You’ve probably heard of financial independence. And you might even be familiar with the Financial Independence Retire Early (FIRE) movement. Both are focused on the day when you no longer have to work, and FIRE is all about getting there earlier than the more traditional retirement age range of 62 to 70. 

But have you ever heard of Coast FIRE? I hadn’t. While I’d come across different flavors of the FIRE movement in years past, Coast FIRE sort of snuck up on me. I first remember seeing it via an Instagram reel, in which a creator who appeared to be in their 30s announced that they were no longer saving for retirement.

WHAT?

We Millennials can be a bit dramatic sometimes, so I figured they were tapping into the hopeless “I’ll never be able to retire, so I’ll work till I’m dead” trope. I find that perspective defeatist, and I almost kept scrolling. But they kept my attention when they said that they’d already done their retirement savings. Now that piqued my interest!

What Is Coast FIRE?

Simply put, Coast FIRE means saving earlier on in one’s career and then stopping. After stopping retirement plan contributions, a “Coast-ing” period begins that lasts until retirement. Sounds a bit counterintuitive, right? The traditional saving-for-retirement script tells us that we keep contributing to our retirement accounts until we retire, after all!

That’s what’s unique about this subset of the FIRE movement. Coast FIRE followers aim for increased saving early on to allow for that period of Coast-ing when they’re longer saving for retirement. And even that sounds a bit backward when you think about it. Early on in our careers, we’re generally earning less as we build skills and experience. Why would we choose to save more for a retirement that’s still multiple decades away when we’re in our lowest-earning years? 

It’s all about planning early for the future. And it allows for multiple different Coast FIRE pathways.

Coast FIRE Path 1: Create Job or Career Flexibility

No longer needing to save for retirement at some point could allow for job flexibility during the Coast period. This could be a less-stressful job later on or a new career somewhere around midlife. (And if we’re considering a 90-year life span, that puts those of us in the age 30 to 60 range smack dab in midlife.) You could also find yourself able to reach retirement earlier than expected, in the good ole FIRE way.

Coast FIRE Path 2: Increase Spending Capacity

On the flipside of job flexibility, keeping the same job and not needing to save any more for retirement could also mean increased cash flow once saving is “complete.” For those on the Coast FIRE path, that could look like continuing to work for benefits like health care while planning for a traditional or early retirement. And that’s all while enjoying extra spending money once retirement savings is done.

Cost FIRE Path 3: Reduce Time at Work

A third path could mean keeping the same job while working fewer hours. That would open up more free time for hobbies, travel, or just extra non-work time. Let’s say someone enjoys their job and wants to keep working. They wouldn’t mind working less, but they’re not planning for full financial independence until later on. It’s just another subset of Coast FIRE.

With three clear Coast FIRE options, let’s get back to the basics. Coast FIRE means saving for retirement early in all three cases, then pausing retirement savings and working to support only current or increased cash-flow needs. Sounds good to me!

How Can You Create Your Coast FIRE Cash-Flow Plan?

There’s no magic Coast FIRE number. That’s due to a number of factors, including …

• The path you choose
• Your Coast timeline
• Your current and future income and how much is available to save
• The amount you already have saved or will save before you Coast
• How the market might perform now, as you Coast, and through retirement
• The total you prefer to spend now, while you Coast, and when you’re retired

The first step in creating your Coast FIRE cash-flow plan is to see where you’re at now. In other words, it begins with your financial plan. We can tailor yours to see where pausing retirement account contributions now or in your preferred year would leave you on the path to your future non-working years. 

From there, we’ll work back to your cash-flow plan. We’ll get to know how much you’re currently spending. We’ll then base your future cash-flow expectations on the goals you might have for increased spending if you’re aiming for path 2. Or we’ll build toward how much you’ll need to work to cover your expenses on paths 1 or 3. 

We can also discover by how much you should ramp up your retirement savings now or if you’ve already saved enough. So let’s learn how to calculate your Coast FIRE numbers! Then we can see how the beauty that is compounding, or your money making money, over your non-saving years could impact your probability of success. Think of it this way: The more you save earlier on, the longer those dollars have to (hopefully) grow. And while saving in your later career years is great, those dollars simply don’t have as much time to grow.

We’ll touch on how your tax situation could change over time without those pretax retirement plan contributions. We can also go into how you could begin Roth IRA conversions during your lower-income years if you choose paths 1 or 3. No matter which Coast FIRE path you choose, if you have employer-provided health insurance, we can build tax strategies to optimize your route if you’re not planning to use Affordable Care Act coverage through national HealthCare.gov options, Connect for Health Colorado, or your state’s marketplace. Or we can work around those by planning to keep your taxable income low so you can obtain premium tax credits as you Coast. It’s all about creating opportunities!

Throughout, we’ll look at controlling what you can control. And last but certainly not least, we’ll discuss how much spending flexibility you might want to bake into your Coast FIRE numbers to avoid some of these strategies’ potential downsides. 

What Are Some Potential Downsides of Coast FIRE?

