Is FIRE Out of Reach?
This could present an attractive alternative
FIRE has always been a topic of contention.
The thought that you need to amass a huge sum of money to achieve FIRE can be intimidating.
It can feel like a long hard slog, with no end in sight.
This can break even the most strong-willed person, making them give up and call it quits.
Fret not, there’s an alternative that’s called Coast FIRE.
Coast FIRE
Coast Fire means “Coast Financial Independence Retire Early”. It lies between traditional retirement and FIRE.
To get to Coast FIRE, we need to save and invest aggressively during our early working years.
Once we reach our Coast FIRE number, we can scale down our savings.
This doesn’t mean we stop work entirely (that’s for the FIRE folks - the extremists).
What Coast FIRE gives us is life optionality, the option to:
Pursue more purposeful work that may not pay as well
Shift from full-time to part-time work
Take multiple sabbaticals and breaks from work
The goal is to have more flexibility and less stress when it comes to our career options.
How much do we need to reach Coast FIRE?
There’re only 3 numbers we need to get our Coast FIRE number.
Our retirement number
This comes from estimating how much we’re spending each year, and multiply that by 25.
If we expect to spend $40,000 per year, then we need about $1mil.
Years till retirement
When do we intend to “retire”?
“Retire” here doesn’t mean not working at all, but pursuing fulfilling work that may pay less.
Expected rate of return on investments
To be conservative, we use 4%, the long-term GDP growth rate of the U.S.
Coast FIRE Number = Future Retirement Savings/((1+ Rate of Return)^Years to Retirement)
For example, if I am 35 and I want to retire at 55, we need around $460k today to reach $1mil by the time we hit age 55.
In essence, compounding $460k at 4% today for 20 years would give me $1mil at the end.
We can get to our goal faster if:
We can compound our money at a higher rate than 4%.
We need less than $1mil.
With inflation sure to eat up our purchasing power ($1mil in 20 years’ time will feel more like $500k), the former sounds easier to do.
If we’ve already hit our Coast FIRE number, congratulations we now have the option to take it easy!
If we’re still some way off our Coast FIRE number (like I am), not to worry and just keep saving and investing consistently.
Should I pursue Coast FIRE?
Coast FIRE might sound good, but it’s not for everyone.
If you have 3 mouths to feed and a huge mortgage over your head, then Coast FIRE might not be suitable for you.
But if you are single with no dependents, then Coast FIRE might be something you want to consider.
Ultimately, it comes down to the individual’s life circumstances.
The less commitments we have, the more likely we can coast.
I hope you enjoyed reading this piece as much as I did writing it.
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