BiggerPockets Money Podcast - The Ultimate Guide to Healthcare Costs for FIRE

Episode Date: June 23, 2026

Healthcare is one of the biggest unknowns in any FIRE plan. If you're considering early retirement, self-employment, or leaving a traditional job, understanding health insurance costs could save you thousands of dollars per year and prevent costly planning mistakes. In this episode, we break down the Affordable Care Act (ACA) health insurance, premium tax credits, MAGI planning, and how healthcare costs vary by state. We also walk through a healthcare cost estimator tool that can help you project future expenses and build a more resilient financial independence plan. Resources Featured in the Episode: Healthcare Cost Projection: https://biggerpocketsmoney.com/healthcarecosts/ 2026 Tax Projection: https://biggerpocketsmoney.com/income-tax-projection/ How Health Insurance Works in Early Retirement Blog Post: https://biggerpocketsmoney.com/how-health-insurance-works-in-early-retirement-and-self-employment-2026/ How to Plan for Healthcare Over Early Retirement Blog Post: https://biggerpocketsmoney.com/planning-for-healthcare-costs-over-a-decades-long-early-retirement/ To go beyond the podcast: Kick start your financial independence journey with our FREE financial resources - https://biggerpocketsmoney.com/ Subscribe on YouTube for even more content- www.youtube.com/biggerpocketsmoney  Connect with us on social media to join the other BiggerPockets Money listeners - https://www.facebook.com/groups/BPMoney We believe financial independence is attainable for anyone no matter when or where you’re starting. Let’s get your financial house in order! Learn more about your ad choices. Visit megaphone.fm/adchoices

Healthcare is one of the biggest and most misunderstood expenses when preparing for early retirement or self-employed. And in this episode, I'm going to share a lot of detailed research I've done personally on this subject to help break down everything you need to know about health care in 2026 if you don't have a regular job and are not on Medicaid, for example. That includes Affordable Care Act plans, also known as Obamacare, subsidies or premium tax credits, Medicare, Medicare, cost projections, and the strategies you can use to build a health care plan that supports. your long-term financial goals. By the end of today's episode, you're going to know how to estimate your health care costs in 26 under current law immediately and how to think about health care costs over the course of the duration of your early retirement or self-employment up through the point when you qualify for Medicare at age 65. All right, Scott, let's jump into this episode. Hello, hello, hello, and welcome to the Bigger Pockets Money podcast. My name is Mindy Jensen,

and with me as always is my pre-existing co-host, Scott Trou. Thanks, Minnie. That's a great healthy intro to today's topic. I'm really excited to talk about this. I've spent a lot of time researching this. I have produced four artifacts that we'll link to in the show notes here. One is a discussion about how to think about health care costs in 2026 and get an estimate. The second is a discussion about how to project health care costs into the future over the next several decades. For example, if you're retiring early or yourself employed and plan to get something other than employer health insurance for several decades. The third artifact is a healthcare cost projection tool, which I'm really proud of. This is a calculator that basically gives you an estimate for what your premiums would cost in your 2026, and also maps out under current law what those premiums would look like over the next few decades through to Medicare eligibility. And then the fourth app is a related income tax projection tool because that's really important when we talk about health care costs, because you need to qualify, you to keep your income low enough to qualify for premium tax credits in order to defray these costs. So those are the four tools. We'll get into this in a lot of detail over the course of the day. And the goal I have for today is two parts.

One is to answer the basic question about how health care costs work today for people who don't have regular jobs and are not very low income on Medicaid. So you can get a feel and get comfortable with estimating those costs. You should be able to do that in minutes or seconds by the end of this show. And then the second part of this is going to be to address the nagging discomfort that many people in the early retirement or self-employed world have about what, health care costs are going to look like over the next 20 to 30 years. There's a lot of genuine unknowns, but framing them, I think, is very helpful to folks who want to plan on this. Sound good? Scott, that sounds great. I'm excited to see all of these things when you share them on your screen. And I would like to remind our audience that this might be a really great episode to watch over on our YouTube channel, which is YouTube.com slash bigger pockets money. Awesome. So let's get

