In my research on various personal finance topics, I’ve read a lot of first-person accounts of the FIRE (financial independence, retire early) movement. Websites and books are replete with stories about people saving astronomical portions of their salary, some up to 80% or more. I’m a good manager of our money, but I don’t think there’s any way I could have saved that amount. Recently though I’ve read about an alternative – it still gives you a level of freedom but allows you to spend a little more and still achieve your goals.
FIRE
Before I discuss Coast Fi, think for a minute about the founding principles of FIRE. Essentially, you save as much as you can early in your career, invest it (usually in low-fee index funds), and hopefully achieve an early retirement 30 or more years before your normal retirement age. People working toward this goal will often add second jobs or invest in rental real estate to increase their income, thereby reaching retirement even more quickly than with just one salary.
The problem with FIRE is that you often have to do without for a long period of time before you achieve freedom. Many people aren’t paid high salaries in their 20s, so saving more than half of it may be impossible. Plus, you don’t have the advantage of your investments compounding over 40 years; you must save more to reach your goal in a shorter period of time. It can be a challenge to stay the course.
Coast Fi
Coast Fi looks at saving for retirement a little differently than FIRE, and may provide you with fewer years of extreme penny-pinching. Instead of reaching your retirement goal and then retiring (like with normal FIRE), with Coast Fi you save enough so that your goal will be reached at a specific point in the future. When you reach that amount, you don’t need to save anymore, assuming your portfolio continues to grow at the predicted rate of return.
Let’s say you’re 22, want to retire at 55, and want to use the principles of CoastFi. You assume you’ll need $40,000 per year in retirement and will use the 4% withdrawal per year as your guide. That means you’d need one million dollars when you hit 55. Your goal is to save up your initial nest egg by your 30th birthday so your savings and investment earnings can compound and you achieve your goal of $1M. How much will you need to have saved by age 30? Since your nest egg would have 25 years to grow, you would need to save up $150,000 (assuming 8% growth) by your thirtieth birthday. That’s a far cry from the amount of money you’d need to save for normal FIRE.
Benefits of Coast Fi
While this doesn’t have you sitting on the beach at 30, it may still open a world of opportunities to you.
Freedom to escape the grind. One thing that COVID revealed is that many people really don’t like going into an office every day. The commute, dealing with cubicle mates, incessant meetings…all the drudgeries of office life can wear on someone. Add to that the fact that you have to be constantly reachable, and you can quickly get burned out. With Coast Fi, you are able to stop investing for retirement, freeing up money to perhaps start your own business or even find a job that makes you happier. You aren’t tied to the same income level since retirement is taken care of.
Ability to stay involved in your career. One complaint I’ve heard from people who’ve retired in their 30s is they miss their work. They don’t miss the trappings mentioned above, but they chose this work for a reason and they weren’t quite ready to leave it behind. Coast Fi keeps you closely tethered to a job – you still have living expenses to account for. So whether you go part-time or continue full-time in a less-taxing organization, you may still be involved in your career.
Chance to find a new career that aligns better with your values. And then there are people who are fed up with the whole shebang. They don’t want to be a corporate peon, or they are tired of not making enough money working for the government or a non-profit. Whatever the case, you have the option with Coast Fi to find something better without having to worry about replacing your full salary.
Advantage of more family time. Sometimes it’s not about the job per se, it’s about not seeing your kids or family. Maybe you’ve had to miss vacations when a last-minute project arose, perhaps you’re just missing the nightly dinner with your newborn. Whatever the case, with more flexibility in choosing your job, you will be able to have more flexibility to be with your family.
Provide a more attainable goal. I’m amazed that people have been able to retire while in their 30s. For someone to reach the goals necessary for that to happen requires commitment and a laser focus. Coast Fi presents what most would consider is a more attainable goal, something more people have a better chance of reaching.
Keep an eye on your returns
While there are a lot of benefits to CoastFi, you are depending on achieving a certain return on your portfolio for the next 20 or more years. As we’ve seen in just the last few years, returns can be all over the board. While it’s named CoastFi, this is not a set-it-and-forget-it financial plan. You will need to watch your returns and be open to the idea of adding in more money over time if it’s needed.
By saving a large nest egg, you have options with your life. Some people will find another job and discover a workplace retirement plan they can’t pass up (who wants to leave free money on the table?). Others will happily work part-time at the local plant nursery and check their accounts once per year. If you’re considering FIRE but can’t quite stick to the regimen, CoastFi may be just the option you were looking for.
Photo by Anukrati Omar