While Coast FIRE sounds great, it carries its own risks. The big one: Once you reach your Coast FIRE number and stop saving, your financial assumptions might not hold up. That’s because a big part of the Coast period is compounding, and we can’t exactly predict how the market will perform or where the Federal Reserve will set interest rates. Since most will invest their retirement funds in the market before, during, and after they Coast, the big one is sequence of returns risk.

What Is Sequence of Returns Risk? 

This sounds like a bit of financial jargon, so let’s break it down. Sequence is, of course, the order in which things happen in the future. And risk refers specifically to stock market risk, since much of your retirement savings is invested in the market. Putting them together, sequence of returns risk is the risk that the market drops … and you need to give it time to recover. 

Rather than a steadily increasing trajectory where your money continually grows, and the money it’s grown also grows, market downsides happen. If market performance drops just as you stop saving and start coasting toward retirement, it can take time to get back to where it was — and only then can it hopefully grow. That ultimately leaves you with less time for your invested balances to increase overall before you start relying on that savings. That’s sequence of returns risk in a nutshell. And since you can time when you start Coast-ing but can’t time the market, there’s not much you can do about it. 

But that doesn’t mean you can’t prepare for it. Perhaps a part of your plan will be the flexibility to adjust your spending. You might switch back into saving mode for a bit to bolster your retirement account balances. Another option might be to put your liquid cash reserve into a high-yield savings account so inflation can’t eat its way too far into your plan. And you can keep your eye on tax law changes that could cause a bump in the road along the way.

What Are Some Other Coast FIRE Challenges?

While sequence of returns risk is the big one, others also exist.

No Longer Saving

For one, it can be difficult to turn your savings “off.” After saving regularly for years, it becomes part of your routine. I see this all the time with those entering their retirement years. And changing a tried-and-true, sometimes decades-long routine can be tough.

Fear of Spending

Another tendency I’ve experienced many times with retirees that I’d expect to see with those who choose Coast FIRE path 2 is fear of spending. With more dollars going into your checking account when you begin to Coast, you might be tempted to save them elsewhere, rather than enjoy them as planned. 

Working Harder to Save Now

A Coast FIRE path can mean taking on a high-income, high-stress job early on in life until it’s time to Coast into paths 1 or 3. For those just starting their plan, five or ten years or longer of ramped-up savings until that Coast time comes might not be easy to face. 

Lifestyle Changes

Those entering into their Coast years may miss their work-related social lives, especially if they’re on path 1. Those on path 3 might see that they lack the self-fulfillment that comes with full-time work. Even those who are continuing to work on path 2 might find their more luxurious spending difficult to achieve after years of frugality.

Loss of Employee Benefits

Moving to less-than-full-time work or switching jobs can disqualify some from employee benefits, like life, disability, and health insurance. After relying on these as back-up plans for decades, alternatives exist, but they tend to be expensive. Lacking the support of subsidized employer-provided benefits can frighten some away from considering Coast FIRE.

For pre-65 retirees and those continuing to work without employee benefits, qualifying for Affordable Care Act subsidies relies on keeping income below certain thresholds and managing spending, making cash-flow planning crucial. From another perspective, managing income and spending, especially for those retiring before age 55 and separation from service for 401(k) withdrawals, can be another challenge. 

Couples with Different Goals

Consider couples with different goals, like one partner who wants to semi-retire or Coast FIRE while the other maintains full-time work. Lifestyle and behavioral changes can become frustration points for both the still-working-full-time partner and the reduced-work or increased-spending partner. These can be challenging to a relationship even if a purely financial struggle doesn’t exist. 

Unforeseen Circumstances

You could save eagerly early on … only to suffer an injury or receive a diagnosis that indicates a shortened life span. Either may stop you from reaching your Coast or retirement aspirations. That said, those are possibilities within any plan. They’re also things we can’t control, and they shouldn’t stop you from seeing whether Coast FIRE is achievable now.

Should You Explore Coast FIRE?

Wondering what the main alternative to Coast FIRE is? Sticking to the traditional retirement script. Even with the ability to take an alternative path, you might choose to stick to the familiar, knowing that it could mean having less time to enjoy what you’ve worked so hard for. If you’re an overly conservative investor who wants to ensure that you have a strong retirement cushion — even at the risk of not being able to enjoy it all yourself — Coast FIRE might not be the best path for you. And that’s ok!

Coast FIRE isn’t for everyone. But if you’re on one of the three pathways — or a different one that I didn’t mention here — I’d love to hear about it! It can be a viable option if you want to save aggressively earlier on to allow for more flexibility down the road. The fear of the path you initially choose not working out doesn’t have to stall your plan completely, as you can change strategies over time. 

So whether you’re already Coast-FIRE-ing or would like to evaluate how it could fit into your financial plan, grab a time for a cash-flow planning consultation. We’ll see whether you could stop saving now or later on, as well as what it could mean for your tax situation and overall probability of success. Plus, we can use your Monarch Money app to track and manage your current savings as well as plan your current and future cash outflows.