into the mechanics and give some answers right away here. Right. So if you're thinking about how do I get health care coverage. Mechanically, it's very easy. This is not a challenge. This is not something to build up in your head. You go to health care.gov and you shop plans. That's it. If you have a state that has a specific exchange, you'll find that out very quickly via Google search. And, you know, for HealthConnect.Vrmont. For example, is the one, the state-specific one for Vermont. But you go there, you shop a plan, you get one. That's it. You have insurance. Scott, isn't it more complicated than that? No, and yes. So it's literally that easy if you're just going to shop it. You might be

pleasantly surprised and get a good answer. But yes, in the sense that this is a really big expense and we need to really have a good framework for how to handle it and think about what decisions we make and how they interplay with health care costs here. So let's start with the Affordable Care Act, otherwise known as Obamacare. Okay, this is the governing law that drives a lot of the health insurance industry right now. There's a whole bunch of complexity behind it, but the basic premise is health insurance companies cannot discriminate against the insured based on preexisting conditions. Right? So if you have a chronic illness, you cannot be denied coverage. They can discriminate or change your charge different pricing based on your age, however. They can also do it based on whether you're a tobacco user. And those are the two major considerations, age and tobacco use. And most other conditions are disqualified with some nuance. But for today's discussion, those are the most important things. So what that means in practice is that as you age in most states, your premiums can rise up to three times the level of a young person's. Right. So if I'm age, 25 in Colorado, I'm going to pay one-third the amount of somebody age 64 the year before they go

on Medicare, what they're going to pay for insurance premiums. Okay? So that's the big, big headline to take away here is that these premiums are going to rise over the course of your early retirement or through, you know, as you age as a self-employed individual. Is that in every state, Scott? It is not in every state there. I think there are two states that are exceptions to that. I think it's in New York and Vermont. And I will specifically call out Vermont as a specific example in this, but then it's very interesting in terms of how, I think it's very illustrative for how the system works and we'll help you understand what's going on here. I also make an assumption here, right? So there's a difference in how we're going to approach health care costs, I think,

if you have chronic illness or pre-existing conditions or poor health or otherwise know that you're going to need to, you know, use up your deductible, your out-of-pocket maximum in many years. But if you're an able-bodied, healthy, early retiree or self-employed individual, I presume that you're going to want to get the lowest cost, the lowest premium insurance plan, the bronze plan, and you're going to have, as part of that, take the highest deductible or highest out-of-pocket max. That makes perfect sense. It's what I do when I shop for insurance. Many of those plans are HSA compatible, which is a very important thing for a lot of people in the fire self-employed community is the triple tax-advantaged nature of the health savings account plan. And so that's what we assume

for a lot of this. Now let's get into a couple of nuances here. One of the things that I think going to surprise people is when they shop insurance, you're going to have one of two reactions. You're going to be absolutely appalled at how expensive it is, or you're going to be pleasantly surprised at how cheap it is. And that's going to depend on where you're located. One of the main artifacts from today is going to be at biggerpocketsmoney.com slash healthcare costs, one word. It's also you can find it in the nav bar if you're using your desktop. So it's right there. And this is a tool I've built. It's an estimator tool. It's meant to be educational and informative. It's not a prescriptive exact estimate. You're exact estimate will be on the exchange, which you can get anytime at health care.gov. That's where you get

an estimate or that's where you get a real quote for how much it's going to cost. It's an estimate. This is a bit, spent a lot of time trying to build a database and trying to help make it useful, but it's not going to be perfect. But I think it will be useful and help you get an idea for how to think about these costs right away. So I'm going to play with my two favorite state examples here. I'm going to start with New Hampshire. New Hampshire is in the Northeast, reasonable income environment. And for my family of four, two 35-year-olds and two kids, My health insurance premiums for an Affordable Care Act compatible bronze health insurance plan are going to be around 12 grand, 11,733. The calculator spits out for this example.

