Recently, I heard of an adaptation of F.I.R.E. that made my ears perk up – Coast F.I.R.E.. What is Coast F.I.R.E.? For us, it’s a way to achieve work-life balance.
Backstory
As a quasi-F.I.R.E. following couple, my wife and I have saved semi-aggressively so we’d be financially set early. But we’ve never been so aggressive that our lifestyle was compromised. We ate ramen noodles and mac and cheese when we were young. As our income increased, so did our quality of life. But we still saved 25%+ of our income until we reached a tipping point. My wife’s job was causing undue stress and health challenges. Budget cuts and software changes, along with numerous other little things, and one night we said, “Do you need to work?” After I crunched the numbers, we concluded she didn’t.
The caveat is I LOVE what I do and have no desire to retire. So we’ve entered coast F.I.R.E. In order to understand coast F.I.R.E., you must first know what F.I.R.E. is.
F.I.R.E.
F.I.R.E. stands for Financial Independence, Retire Early.
It’s a personal-finance framework focused on accumulating enough assets through aggressive saving, disciplined spending, and long-term investing, to reach a point where paid employment becomes optional far earlier than the traditional retirement age.
Key components:
Financial Independence (FI) – Reaching a net-worth or investment-portfolio size large enough that withdrawals or passive income can sustainably cover living expenses.
Think the “4% rule”. If you can live on 4% of your invested assets annually, you’re financially independent. (E.g., $40k/year spending ? ~$1M portfolio.) (Note: as an advisor that’s done planning for almost 30 years, you can actually spend more than 4% if you factor in social security and other variables. But I digress….
Retire Early (RE) – The optional ability to stop full-time work—sometimes in one’s 30s, 40s, or 50s—once FI is achieved. Many continue working part-time or on passion projects.
Savings rate can reach 50–70%+ of income, but don’t need to. Coupled with smart cash flow budgeting and low-cost index-fund investing, F.I.R.E. is achievable in your 50s without saving 50-70%.
Enter CoastFIRE
Coast F.I.R.E. is saving/investing early so future compounding can lead to financial independence without further contributions. In other words, you have enough that if your money doubles every 7 to 10 years, you can retire without having to save any more. That’s where our story is.
My wife and I can let our nest egg compound until I decide to retire. We don’t have to add anything to it. We will, because I love putting money in my SEP IRA. But it’s nice knowing that if we decide to take a big trip, we can.
Takeaway
F.I.R.E. can be liberating in that you can retire early. But it can suffocate your lifestyle while you’re saving. With coast F.I.R.E., you can keep doing your job if you love it. But instead of saving 25-50%+, when you’ve reached coast F.I.R.E., you can start spending 25-50%+ on things you enjoy, like vacations and golf.
Have you reached coast F.I.R.E.? While I’m a big believer in financial plans because they’re more detailed and bear more confidence, you can always get an idea at https://walletburst.com/tools/coast-fire-calc/.
