Can You Coast FIRE? A New Early Retirement Strategy

Have you ever heard of Coast FIRE? It’s a fresh approach to Financial Independence, Retire Early that doesn’t mean walking away from work altogether. Instead, Coast FIRE is about saving aggressively in your early years so your investments can grow to cover retirement, giving you the freedom later to focus on passion projects, flexible work, or simply enjoying life without the financial pressure. 

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Chapters

• 1:01 What Does 'Coast FIRE' Mean in Retirement Planning?
• 5:43 Who Can Actually Coast FIRE?
• 12:14 To Keep Contributing into Your Retirement Plan or To Stop?
• 13:03 Having Career Freedom with Coast FIRE
• 17:39 Your Life Changes & So Should Your Financial Plan

Transcript

You are listening to The Wealth Mindset Show, where Hixon Zuercher Capital Management's team of finance professionals, portfolio managers, and a life coach come together to tackle complex topics in finance and retirement planning so you don't have to. From investment strategies and wealth management to tax planning, retirement income, and aligning your money with your values and purpose, the Wealth Mindset Show offers the tools to thrive.

Austin Wilson:

All right. Hey, hey, hey. Welcome to the Wealth Mindset Show, where our Hixon Zuercher team dives into conversations about managing wealth, navigating retirement, and making smart decisions for a secure, meaningful future. I'm Austin Wilson, director of Investments at Hixon Zuercher Capital Management.

Josh Robb:

I'm Josh Robb, director of Wealth Management at Hixon Zuercher Capital Management. And today we have Jordan Shaw joining us as one of our financial advisors to talk about a topic that this is a subtopic of something we've hit on before, which is the FIRE movement, which FIRE stands for financially independent, retire early, F-I-R-E.

Austin Wilson:

And we had an episode a couple of years ago about this.

[1:01] - What Does 'Coast FIRE' Mean in Retirement Planning?

Josh Robb:

Yep. So this is a specific version of FIRE. And what we're talking about is financially independent, retire early. Listen to that episode to get the gist of it. There's different ways of going about it.

Austin Wilson:

True.

Josh Robb:

How do you consider whether you're successful or not? Your approach to how you get there and when you get there, the amount of effort you put in on the front end versus later, all that stuff. This is one version and it's called a coast FIRE.

Austin Wilson:

And we're not talking about what happens all the time in California, coast FIREs.

Josh Robb:

No, this is not a brush fire.

Austin Wilson:

This is not about a brush fire or either coast actually. This is about looking at your situation and determining maybe you've saved enough early on that you can coast.

Josh Robb:

Yes, it's coasting into.

Austin Wilson:

It's a verb, not a noun,. And let that money grow on its own and you can slow down your retirement savings and still hit your goals. So we're going to talk about how that works. We're going to talk about where it makes sense or where it doesn't make sense and how it might fit in to you having a fulfilling career and life. So you already hit on it, Josh.

Josh Robb:

Yes.

Austin Wilson:

coast FIRE means we're honing in on fire, financially independent, retire early, but we're talking about the coast part of that, which is can you do a bunch on the front end, essentially front load your savings and then just kind of chill out and have a lot of flexibility going on and going forward from there. So what does that look like?

Josh Robb:

Yeah, so what it looks like is, again, there's going to be some math involved here and everybody's different because how much they need to live on all those things.

Austin Wilson:

True.

Josh Robb:

So when we're talking some of these, we're going to use some general numbers and terms. So you're going to have to find out for yourself what your numbers are to make this work. But what it says is, I know how much I need to spend when I'm retired. So $50,000, 70,000, whatever the number is. And then most people in the FIRE movement use a 4% withdrawal rule. That's kind of the old rule of thumb. They use that as their reference point. So in a sense, I need 25 times that living expense to know what my lump sum is to give me the money for the rest.

So if it's $50,000, 25% of that is 1.25 million. All right. So if I have 1.25 million, I can take $50,000 out per year for the rest of my life and should have enough to survive. Now should, because it all depends on markets and all this stuff. But historically speaking, taking 4% out for the rest of your time is a good rule of thumb. So that's their calculation. So then it says, okay, if I need 1.25 when I retire to start this withdrawal, how much do I need today that will grow to be there when I want to pull the trigger? And the idea there with this coast FIRE is once I get to that saved amount, I'm done saving.