I'm also going to have some out-of-pocket expenses each year that I'm going to estimate as part of that. Maybe about $4,000. You can play with that or change that assumption if you don't like it. If you're watching this video, you may be like, what? That's really cheap. My employer pays a lot more than that for my health care plan. And yes, that's a known, surprising thing in many states, maybe a little. more than half the states, you go through this and you're like, wow, health care costs really aren't

this big blocker to my early retirement or self-employment desires. And my employer doesn't have that much sway over me because of their health insurance. I can actually get a pretty good plan. No problem on the exchange. So does that surprise you, Mindy, how cheap it is in a place like New Hampshire? When you said $12,000, I was like, really? That's super cheap. That is not what I pay. But Scott, let's point out, you're 35. I'm 53. My health care costs are going to be a lot more expensive. Plus, I have a 16-year-old daughter and a 19-year-old daughter. So they are in a more expensive category as well because they are of childbirth age. Knock on wood that they're not going to have kids for any time soon.

You're 53 and Carl's what, 51? Carl's 52. And then we got two kids, 16 and what was the other age? 19. So recalculating that, you're going to pay 16 grand in a place like New Hampshire, right? Still not something that you're like, you know, yes, that's a big number. It's not pleasant. It's a reality in health care in the States.

But you're probably also not like, whoa, that blows up my entire life plan here for that number. Is that a fair reaction? Correct. But, yeah, $16,000 is more what I thought it would be because that's more what I was paying before I got health care. Now, let's play around with this. Let's move across the state border to Vermont. Okay, I'm going to put this back for my families. Remember, I was paying $12,000 a year for my family in premiums if I'm in New Hampshire.

Let's go to Vermont. Now the premium is $35,000. Whoa! That's a huge difference, right? And why is that? It's because every state has different dynamics with the way that they price insurance. There's competitive dynamics for the insurance companies that are allowed on the exchange and how they compete. There's the costs of local care that vary from state to state. And most importantly, in Vermont's specific example is they override the ACA law that allows insurers to charge more expensive health care for older Americans versus younger ones. And so everyone pays the same amount. Right. That results in one of the largest overall healthcare costs pools in the country. I think it may be the largest. I'm not 100% sure, but it's certainly up there. Now, all of a sudden I'm staring down for my family a $35,000 unsubsidized insurance premium before I get the any out-of-pocket expenses and actually use the plan.

So that number is crazy. It's absolutely insane. And by the way, that's the bronze plan. The benchmark, the one that a lot of the math is tied to, is the silver plan. And that's going to be $51,000 a year for a family of four. Did you know that you already have an estate plan? The catch is that your state wrote it. They're called intestacy laws, and they decide who gets your stuff if you don't.

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just on insurance premiums and before we get to using the health care, right? So that's before any deductibles out-of-pocket maxes. This is the highest deductible, highest out-of-pocket max plan. So your health care costs could be much more than this amount every year. That's just, just the premiums for the silver plan. Okay, Scott, at $50,000 a year, you're going to need an additional $1.25 million in retirement money to be able to pay that. That's making Vermont look like not the state I want to retire to. But here's the thing. So yes, that's the headline number. That's why people get so scared about all this stuff.

Now, let me get into some real wacky, crazy stuff here about how this works. This is wild what you're about to see here. Remember, that was all without subsidies. Now, if I'm going to plan on premium tax credits, which exists in 2026 and I should be planning on, if my intent is to use an affordable care act to plan, I should be aware of this number. When I turn on premiums and make sure that my magi is below that cliff, my mattified adjusted gross income, below that cliff. Then my $50,000 premium is offset by $38,000 in premium tax credits. Right? So those tax credits are a direct offset the tax as I pay or are returned to me with a tax refund at the end of

the year. So it's cash that I'll get from the government to cover that. And that will go up to the full amount of the premium here, but no more. Now watch this. This is where it gets crazy, Mindy. Remember we were using a bronze plan previously? Because those credits are pegged as a percentage of your income against the silver plan. In Vermont, I will get the entire premium for a bronze plan refunded to me. So my health insurance is totally free for a bronze plan in Vermont in this scenario. We went from thinking Vermont is an impossible place to retire to health care costs are crazy to. I actually have totally free insurance in Vermont and I'm only responsible the out-of-pocket numbers here. Is that crazy or what? That is crazy. And state of Vermont,

I'm sorry for saying that you weren't a great place to retire to. Arguably, what I'll show you watch this now. Okay. So this is going to make you mad or makes me a little frustrated here. I'm going to go to New Hampshire. Remember, we're same situation. We're back, we're back in New Hampshire. My total premiums for my family in New Hampshire are 12,000, $11,700, right? Rounding up to $12,000. However, because the silver plan is so cheap, right, and I'm benchmarked to that. I have a certain amount of income that's helping me project my Magi here and the premium tax credit. When I switch to the bronze plan, I only get a $2,000 premium tax credit to offset that. So in New Hampshire, my premiums are $12,000, but I

