What is Coast FIRE? Should you pursue this instead of vanilla financial independence?

Financial Independence and Retire Early (FIRE) is a movement that has pervaded the mindset of young working people who are keen to take early retirement in their 30s or 40s. 

Being financially independent is crucial to retire early and hence the term (Financial Independence Retire Early) tends to strike a chord with some young people. 

Nevertheless, FIRE also has some sub-variants, each catering to the proponents with unique characteristics. Coast FIRE, for instance, is one such category that essentially caters to FIRE followers who want to go a little slow in their savings and are open to the idea of working a little in their retired life.

What is Coast FIRE?

This is a part of the FIRE movement wherein would-be retirees focus on front-loading of savings but are willing to work in their retired life too in order to meet their living expenses. 

The savings regime under Coast FIRE is less intense but makes the most of compounding. The process is gradual so that the retirees just Coast into their retirement. The key idea behind Coast FIRE is to cease savings during the later stage of retirees’ career.

This can be achieved through the power of compounding over a period of time which can be as long as a couple of decades.  

What are the advantages of Coast FIRE?

There are numerous advantages of Coast FIRE such as the flexibility and the initial convenience of lower savings. Some of the key advantages of Coast FIRE include the following:

A. It does not focus much on intense saving. So, one can save and invest more than usual but not intensely enough to sacrifice the current joys and pleasures of life.

B. This is quite flexible and in case it takes a little longer to save adequate savings to be able to become financially independent, it is considered fine. 

C. Since this movement is open to the idea of working in the retired life, it does not require massive savings to achieve the goal.

How is it different from FIRE?

The concept behind the two versions (FIRE and Coast FIRE) is quite similar but still distinct in its own way. 

Under the broader concept of FIRE, the retirement corpus is meant to be colossal and retirees are supposed to withdraw a small portion from this (say 3 to 4 percent each year) whereas in the Coast FIRE, retirees have to save only sufficient money for the big expenses such as children’s education, emergency fund and even for holidays, but not to meet the living expenses. 

So, Coast FIRE encourages its proponents to front load their savings so that they don’t need to worry about saving at a later part of their career. 

Consequently, one has to take up a low-paying job to meet the living expenses.    

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Published: 20 Dec 2023, 09:08 AM IST

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