Austin Wilson:

You can coast.

Josh Robb:

I can just coast. It'll grow on its own and I will have what I need when I'm ready to retire. So you got to know what age do I want to retire, how much do I need to live on? And then backs the calculation all the way back to, and then what year will I be able to save enough so then I can coast the rest of the time?

Austin Wilson:

Absolutely.

Josh Robb:

So a lot of math there, but that's the gist of coast FIRE is backing into a number to say if I am 30 years old, how much do I need at that age to coast into have enough at retirement and let's say retire early is 50. So how much do I need at 30 to have enough at 50 to take the rest out going forward?

Austin Wilson:

Jordan, what's that make you think?

Jordan Shaw:

Yeah, I think that this is something where everybody kind of is doing these calculations regardless of if you're going fire, coast FIRE, or regular, whatever you want to call that, it's just called retirement, normal retirement. So it's a matter of what's different with FIRE and coast FIRE is the priority is as early as I can possibly do this or as early as I can while still being able to maybe work a little bit or provide some additional income. That's where everything is focused.

And it does focus around what can I spend or what do I have to save and things like that. But you always say this, Josh, you can retire whenever you want. It's just a matter of how much can you spend.

Austin Wilson:

What you do with it, yep.

Jordan Shaw:

I could retire tomorrow, but I could afford a Happy Meal a year and that's it. So you have to know realistically what you're looking for, but it's what are your priorities? And the people who are specifically looking at coast FIRE are saying, how can I build flexibility into my life as early as possible?

Josh Robb:

Yeah, because that flexibility comes, if I know I don't need to save anymore, my need for income goes down because all I need to do is take care of today's living expenses.

Austin Wilson:

True.

Josh Robb:

I don't need extra to save for the future because that compound or growth of my bucket will get me where I need to be. And that's the other factor I didn't talk about is how much are you assuming it grows by, and that'll matter based on your allocation.

[5:43] - Who Can Actually Coast FIRE?

Austin Wilson:

Totally. So the next question, which is logical to me is who can actually coast FIRE? And I have a couple, here's some interesting options. Number one, crypto billionaires who live in their parents' basement, those probably could coast FIRE. Tech people working at NVIDIA who have $100 million of stock options can probably coast FIRE and any other ideas?

Josh Robb:

Well, and again, the whole point of the FIRE movement is taking a very focused approach on saving to get you to a point where you are financially independent. That's the first part of that FIRE acronym. And the idea there is my assets are enough to take care of me. And that retire early is a relative term. Early to what, were you planning on versus where you go.

So yeah, who can do this? Anybody who's willing to front load their savings, and we kind of talked about that. It's just saying, let's say I am a 20-year-old just getting out of college and I'm saying, okay, I got a good job. I don't need as much of this. I could spend it, but I don't need all this income early on. If I start saving, I'm going to just accumulate. And it may not be like you said, like, oh, I made the right decision on crypto, now I got a ton of money, or look at all these stock options. It could just be from 20 to 30, I just have a higher savings rate. And then I hit that accumulation number to say, now this can continue to grow from 30 to 50 and I'll have what I need.

And then at 30 that person who's doing this coast FIRE could say, okay, I may not have to do this high stress job. I could pivot to something that gives me more freedom, more flexibility, and earn enough just to take care of my needs. Or you take that extra money, keep the job, and you can save and shorten your retirement period or spend it on those things you want to do anyways. It just gives you the freedom. That's the whole point of it.

Austin Wilson:

You're giving up something no matter how you look at.

Josh Robb:

There's always a trade off.

Austin Wilson:

When you're being a really aggressive saver young, that's great, that's an option, but you're giving up spending now, and joy and fulfillment in terms of what you can do with your family or what that is now in favor of doing it later. It's the other way. If you do everything you want to do now and don't save very much, you're going to have to live a different life as you get further along. It's all puts and takes.