I only get a $2,000 credit. I'm all in for $10,000. In Vermont, my premiums are $35,000, but I get the entire premium covered under this law by taxpayers. So I have zero insurance premium. So we just flipped it, right? Like this, this is why it's so crazy, right? I was like, hey, how do you work this mechanically? You go in the exchange, you get a quote. Well, as you can see, there's a lot more detail here because of the way these dynamics intersect. It's absolutely bonkers that I'll go to New Hampshire, and my plan is literally $20,000, $20 plus $1,000 cheaper, but I actually have to pay $10,000 out of pocket in early retirement because of the way the premium tax credits work versus when I go to Vermont, I pay three times as much for the insurance,

but if the taxpayer refunds me entirely. So this dynamic is really important. It plays out in every state to varying degrees when you net out these items here. As long as you stay below that modified adjusted gross income cliff. And by the way, you can't go too low. Because if you go below the poverty line, below 100% of the poverty line, then you go on Medicaid and you have a whole bunch of other issues. So how am I doing so far? Helpful? This is really helpful, Scott.

When you first said that this is for entertainment purposes only and the real numbers will be on the health care exchange, I thought, well, why would somebody go and play with this health care costs projection calculator that you shared? But this is why? Because you can change the state so easily. And some states, but not all states, have their own. ACA plan so you have to go to their different websites. You could be hopping around a bunch of different websites. This one allows you to take the different states, choose between silver and bronze,

play with all the different variables that you can have. This looks like a great way to spend a lot of time really, really researching what your potential health care costs are. And then maybe you've decided, I live in Vermont. I'm not choosing to take the health care subsidies. Therefore, Vermont is very expensive for health care. I'm going to look at it. other states, oh, New Hampshire's right next door. That's actually more consistent with what I thought I would be paying anyway. I could just hop state lines. Or, hey, I'm going to go down to Arizona. I don't even know if Arizona is a good state for health care. Let's see. I don't know, but let's see, Arizona. Right. So same deal. I'm moving to Arizona. Arizona's in between,

right? $17,000 in total premiums with a $9,000 estimated premium tax credit in this scenario. So in between, I'm paying about, I'm actually paying less than New Hampshire again, which has got to be so, you know, frustrating to the good folk of New Hampshire, the way that their state is one of the cheapest for insurance, but actually costs them the most. So, but yes, Arizona's in between. If you're thinking about early retirement, if you're thinking about moving in early retirement, this is a great tool to just change some of the variables and see what you get. That's kind of the first part of this, right?

is I think we've kind of, we've covered this at the highest level. We should probably spend a minute on Magi, Modified adjusted gross income. Modified adjusted gross income is adjusted gross income, which is your total income minus certain adjustments. It's earning income plus investment income, so capital gains and qualified dividends and stuff, do count. Retirement and government benefits and most other types of income count towards adjusted gross income. And then from there, you subtract things like retirement contributions, HSA, health savings account, contributions, self-employment taxes, and those types of things. And you also can subtract health insurance premium costs from your modified adjust to gross income, but only if you are self-employed

and only from your self-employment income. So you cannot do that if you're an early retiree and do not have any type of self-employment income, for example. So you want to be careful about that. There are real nuances in here that, you know, if you're close to this stuff, if you think you're going to be anywhere in the ballpark, really worth talking to a professional, I think, you know, in this particular domain. So Magi, takes that adjusted gross income and then modifies it further in ways that, you know, sound complicated, but probably don't apply to most people. Specifically, those modifiers are going to be municipal bonds. So if you have untaxed municipal bond interest, that will be added back

to AGI and could disqualify you from getting these credits if it takes you over this cliff, untaxed foreign income. And then the non-taxable portion of social security, which is unlikely to apply in most cases, because most people are not going to be taking social security, but may apply if, for example, your spouse is taking Social Security and you are much younger, for example, or a little bit younger. You've got to be careful about this in here. And again, if you're close, you've really got to pay attention to this. I have also, to help with this, built another tool at biggerpocketsmoney.com slash tax projection, which is intended to help build up the complicated tax positions that many bigger pockets money listeners have and attempt to produce an estimate.

