than triple, from roughly $5,328 to $16,500. A 60-year-old who lands at 401% of FPL instead of 399% could owe roughly $9,600 more a year — for one dollar of income. One dollar gets you a R.O.U.S. (rodent of unusual size to contend with.
That’s the kind of number that should change how you sequence withdrawals in your bridge years to keep your taxable income low. More on that in a moment, but first we visit our friend Inigo Montoya.
Know your Agrippa
Most people approaching the ACA cliff are improvising – or worse, just abandoning the effort entirely by delaying retirement. But Inigo Montoya didn’t show up to that clifftop duel guessing. He’d drilled specific methods of swordsmanship so he was ready.
Inigo Montoya: You are using Bonetti’s Defense against me, ah?
Man in Black: I thought it fitting considering the rocky terrain.
Inigo: Naturally, you must suspect me to attack with Capa Ferro?
Man in Black: Naturally, but I find that Thibault cancels out Capa Ferro. Don’t you?
Inigo: Unless the enemy has studied his Agrippa… which I have.
Early retirees know the subsidy exists, vaguely, the way you know there’s a sword in your hand. They don’t know which state mechanism applies to them, whether it’s durable, or where it stops working. So we went state by state and actually checked states to see what that looked like.
Two things to look for in your search:
- Does your state have reinsurance — and does it meaningfully lower above-cliff premiums?
- Does your state have a subsidy backfill — and does it reach 400% FPL or stop short?
The ACA cliff by state
When Inigo and Fezzik showed up at Miracle Max’s door, his response was immediate: “Look, I’m retired.” Most states looked at the expiring federal subsidy and made the same call — not their problem, not their fight. No mechanism. No pill.
Even the states that have worked hard to replace federal subsidies for ACA can charge a pre-retiree couple over $2,000 a month at an income level of $84,601 — the table shows exactly how much.
We ran the KFF Health Insurance Marketplace Calculator for a couple at $84,599 and again at $84,601 across nine states. Same couple, two dollars of income apart:
Cost for a silver plan in each state:
| zip | MAGI $84,599 | MAGI $84,601 | |
| Washington | 98270 | $701 | $2,704 |
| New Mexico | 87176 | $702 | $2,182 |
| New Jersey | 08619 | $702 | $2,266 |
| Massachusetts | 02201 | $702 | $1,644 |
| Colorado | 80233 | $702 | $2,119 |
| Minnesota | 55408 | $702 | $1,611 |
| Florida | 32856 | $702 | $2,829 |
| Arizona | 85018 | $702 | $2,013 |
| Alabama | 36116 | $702 | $2,643 |
| National Average | $700 | $2,598 |
One dollar over the cliff. That’s your R.O.U.S.
Our home state of Washington was of course our focus here. But here’s how some states are currently dealing with the ACA cliff as described by Billy Crystal’s Miracle Max:
“It would take a miracle” — states where reinsurance lowers the fall
The only mechanism that meaningfully helps above 400% FPL is reinsurance — a program where the state absorbs a share of insurers’ highest-cost claims, allowing them to price plans lower for everyone, subsidized or not. Two states in our table have it and it shows.
Minnesota has run reinsurance since 2017. In 2026, that program keeps premiums roughly 47% lower than they would otherwise be for unsubsidized enrollees. At $84,601, a couple in Minnesota pays $1,611/month — the best outcome in our table, and $987/month less than the national average. The waiver runs through 2027, with legislation in progress to extend it further.
Massachusetts runs a similar reinsurance program alongside ConnectorCare, its state subsidy for enrollees under 400% FPL. ConnectorCare doesn’t help above the cliff — but reinsurance does. At $84,601, Massachusetts comes in at $1,644/month, the second-best outcome in the table. If you’re in either of these states, you’re still falling off a cliff. You’re just falling a shorter distance.
Roughly 18 states have active reinsurance programs in 2026 — including Alaska, Maine, Oregon, Montana, Idaho, Delaware, and Nevada among others not in our table. We didn’t run every state. If you’re in a reinsurance state, run the KFF calculator at both sides of $84,600 before assuming your above-cliff cost matches the national average.
“…only mostly dead” — state subsidies that help, just not at your income
Several states stepped up with real money to replace the lost federal subsidy — but their programs target enrollees well below 400% FPL. For a pre-retiree couple earning near or above the cliff, these programs are largely beside the point. The cliff still bites the same way.
New Mexico committed roughly $38 million across its regular and October special sessions, fully backfilling the lost federal subsidy for enrollees under 400% FPL, with the 2026 legislature extending that coverage through mid-2027. Base premiums still rose 35.7%, but lower-income enrollees were protected. At $84,601, a New Mexico couple still pays $2,182/month.