A couple other options of people who can realistically look at this because yes, my Bitcoin billionaire, yes, that was kind of a joke, but people who just do really great at systematically maxing out retirement accounts at a young age are probably going to do a pretty dang good job of retiring at least earlier than their peers. That's just math. That has more time for money to compound. And we know that time is going to help.

Josh Robb:

And that's when you look at these, the sooner I do this or sooner I focus on this, the less I need to save. Because again, the compounding is the key here. So in my example, a 30-year-old versus a 40-year-old making this decision to try to get to coast FIRE, that's a significantly different number from 30 to 40. It probably almost doubles on what you need to get that retirement.

Jordan Shaw:

You know who can do this?

Josh Robb:

Yeah.

Jordan Shaw:

DINKs, that's another acronym. DINKs can do this. Dual income, no kids. You've got the flexibility right there.

Josh Robb:

You can do this.

Austin Wilson:

D-I-N-K, dual income, no kids.

Josh Robb:

You can retire at 40.

Jordan Shaw:

Yep.

Austin Wilson:

That is very true. Jordan and I actually talked about this before we even had this conversation. It's like I feel like this whole movement, they're not geared at a single income house with kids and a wife. These people, unless you're willing to forego doing anything with your family, are probably going to be working a while, which is why you should do what you love with who you love.

Josh Robb:

Or kid labor.

Austin Wilson:

Or kid labor. We got to work on that. There's some labor laws around this. I'm going to have to talk to HR. A couple other options. Maybe you had a inheritance. There's a lot of generational wealth passing along. These people are prime for doing this because it front loads their retirement savings without them really having to do much saving on their own.

Josh Robb:

Oh yeah. You may be working hard and then all of a sudden-

Austin Wilson:

Million dollars drops in your-

Josh Robb:

This lump sum shows up, and it doesn't even have to be a big number like that. It may be just enough to get to that threshold where then it will compound and grow. So again, it doesn't mean you stop working, it just means at this point you just need to cover your expenses. So you're right, it may not even be a million dollars, it may be a couple hundred thousand, but that was all you needed to get your savings up to that number to then let that coast the rest of the way in.

Jordan Shaw:

I'm going to add a caveat to that mindset too, though. There is a sense of sustainability and longevity to coast FIRE. You need it to be able to provide for an even longer retirement. So the thought there with the inheritance or something acquired quickly, you need to have good management or know someone who can help you manage it. Because there's a proverb that says wealth gained hastily will dwindle, right? But little by little, the one who gathers little by little will acquire wealth. So it's just something to think about. You also need to have the long-term mindset. Even though you're doing things in a compressed time to build wealth, it does need to have both.

Austin Wilson:

Well, and I think that that's just made evident by the fact that most people who get lump sums of money dropped into their lap from a variety of reasons, whether that be the lottery or inheritance or X, you name it, they do not do well financially.

Josh Robb:

Or even you leave a job and you get a big buyout or severance or those type of things, those tend to disappear very quick. You're right.

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[12:14] - To Keep Contributing to Your Retirement Plan or To Stop?

Austin Wilson:

So the next question is, how do you know when to keep your foot on the gas or maybe take your coast?

Josh Robb:

Yeah, or you get hit number.

Austin Wilson:

You hit the number and you can chill. So how do you know that, Josh?

Josh Robb:

Well, and so that would just be your goals and priorities, right? Is okay, so I worked real hard to save. I got to that dollar amount where theoretically it'll grow to hit the point where I want to retire. All right, so what do I do now that I don't have to save anymore? Let's say I was maxing out my 401K, so that's $23,000, just round number. It's a little more than that. $23,000. I now have extra. What do I do with that if I maxed out my 401K? That's $2,000 a month almost, right?

Austin Wilson:

Yeah, exactly.

Josh Robb:

Do I spend it? Do I continue to save? What do I do?

Austin Wilson:

Yeah, move to a taxable account.

[13:03] - Having Career Freedom with Coast FIRE

Josh Robb:

Change my job where I don't have that extra income? So what are the choices? Now, keeping your foot on the gas means the longer you continue to save, that retirement age moves closer and closer. Or again, the other trade-off is I start spending some of that money now instead of putting it away and start doing some of the things I want to do. It's all about trade, trade-offs of freedom and flexibility. It really comes to your goals. That's really what it comes down to.