This is not a perfect thing. It's nice. This is for entertainment, educational purposes only. but I think it is useful understanding how taxes are computed in many places, and it also includes each state as well, depending on where you're at and builds through the progressive tax brackets, depending on where you're at. That's the federal. So Colorado, for example, has a flat tax, but California, we will build out a full progressive tax table. So we'll actually do another video on a deep dive on how to use this tool later for bigger pockets of money. But back to health care here. Modified, adjusted gross income is a huge part, maybe the primary, concern or primary planning constraint for early retirees and maybe many in the self-employment

world if you have control over your income and when to realize it because of this dynamic. And it's almost a non-factor. It doesn't really even matter to a large degree for, you know, in the situation I described with a $125,000 income in New Hampshire for this year. And it literally is a $35,000 difference. Flip of the switch if you go over that cliff in Vermont. So it's pretty insane how health care costs work, isn't it? It has always been untenable how health care costs work. And I think they're just getting worse. And I can't wait for them to change. But I've been waiting for a long time. Okay. In practice, what do we do for 2026? Well, if we're an early retiree or self-employed, then the most important planning constraint is, again, not moving over the modified, adjusted gross income limit for our household. I remember that number, that 132,000 or 128,600 cliff, which I would take the more conservative of the two, because that number is cited differently in various sources for this year. But you want to stay below that. That's for a household of four. When you move down to from a household of four to a household of three, that number changes.

It changes again when you move to a household of two or one. So you got to be careful about that number and make sure you go under that. You stay under that number for your household size. Remember that some income like qualified dividends, simple interest from your emergency fund, rental income, and some other stuff may just happen to you in a given calendar year. As a result of keeping your existing portfolio in place, so you need to make sure you're projecting those. And then on top of those, if you're going to have other income that is your choice, like selling positions with capital gains in them, rebalancing your portfolio, doing Roth conversions, doing any early withdrawals from an IRA, like a 72T, you really want to make sure that those decisions are not putting you over these limits in the calendar year and knowingly moving you past these cliffs. And then remember that many Ron's affordable care care plans are health savings account compatible. and the HSA contribution reduces your modified adjusted gross income. So that's an easy and obvious win in euros where you're going to be somewhat close to this

magic cliff to just max out your HSA and that will bring it down by a few thousand bucks there. Again, you can use the tax projection tool to get a very preliminary high level estimate that is not an official one that you should definitely check with somebody else. But hopefully that will be at least helpful or useful to you in this journey. Sound good? That sounds great, Scott. What's next? Okay. So to recap everything for 2026. We talked about magic.

mechanically getting insurance is straightforward. Go to health care.gov and shop your policies or health connect.remont.gov or whatever your state one is if you have a specific state exchange. Location is the single biggest variable in health care costs. And the sticker price on the premiums

for your state may be very different from the net cost you pay after premium tax credits. And that changes with your household size and your income, especially if you go over that cliff. And that means, again, staying under the magi cliff becomes a single most important planning constraint in 2026 in many jurisdictions for many early

retirees or self-employed folks. Okay. So if that's 2026, the second component of this analysis that you have to think about is how to approach health care cost modeling and the context of a financial independence journey. And we're going to move out of the world of fact here, what is what the current law is to conjecture. We have to project here. And this is where people are going to disagree in reasonable stance. I'll present my opinion about how to do this. And you can agree or disagree and modify it how you want. Sound good, Mindy? Yeah, that sounds great. Okay, so let's take my household and I'm going to move me back to Colorado where I actually live. My household of four with two age 35 adults, two children, is going to pay about 14 grand in unsubsidized premiums

for a bronze plan in calendar year 2026. Plus, I always think you have to estimate some out of pocket costs, right? You're not going to go most years paying zero in health care costs. Something's going to come out in the world of health care spending. I estimate four grand for my family across the course of the year. Remember, if I change, my age, if we just insert Mindy's numbers here, these numbers move because insurers can change the pricing based on age. That is not inflation, right? And so we have to think about when we're projecting this, the 4% rule and other retirement rules of thumb as for our cash flow assume constant spending relative to inflation. But health care costs are going to rise and it's not

