She converts $46,000 to a Roth in 2026 — a move that is recommended constantly, and on its own terms a sensible one. It puts her income at $64,000 against a threshold of $63,840. Over by $160.
Worked example · computed live
Can I retire at 62, three years before Medicare?
Watch the model work through one household’s numbers and uncover the $7,900 that lands a year after the decision that caused it.
Her health subsidy, two years running
None
2027 — because 2026 income was $64,000
$659/mo
2028 — because 2027 income was $18,393
The cut-off is $63,840, and one ordinary decision put her $160 over it. Because the subsidy is worked out from last year’s income, the consequence arrives a year after the choice that caused it — which is why almost nobody sees it coming.
Two years running
Subsidy eligibility does not taper: at $63,839 the credit is worth roughly $650 a month, and at $64,000 it is worth nothing at all. Every other number in a retirement plan moves gradually. This one falls off an edge — and there is no marking at the edge. This is why the whole plan needs to run.
Renee Alvarez
62, Tampa, Florida
Renee is 62, single, and stopping work this year in Tampa. She has $350,000 and three years to cover her own health insurance before Medicare starts.
What they have
- Taxable
- $60,000
- Tax-deferred
- $270,000
- Tax Advantage (Roth)
- $20,000
- Social Security at 67
- $2,400/mo
- Other income
- $1,500/mo
- Roth conversion
- $46,000 at 62
- Spending
- $3,400/mo
- Health cover before Medicare
- $780/mo
What they’re asking
Can I retire now, or do I have to hang on three more years for Medicare?
I did a Roth conversion because everyone says to. Could that cost me my health subsidy?
If I take more from the 401(k) this year, does anything else change?
She is here for one rule that catches people every year and is almost impossible to reason about unaided: the health-subsidy cliff. It is not a wealthy person’s problem. It is specifically a problem for people who are not wealthy.
The report works through these in its own order. Every one of them is answered — the answers are gathered at the end.
Run the numbers.
The full report is below, computed in your browser from exactly the figures above. Nothing is withheld and nothing is a screenshot — the controls in it work, and moving one re-runs the whole projection.
Now look at 2027, not 2026. Her subsidy is zero — roughly $7,900 gone — because the credit is set from the previous year’s return. Twelve months separate the decision from the bill, which is why almost nobody connects the two.
And in 2028 it comes back, at $659 a month. The cliff releases as sharply as it bites. Nothing about her plan changed; only the year did.
You now know enough to know who to call
A licensed ACA navigator, or a CPA
“What is the benchmark plan in my county, and where exactly does my cliff sit this year?”
We model the cliff against the premium entered here. Your actual subsidy depends on the benchmark plan where you live, and those vary by more than most people expect.
Their questions, answered
What the report told them
Every figure below comes from the report above — nothing here is worked out separately, and each answer links to the stop that shows how it was reached.
“Can I retire now, or do I have to hang on three more years for Medicare?”
You can, and on a steady return the money reaches 100 — but only just, with $31,402 left. The stress test is where the real answer sits: 115 of 300 paths last that long, 38%. Waiting until 2029 takes that to 77%. What the difference buys is the three years before Medicare, when you fund your own cover with no employer behind it and no certainty of help.
“I did a Roth conversion because everyone says to. Could that cost me my health subsidy?”
Yes — and it did. The $46,000 you converted in 2026 put your income at $64,000 against a cut-off of $63,840. Over by $160. Nothing happened that year, because the credit is worked out from the previous year’s income: your 2027 subsidy was zero instead of roughly $650 a month, about $7,900 across the year. In 2028, with the conversion behind you, it came back at $659. The conversion may still be worth it for the tax it saves later — that is a real calculation, and this report does not make it.
“If I take more from the 401(k) this year, does anything else change?”
Before 65, yes — more than the tax on the withdrawal itself. Money out of the 401(k) is ordinary income, and income decides next year’s health subsidy. Close to the cut-off, a few hundred dollars more withdrawn can cost the entire credit twelve months later, which is exactly what happened to you in 2027. After 65 the cliff disappears and Medicare surcharges take over on a gentler slope. The year-by-year table shows which years you are standing near an edge.
What we could not tell them
Whether the conversion was worth it anyway. Lower required distributions later may outweigh one year of full-price cover — that is a real calculation, it depends on figures she has not given us, and we will not guess at it.
Your turn
Renee’s subsidy cliff was hiding a year in the future. Whatever is hiding in yours, the same model will find it.
Or read another household — all six are here. Each one reaches a different limit.