Austin Wilson:

Jordan, when it comes to career choice, as you're thinking about this movement, how can you make changes as you get closer and closer to your goals?

Jordan Shaw:

It's really keeping a pulse on your own priorities, how you're feeling about your career. And what I think is so different about coast FIRE, trying to differentiate it from the more well-known and older just FIRE is the transition is more gradual. And I think that's a good thing. I can actually get behind this coast FIRE idea a little more than FIRE.

Josh Robb:

I see this working better.

Jordan Shaw:

Yes, absolutely. And it's just a matter of needing to be flexible, but with the whole thought of taking your foot off the gas a little bit. It might be you're checking in, you're keeping a pulse on how things are going, how is your stress level? Do you really enjoy your work or are you ready to make the change financially and non-financially? There's all those things that are coming into play here. And it's a constant thing, especially when you're approaching the time where you're starting to think, okay, my numbers are looking good. I'm seeing some flexibility opening up here in the next few years. And just say, okay, maybe even having a trial period, like a little sabbatical or something like that to see does this really work for me? Can I do something that I love doing that doesn't pay anything at all while also having some additional income? Yeah, there's a few different ways to do that.

Josh Robb:

I see the main people in this is a high-stress, high income job, because they say, man, there's a lot that this takes out of me a big toll. But there's a lot of good income as a trade-off for that.

Austin Wilson:

I think like a lawyer.

Josh Robb:

Yes. And it's like, okay, I could burn myself out or I could do this for a while, save, and when I get to that point, either reduce my hours and still continue the career if you really like what you're doing or find a different career that's a little more rewarding, less stressful.

Austin Wilson:

Yeah..

Josh Robb:

Those are the people I think that would be most likely to be drawn to this is saying, I am earning some income and if I focus in I could save and get to a point where saving isn't needed anymore, and now I can choose where to go.

Austin Wilson:

I think that's the part of this whole thing that's most appealing to me is someone who doesn't want to stop working but just wants to be in a lot more relaxed state, right? With a lot less pressure because I just don't feel like people do well being idle. I think that having some sort of work, paid or not paid, is a very, very good thing. So I think this is a good thing.

So I guess the next point is as you're doing this process, this coast FIRE process, one thing that's interesting to me is that this is all about projections. It's all about, think about what a Monte Carlo like forecast looks like when you're looking at how many years. Maybe you want to retire at 30 or 40, holy moly, the deviation of outcomes is way larger than it would've been if you're only looking at 30 years or something like that. So I think that this is all about forecasting. But what are some things to look at? Because obviously these plans should evolve with the reality of your life and what's going on. What are some things to keep in mind?

Josh Robb:

Well, you mentioned it. So let's say you start this project and you're not married or you're married and you don't have kids. If life changes, you're going to have to reevaluate this. What new expenses do I have that I didn't plan on? What changed? Those are the things because you made a number based on your current situation. And so those are the big ones. And then just watching your lifestyle, because if you take some of that extra income once you hit that number and then you start enjoying a higher lifestyle, does that change what you want to do in retirement? Does that become a higher lifestyle as well?

Austin Wilson:

Right.

Josh Robb:

So you got to reevaluate your current and projected future living expenses on an ongoing basis. And then you also got to watch what the market's doing. Because if I project that the market's going to get 6, 7, 8, whatever the number you're using based on your allocation, is it actually meeting that target? Am I on track to hit that number when I think I was going to? And so those are the two things you got to always keep an eye on. And then along the way, if I switch careers, what does that do to my taxes? All the things, healthcare, maybe I go part-time, now I don't have healthcare. Well that's a bigger expense I didn't plan on. There's all those things you got to factor on. So it's a constant adjustment along the way.

[17:39] - Your Life Changes & So Should Your Financial Plan

Austin Wilson:

Jordan, talk about how this is really important to be working with an advisor and checking in regularly because of the changes that go on.