because of inflation. It's because of this structural feature of the insurance marketplace. And so we have to think about that. So this gives us three problems when it comes to planning for early retirement or self-employment, long-term self-employment, health care costs. The first is that health care costs are inherently variable. The amount of coverage that I'm going to need in each year is not going to be $4,000. I'm not going to spend $4,000 in 2026. I'm probably going to spend much less than that and not need much health care. And in another year, I'm going to spend the entirety of my deductible and my out-of-pocket max, you know, because some event happens. That's why we have insurance. There's to protect against those things. And so that's a challenge. The second is, again,

that those premiums are going to rise because of the way that the healthcare system allows to price based on age. And then the third is that healthcare inflation is real and going to rise very quickly over the next few years and is rising very quickly in 2026 for reasons I'll explain. This gets controversial because people don't like to, you know, hey, CPI includes everything so you can't, you know, assume a higher rate in health care or whatever. But I'm telling you, I think you got it in this case for a number of reasons. I'll make my case and you can agree or disagree. model that I built here does allow you to assume that there is no health care cost rises in excess of inflation if you choose to model it that way. But I choose to default it to a reasonable

number here. So they does seem like the challenges to you, Mindy, or do you have any other ones that you've observed? Well, I want to go back to this comment really quickly. You're being very conservative with your numbers or very aggressive with your inflation. And if you're wrong and it comes in less, then great. You have more money. But if you're aiming for, oh, I don't think it's going to be more than what CPI is. And then it comes in higher when we're in a very inflationary time right now. So plan for an aggressive inflation or plan really conservative numbers because if you're wrong, it's just, it's better to be wrong in the, oh, now it doesn't cost me so much vain than wrong in the oh, I thought I had enough money and now I don't. I agree with that philosophically. And many people

disagree with it philosophically, right? You can go, you can be conservative about everything. You can find every conceivable risk in the world and add it in there and you'll never retire early. And I get that. But I think this one is too important and too large a variable to ignore and sweep it into the umbrella of everything else going on here, especially if you're going to really be close on your numbers over that period. And your plan has a very small margin of safety here. Remember, my household costs will rise drastically as I age. And that will happen gradually over time. It won't happen overnight. But every year, my cost will go up a little bit. So by age 40, If my costs today are $18,000, including my premiums and my out-of-pocket expenses,

then my unsubsidized premiums plus out-of-pocket max will be $20,000 by the time I turn 40 in five years. At age 50, they'll climb to $29,000. And age 60, they'll climb to $36,000, even after both of my then-adult children roll off my plan. I think this is really important, right? What's going to happen with these premium tax credit? This is where I get controversial and people get pissed off, and that's okay. I'm going to say how I feel and you can agree or disagree. But this is not going to continue for decades. Or it's a bad, silly plan. It's a bad plan to assume that the taxpayer is going to fund your early retirement by subsidizing your health care costs for the next several decades. So my model decides to model the unsubsidized premium. It says you're not going to get any of these premiums in retirement. You're going to pay the costs on the exchange today. That's almost certainly too conservative, but not because premium tax credits are going to stick around, but it's because this system's going to blow up

at some point in the next 10, 15, 20 years, I think, and be reported. Either we're going to go to a single-payer system that was Obamacare Affordable Care Act's original intent, or there's going to be some reform from the right wing that's going to allow insurers to price based on lifestyle health or other factors or some combination of that, some technology improvement that's going, I believe, is going to disrupt this industry. But in the meantime, we can't really plan on that, right? That'd be were preposterous for me to model a political reform to the system. So I'm modeling based on what the current law says will happen. Today's prices, right? You can model, you can move this to zero inflation, for example, for the time being here to get an idea of this. But without any inflation,

I know my costs are going to rise because I'm going to get older and my premiums are going to go up. And I should probably also model in a little bit of rising out-of-pocket maximums because age is the number one correlate to health care spend independent of everything else. So I know I'm going to need to spend more on health care as I get older before inflation comes in, as I approach age 65. And by the way, this is all before the retirement spending smile, right? The retirement spending smile research where you spend less as you age applies. It's a real thing.

