Can You Afford to Retire Early Because of Obamacare?

You may be eligible for an insurance discount -- and that may free you from needing employment for coverage.

Mar 16, 2014 at 7:30AM

Studying the long-term effects of the Affordable Care Act, the Congressional Budget Office recently projected a drop in hours worked equivalent to having 2 million fewer full-time workers in the workplace in 2017. Several factors play into this forecast, but one major driver is the flexibility offered by available affordable health insurance. So how will the new law affect your ability to retire early?

You may be eligible for deeply discounted health insurance
Insurance premiums for older men and women are expected to drop by 19% and 32%, respectively, under the Affordable Care Act, according to a recent study. This will decrease the amount of out-of-pocket premium dollars this population will need to spend on health insurance, meaning they will need less money to cover health expenditures.

Furthermore, health insurance companies are no longer allowed to refuse coverage or increase premiums based on pre-existing conditions or the age of the enrollee. Before the ACA, many Americans needed the insurance benefits offered through their work -- and therefore stuck with a full-time job. But if health insurance is available at a lower cost, older Americans could choose to retire and purchase coverage through the exchanges.

Premium costs are expected to drop thanks to tax credits -- essentially discounts on monthly premiums. Enrollees can qualify for tax credits based on their family size and income, and this may allow them to work less or not at all. The ability to purchase affordable health insurance is not the only reason people may consider working less: Premium costs decrease as income decreases, so there is an incentive to work less and therefore to earn less. The regulations for the 48 contiguous states are:

  • $11,490 to $45,960 for individuals
  • $15,510 to $62,040 for a family of 2
  • $19,530 to $78,120 for a family of 3
  • $23,550 to $94,200 for a family of 4
  • $27,570 to $110,280 for a family of 5
  • $31,590 to $126,360 for a family of 6
  • $35,610 to $142,440 for a family of 7
  • $39,630 to $158,520 for a family of 8

Community rating restrictions require health insurance providers to offer policies to their costliest beneficiaries at no more than three times what they charge to their least-costly ones -- regardless of health status. As a result, older Americans will, on average, see a 13% drop in their premiums -- as opposed to a 75% spike in costs for the youngest group of insured Americans.

This drop in cost for older Americans may mean less of a need for employer-based insurance, less money needed in their 401(k) accounts, and, therefore, less time spent in the workforce.

For example, using the Covered California shop-and-compare tool, a couple in San Francisco, both age 55 and with a household income of $60,000, could find bronze coverage for $2 per month after premium tax credits. While not all prices are so low, this exemplifies just how affordable some plans can be.

Medicaid expansion may be your ticket
Medicaid is expanding in some states, and this expansion will cover a group of newly eligible individuals: people between 19 and 65 who have an income below 138% of the federal poverty level ($15,856 this year for a single person), meet citizenship requirements, are not incarcerated, and do not qualify for Medicare.

The expansion of Medicaid benefits is made possible through federal funding mandated by the ACA, and will result in a having higher number of Americans qualify for additional health-care benefits -- making early retirement possible for some. Beware, though, that Medicaid expansion has not been approved in all states. You can find information about your state here.

Some important care is now free
Marketplace insurance plans cover a set of free preventive health benefits that are not subject to a copayment or deductible. Certain tests and screenings have specific criteria based on health and age, and some may be more applicable than others, so don't worry about getting every screening just because it's free. There are some screenings that everyone should consider getting, and women have an additional set of benefits to take advantage of. While these free benefits are an exciting part of the Affordable Care Act, know that they are free only when performed by an in-network provider.


Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers