How the New Tax and Spending Bill may create momentum towards CoastFIRE

The recently passed "One Big Beautiful Bill" will have a significant impact on early retirees in America.  For the community of Americans pursuing Financial Independence and Retire Early (FIRE), the healthcare provisions in this legislation will increase expenses for most early retirees, and may make alternatives such as CoastFI and Expat FI more affordable and feasible in some cases.  While there are other elements of this bill that actually benefit early retirees, this article will focus on the healthcare changes specifically, and their potential impact.

Healthcare Cost Changes

Starting in 2026, enhanced ACA premium tax credits will change, causing health insurance premiums to rise for early retirees. Those earning above 400% of the federal poverty level ($62,600 for individuals, $128,600 for couples) could lose subsidies entirely.  

This may not impact those with a higher income or are currently still working and receiving employer sponsored healthcare, however.  This is also coupled with potential premium increases proposed by insurance companies to cover the cost of fewer individuals opting to carry health insurance.

Additionally, and arguably the main threat to early retirees, is the Medicaid/ACA work requirements starting in 2027, creating a "cliff" for lower-income early retirees. Those who qualify for Medicaid but can't meet the 80-hour monthly work requirement will not only lose Medicaid coverage but become ineligible for any ACA marketplace subsidies – forcing them to pay full premium prices regardless of their income level.  This is a significant challenge as it may force early retirees to maintain 20+ hours of part time work to potentially bring coverage costs down.

For early retirees living off investment income or rental properties, passive income sources don't count toward work requirements, and business income is particularly tricky or unclear on how to account for the 80 hours. 

Essentially, this change looks to promote work regardless of readiness to retire by creating a health insurance premium problem for early retirees managing cash flow.  The idea behind it is to generate more tax revenue and social security revenue, and to drive further economic development from more hours worked.

Ultimately, this may lead to people choosing to reduce their hours, or partially retire earlier than expected, and simply work part time longer to maintain eligibility to reduce premiums.  This also changes some of the general principles around early retirement math, specifically the 4% rule, which for some, may need to be revised to a higher percentage to account for potentially higher healthcare costs.

Alternative Strategies:

Coast FI

Healthcare premium changes are likely to accelerate interest in "CoastFI" – a modified approach to financial independence where individuals save aggressively early, then "coast" in lower-stress, part-time work until traditional retirement age.  I have linked a more detailed blog on this above.  

CoastFI offers several advantages in this new landscape:

• Part-time work (20+ hours weekly) can satisfy Medicaid work requirements

• Some employers offer health benefits even for part-time workers

• Lower stress than complete retirement while maintaining financial security

• Flexibility to increase hours if healthcare costs spike

A silver lining in this is the idea that easy part time work that is enjoyable may actually lead to a happier retirement for some, as it is common for those who fully retire to seek out work anyway out of boredom.  This provides a stronger sense of purpose for some.  

Lastly, in some situations, utilizing a coast FI strategy may allow one to reduce hours or ease into retirement earlier than expected if they have already reached financial independence.  An example of this is below for a couple considering early retirement:

A couple, who are already financially stable with growing savings planning to retire at the end of 2027, who are currently 58.  They work 40 hours per week currently.  They may consider revising this to both reduce hours to 20 at the end of 2025, and work until 2029, earning enough to cover their expenses, or until new legislation is adopted.  This allows for reduced premium costs in some cases for health insurance, while still working the same amount of hours they previously planned on.  

Expat FI

For those looking for a solution more extreme, moving out of the US to maintain low monthly costs could be on the table.  Moving abroad comes with its own set of challenges, costs, and other cultural and lifestyle factors that should be considered beforehand.  

It does have the potential to dramatically reduce the cost of healthcare in retirement and overall expenditures, but one should carefully understand all aspects of this before going forward.  In all likelihood, I believe that this may be sought after similar to CoastFI more frequently given the generally lower cost of living associated with living abroad.

Other Healthcare Alternatives for 2027 & Beyond

Here are some other alternatives to look into related to health insurance.  

• Health sharing ministries offer coverage at roughly half the cost of traditional insurance, though with payment uncertainty.  This article breaks down what these are in more depth.

• Catastrophic plans combined with health savings accounts for emergency coverage.

Both of these would likely be less costly, but could leave gaps in coverage.  In all likelihood, we would likely see more people choose catastrophic health plans for a reduced premium if they have the assets and cash on hand to cover basic health necessities out of pocket, and are relatively healthy.

There are many other changes in the new bill that impact early retirees that I plan to cover in separate posts.  In sum, these new rules by no means kill early retirement, but alter the strategy intended to achieve it.  I conduct complimentary initial sessions and can provide further guidance on whether or not it makes sense to review your own strategy. I have helped several retire early with a proactive plan of attack to combat risks to their plan.  Feel free to use the link here if this appeals to you.