But it applies to traditional retirees, not to people age 40, you know, or 50 spending less. That's not a likely thing that's not saying I'm planning on. So, anyways, I think that you should plan on paying the full unsubsidized premium over the course of the next, you know, 30 years here. Make sense? Yes, I agree with you, Scott, because. Because someday somebody is going to wake up and say, oh, there should be a net worth component to these subsidies, not just an income component. That's what we got here, right?

I'm saying every year, this number is going to go up over the course of time. And you've got to plan on this, right? This can blow you up if you're not planning on it, right? If I'm straightlining my health care spend at $18,000 per year today, when I'm age 55 and I'm spending $40,000, $22,000 a year more adjusted for inflation, I'm not have a problem on my hands. That can be a real issue for my 4% rule withdrawal. So this engine runs a present value calculation. It says if I'm going to spend 18 grand this year, I'm going to spend 20 grand at age 42 and 32 at age 51 and 36 at age 59, well, those increments, those dollars above and beyond the

$18,000 today, I can perform a present value computation for those. And that number, depending on what assumptions you want to put in place, and you can toggle them, is $250,000 in my situation. So I need $250,000 more than the 4% rule calls for in order to declare financial independence if I don't want to count on premium tax credits subsidizing my health care and my early retirement or self-employment. And that's real numbers that people need to be considering when they are planning for their health care. I'm so glad you included that in here. We're recording this in June of 26. We're halfway through the year. I remember that health care costs went up this year across the board. This was a big news story back in, you know, November, December, January when there were new plans coming on.

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Now, what you're talking about is inflation and I think is a serious discussion here that we need to have because what you're talking about is this observation where last year from 2025 to 2025, insurance premiums before subsidies increased 26% year every year. That's a huge increase. That is health care inflation in the United States, 26% in one year. And I believe that number is going to get worse before it gets better in the next few years. I do believe it will eventually get better because I'm an optimist here. I think that there will be breakthroughs.

But I think for the next few years, it's very hard to come up with the answer about why that number will stop inflating at very high rates here, much less begin to deflate. Now, again, there's a big law change. many people are familiar with as well, where the enhanced premium tax credits that did not have the 400% federal poverty line cliff expired. They were put in place for COVID to help more people, including higher earners, qualify for premium tax credits here. Those expired. And so the premiums that people actually pay net of those tax credits more than doubled year every year from 2025 to 26. There's the health care inflation and there's what you pay and both are going up, but what you

pay went up a lot more on average across in this country in the last year. Yeah, I think it's foolish to ignore or assume that inflation is going to be very low in your health care costs. One thing I want to note here about what happened, right? Because I think this is important understanding this. The Affordable Care Act basically said, everybody's going to have insurance, single payer system here or one marketplace. Everyone's going to have insurance. We're all in this together. And if you don't have insurance, you're going to pay a penalty. Now, in 2017, the The Tax Cuts and Jobs Act eliminated that penalty, right? I think that law went into effect in 2019. And so you saw some people stop with their insurance on the exchange in that period.

You saw a small decline here. Then COVID hit, and they put in place these enhanced premium tax credits, which subsidized, heavily subsidized premiums for many, many people across the country, all about the, you know, extraordinarily high income earners, you know, because they were subsidizing you if your premiums were more than eight and a half percent of your household income. And with cap on income. Now you see in the COVID aftermath a huge surge in marketplace enrollment, in part because of those premium tax credits. Well, they expired. And so KFF, which is a leading authority on this, projects that the number of people in the marketplace, Affordable Care Act marketplace, is going to fall 17% in a single year from 22.5 million to 17.5 million people that are going

to be insured on these plans. Guess who's leaving these plans, right? If I'm no longer getting premium tax credits, and I've got to pay 35 grand in Vermont, and I'm not going to have insurance. I'm probably likely to be very healthy. And so the healthy people are leaving these exchanges and the unhealthy people who are more likely than any care are staying on there. And that's creating a vicious feedback loop that insurers are aware of and price in ahead of time. So those prices rose this year. I think it's very hard to be optimistic that this pattern is not going to continue again in from 2026 into 27, Mindy. I agree. I think it's going to continue until something changes. That's what we got. And

I think that it's irresponsible to not assume that there's going to be larger than expected healthcare cost inflation in here. Now, whether you want to just assume higher inflation in your overall spending target or you want to bump up health care specifically, I don't know, I do think that long term, there's reasons to believe that AI and other technology progress will bring down costs in many cases across the board, perhaps including in health care. But for the next few years, I think this problem is going to get worse before it gets better. We'll see how wrong that is.