New Jersey stacks its own NJ Health Plan Savings subsidy on top of federal credits for lower-income enrollees. At $84,601, the table shows $2,266/month — no meaningful advantage above the cliff.
Colorado put $100 million into its new Colorado Premium Assistance program, adding $80/month for the primary applicant and $29/month per dependent. The funding is one-time, revisited year by year. At $84,601, Colorado comes in at $2,119/month.
Washington gets mentioned often as a state that stepped up, and below 250% FPL that’s true — Cascade Care Savings adds $55 per member per month for lower-income enrollees. But the program cuts off at 250% FPL — well below where most pre-retiree income lands. Worse, Washington’s silver loading, a markup on Silver plan premiums designed to inflate federal subsidy amounts for those who qualify, punishes anyone who falls off the top of the cliff. At $84,601, Washington charges $2,704/month — the highest in our table, worse than Florida, worse than Alabama. A well-intentioned mechanism that helps lower-income enrollees get bigger federal credits becomes a liability for anyone on the wrong side of 400% FPL.
“You rush a miracle man, you get rotten miracles” — no mechanism, no cushion
For states with no reinsurance and no state subsidy program, there is nothing above or below the cliff beyond the standard federal credits that no longer exist above 400% FPL. This is most of the country. MoneyGeek’s 50-state breakdown documents the full damage: https://www.moneygeek.com/insurance/health/aca-subsidy-cliff-2026/
The range runs from modest decreases in reinsurance states to a $3,948 annual increase in Arkansas. Non-expansion, non-reinsurance states concentrated in the South averaged roughly 29% premium growth versus about 9% in the Northeast. Florida at $2,829/month and Alabama at $2,643/month in our table show what the unprotected cliff looks like. Arizona is at $2,013/month — better than Florida but still well above the reinsurance states. The difference between Minnesota and Florida at the same income, same two-dollar overage, is $14,600 a year. That’s not a rounding error. That’s a planning variable.
Unfortunately, this isn’t the “as-you-wish” world imagined by William Golding, but rather the the wild west of the US health insurance marketplace. And yes, our analogy is beginning to break down.
Withdrawals and MAGI
Miracle Max helps us understand the landscape, but that doesn’t conjure our own little miracle pill. For that, the KFF Health Insurance Marketplace Calculator is our “As You Wish” tool, updated for 2026 premiums. Enter your age, income, and state, and you’ll get an actual subsidy estimate to help you plan.
Once you have your number, work backwards. While this is a well-known concept, the intent here is to do it on purpose three to five years out instead of discovering the cliff exists when your 1099s show up in March.
Qualified Roth withdrawals and brokerage withdrawals of contributed capital generally don’t count toward MAGI. Traditional 401(k) and IRA withdrawals do, as do most other income sources including Social Security. If you’re bridging early retirement to Medicare, which accounts you draw from first can matter as much as how much you spend — especially within a few thousand dollars of a threshold.
HSA contributions, Roth conversion timing, and draw order are levers you pull before December 31 each year. Not after.
Our own 2029 ACA cliff math
One of us plans for 2029 at 59, the other the following year at 60.8. If neither touches Medicare until 65, we’re both standing at the base of this exact cliff — in Washington state, which our table shows is the worst above-cliff outcome of any state we checked.
Managing our MAGI under $84,600 is a savings of $24,000 per year! Functionally, that means making $86,599 is the same as making $108,601, which is mind-blowing to think about. Imagine being the dread pirate Roberts and having to work one more year instead of passing it on to Westley… because of healthcare. A pirate might say “Aargh”, but for me this is just “Ugh.”
In Washington state, Cascade Care Savings helps enrollees below 250% FPL, well below where our income will land in our bridge years. For us in Washington, getting the income sequencing wrong doesn’t just cost us a few hundred dollars. It costs us $2,000 a month. If you want to see how directly healthcare costs move your retirement plan’s actual odds, try the Retirement Probability Calculator. Run 2,000 Monte Carlo simulations once with your annual healthcare assumption both under and over the 400% FPL threshold and see how far your success probability moves.
The Cliffs of Insanity are climbable. Some of you have a rope. Some of you are free-climbing. Know which one before you’re already halfway up.
“Good luck storming the marketplace”
Tony Markey, MBA, founded DIY Retiree to provide free retirement planning tools and straight-talk guidance for pre-retirees managing their own financial futures. Read more about his story here
More references:
Economist enterprise survey on delaying retirement: Benefits 2.0
HHS on federal poverty levels: https://aspe.hhs.gov/topics/poverty-economic-mobility/poverty-guidelines
Another great moneygeek article regarding 59 year old health insurance premiums: https://www.moneygeek.com/insurance/health/aca-premiums-age-59-in-2026/
Geek out over Princess Bride fighting dialogue here: Fencing Language in “The Princess Bride” |