Jordan Shaw:

Yeah. The stress of the job that you're trying to get away from can probably very likely transition into the stress of I'm watching the market.

Josh Robb:

You'll replace it.

Jordan Shaw:

We see this all the time with new retirees, right? It's oh my goodness, is my portfolio okay? And it's like they're not trying to do FIRE or coast FIRE or anything. These people who are focusing on this are yes high performers, but they're suddenly going to be in an environment potentially where they're depending on a lot less income and they're trying to do a lot more over a longer period of time in terms of experiences and spending and things like that.

If you don't have someone to help you talk through those questions and run scenarios, projections, I'm not saying people should be constantly modeling, modeling, modeling, what if, what if, what if, because that can bring its own sort of problems. But I would think you really need to have someone else in your corner like an advisor to say, okay, you've made this decision, we're all for it. We see that it's better for your life, your mental health, your family life, whatever it is. But here's some things you need to be realistic about with what the market's doing, what your finances are doing.

Josh Robb:

And then the other thing too with it is similar to help keep everything in perspective. Because again, the stress is maybe you were in a specialized field. Once you leave and you're out for a couple of years, you may not be able to get back into it. You may have lost that ability, and that stress point of what if maybe my returns aren't what I projected and I have to go back to a more full-time work, but now I can't go back into the field I was good at. There's all those points you got to consider as you're making those decisions on how much buffer do you want, how much cushion do you need in those calculations. If you're retiring at 30, is a 4% the right number. All these things you need somebody to help you factor in those conservative what-if scenarios to say, what if this happens, how will we respond to it? And advisor is a great way to do that.

Austin Wilson:

So that's coast FIRE.

Josh Robb:

Yes.

Austin Wilson:

I can safely say I'm not necessarily planning on that. The whole wife and kids thing really makes me not want to.

Josh Robb:

I do that. I mean the term is there. We see it as advisors. So many people as they leave their full-time employment, get some sort of supplemental income. So it's not this full version, but it's a hybrid of this saying, I'm ready to pull the trigger, but I'm going to ease into that by kind of cutting it down a little bit along the way. So I see this a lot, not in this full extreme version. I could see it working for some people. But you're right in that, family, kids, all the things that play and sometimes it's just more of a stair-step approach as you go from full savings all focused in to backing up off of that until you're all the way into retirement.

Austin Wilson:

Another thing that is interesting that I think might be a little hole in this thinking is, and with really the whole FIRE movement is your income dollars so much less, because they're front-loaded, right? And although over a long period that your Social Security is going to be greatly impacted.

Josh Robb:

Yeah, there's all these things we didn't even touch on.

Austin Wilson:

I just thought about this. I'm like, oh, that's a big-

Josh Robb:

Yeah, Social Security uses 35 years of earning. They take your top 35. So if you're zero, they put a zero in for the calculation. So if you only work 20 years or 15, you're going to see a dramatic decrease in some of those benefits. And so those are all things we didn't even touch on in here. So you're right in that those are auxiliary impacts. So you're going to have to calculate to say, hey, I'm giving up some supplemental income from this source by doing it this way. Am I okay with that?

Austin Wilson:

So the question is, is fire right for you? And the answer is?

Josh Robb:

Maybe.

Jordan Shaw:

It depends.

Josh Robb:

Yes, I love it.

Austin Wilson:

Oh, Josh loves it. He always loves-

Jordan Shaw:

Depends on how many kids you have.

Austin Wilson:

That's right. So that is FIREA, coast FIRE as we talked about. If you found this episode helpful, please hit subscribe on whatever podcast player you listen to so you don't miss an episode. Also, head to thewealthmindsetshow.com to sign up for our newsletter and you can see all of our show notes and resources on that website. And if you're ready to invest with us or have questions about what we do at Hixon Zuercher Capital Management, visit Hzcapital.com. And until next episode, have a good one.

Josh Robb:

All right, talk to you later.

Austin Wilson:

Bye.

Thank you for joining us at the Wealth Mindset Show where we tackle the complexities of finance and life planning to help you align your wealth with your values. We hope today's conversation provided value and clarity as you navigate your financial journey.

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