And you can laugh at me, like you can laugh at me for many predictions. that I've made over the years that have turned out poorly. Some have gone the way I thought. Some have definitely been misses. But that's what I'm seeing right now based on the data. Scott, this is great, but it's also kind of getting discombobulated. What am I supposed to do? Tell me what to do. I think the first thing is go shop on the exchange today. Just go go on the exchange and look at browse plans, maybe try to get a quote if you're considering getting health insurance on the exchange right now. You can do that at health care.gov. The second thing is if you want to play around with this, go to biggerpocketsmoney.com slash healthcare costs, plug in your numbers and see how age and state

and those types of things change the prices you pay, see if you agree with my assumptions or not. And then this will produce a present value estimate based on the assumptions you want to put in of how much this tool estimates you could pay above and beyond your current premiums and health insurance costs today. And for me, again, in Colorado, that comes out to about a $250,000 present value assumption. that number can change if I reduce healthcare inflation down to zero above CPI. It can be reduced further if I assume I'm never going to have a full out-of-pocket maximum year. You're going to pick up to five years. If you think you're going to have more than five years hitting your out-of-pocket

max and deductible, you should probably choose a different plan than a bronze plan, I think. I mean, that will change the analysis to some degree. But I think that this tool will help you kind of contextualize or give you a concept of the risk profile of this. And it will only take you a few minutes. You play with it one or two times. You get an idea for the framework of the problem. and you can make your own decisions about how you want to put this margin of safety into your financial independence retire early plan or how to think about it as a self-employed individual. Yeah, this is great, Scott. Yeah, all these resources, you can find them.

Go to biggerpocketsmoney.com slash healthcare costs. You'll find the calculator and you'll be able to easily navigate from there to the two blog posts, how to think about health care in 26, health care costs in 2026, and then how to think about health care costs over the course of a full early retirement or self-employment tenure through to Medicare eligibility. We can have a whole other debate about whether Medicare will be the same in 30 years when I'm eligible or not. That's outside the scope of today's show. Okay, Scott, this was a lot of fun.

Thank you so much for building this. I know I'm going to spend quite a bit of time playing around with this. Not only for me, but for my kids, my 19-year-old will eventually fall off of my insurance and we'll need to get her own. And this is something that I need to show her. Not only is the cost of being an adult expensive, it's going to go up every year. I'm having a lot of fun tinkering with these tools. they are education and entertainment only. The data sets change, the laws change.

It could change this year. So think about these a static point in time things here. This is inherently unknowable. And the best thing you can do, I think, is if you have the means and you achieve financial independence or self-employment is FitFi. Get fit, get healthy, and lead a bunch of healthy habits if you have the privilege and good fortune to do so because that is probably the number one thing beyond all of this that will keep your health care costs low over the course of the next 30 years.

Yeah, that's a good point, Scott. FitFi. FitFi. Your muscles are a little bit bigger than mine, Scott. You're looking great, Mindy. That's what I got on health care costs, at least in this iteration. Always looking for new updates, edge cases, tweaks. If you have them, send them to me at Scott, at Bigger Pockets Money,

and I'll try to incorporate them into the tools and my write-ups. I'll evolve the plan or evolve the way I think about this as the law changes, as the data changes, as I get corrected or educated on this. But I'm really not aware of other resources right now that attempting to do this same work. So I'm proud of it and I think it will help be helpful or at least directionally useful for folks as they're thinking about this problem, at least in this year, until the law changes. Scott, I love all of these calculators and tools that you're creating for our listeners. We love to hear from our listeners. If you want Scott to build something different,

if you're having a hard time modeling something, Scott's mind works in a way that nobody else's does. So send him a note, Scott at biggerpocketsmoney.com and ask him to create you something awesome. All right, Scott, should we get out of here? Let's do it. That wraps up this fantastic episode about health care costs in the U.S. in 2026. He is Scott Trench. I am Mindy Jensen saying,

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