Weekend Reading – Are we Coast FIRE now?

Weekend Reading – Are we Coast FIRE now?

Hi Again!

Welcome to a new Weekend Reading edition, about Coast FIRE.

What the heck is that? Why does it matter?

Read on…. 🙂

Weekend Reading – Are we Coast FIRE now?

Source: Finiki, the Canadian Financial Wiki

I suspect we are…!

Financial Independence, Retire Early (FIRE) concepts have been around for generations (people did retire early before the internet….!) however FIRE concepts have been popularized by social media even moreso over the last few years for many reasons.

Your Money or Your Life is a fine example – a book written decades ago but has since further triggered the FIRE movement among some 30- and 40-somethings seeking financial independence.

FIRE requires context; it has many forms and many variants…consider some of the following:

• Half FI – saved up 50% of your end goal (e.g., $500,000 of $1M).
• Lean FI – saved up >50% of your end goal but not quite there yet.
• Flex FI – saved up closer to 80% of your end goal (e.g., $800,000 of $1M). This provides financial flexibility to cover most retirement spending but not everything.
• Financial Independence (FI) – saved up 100% of your end goal, you have something like ~ 25x your annual expenses saved up whereby you could withdraw 4% (or more in good markets or in bad markets) for 30+ years and never run out of money (i.e., the 4% rule).
• Fat FI – saved up at or > 120% of your end goal (in this case $1.2M for this example), such that your annual withdrawal rate could be closer to 3% or less making your retirement spending plan almost bulletproof since assets should grow more than your withdrawal rate. 

I outlined those terms and more in this post:

The six phases of financial independence

Coast FIRE, what I did not include above but likely should have, is where you can essentially cease savings for retirement during the later stages of your working career. 

Coasting to retirement (financially speaking) can be achieved through the power of compounding itself because you have enough assets to compound to get there, whatever your retirement date is. Once you hit your Coast FIRE number, you can largely reduce or even eliminate how much you save for retirement since the only thing you really need to worry about now is covering your current expenses.

With Coast FIRE:

1. While you expect your retirement assets to grow, the good news is, 
2. Based on the assets you have, you don’t really need to save money for retirement longer since existing income, whatever that is, covers your expenses. You are financially coasting to retirement now….

I’ll point to some of my inspiration for today’s edition in a bit but I see many, many advantages of this Coast FIRE-state:

1. Captain obvious – you don’t really need to save for retirement any longer. Sure, one can continue to save but it’s not required. You don’t need to delay gratification further. Whatever you make you can largely spend. 

2. It’s cheaper than an aggressive FIRE-like journey. With traditional FIRE you are striving to support your lifestyle today and well into the future, often through extreme frugality starting out. Some people live like students well into their 40s only to enjoy life later. That never appealed to me: delay most of your spending for many years only to enjoy spending later on. Coast FIRE or FIWOOT as I call it has always been more attractive since it means a. I still work and b. it’s at whatever I want. 

3. More meaningful, current employment. Coast FIRE can exist in harmony with existing full-time work, part-time work, or any side-hustle as you please. Studies after studies demonstrate work and structure is important for well-being but so many benefits come with doing that on your terms. Meaning, working at what you enjoy can deliver a higher sense of personal fulfillment with less stress financially knowing you could step-away and/or change direction at any given time. 

4. The sum of the above equates to higher financial flexibility. Since saving for retirement is largely done, you have opportunities and choices: you can save (more) for retirement as you wish, you can delay your retirement date while working at whatever you do, or you can consider something different in your life. Financial independence offers choices. 

The purpose of Coast FIRE is to save in your early working years until your portfolio reaches a point where its expected growth will secure future retirement needs: 1-year, 2-years or more years into the future. Your Coast FIRE number is totally up to you. 

My inspiration for this week’s post was from Of Dollars and Data, see below, who also linked to a free Coast FIRE calculator for your number. 

What is Coast FIRE? The Ultimate Guide to Semi-Retirement

I’ve linked to this calculator here and I’ve also listed this on my Helpful Sites page along with other free tools and resources for you. 

With Coast FIRE, while you don’t get to stop working entirely you can:

• Keep working, of course, as you wish.
• Shift work / consider part-time work.
• Consider hobby work / occassional work. 
• Take extended breaks from work.
• Or all the above. 🙂

Whether you gravitate to the term FIWOOT like I do (Financial Independence, Work On Own Terms) or align yourself to Coast FIRE, the concepts are the same:

….if you save early enough and remain invested long enough, you might find yourself at a point in your life whereby you can allow your existing investments to grow while there is no longer any real urgency to save more for retirement. You are financially coasting to retirement now….

Essentially, that is where we are right now.

You can read more in our some recent posts below, about how we invest and what our financial independence budget is, new pillar posts I will keep updating every year as our investing plans and expenses change with time. I’m sure they will. 

How We Invest

Financial Independence Budget

What’s your take on FIWOOT or Coast FIRE? Have you arrived at your retirement income planning destination? What have you learned, like I have, from others to help you get there?

With thanks to @BoomerDivvies recently – good timing:

I look forward to your comments.

Have a great weekend!

Mark

More Weekend Reading – Are we Coast FIRE now?

Finally, when it comes to cash on hand, I agree with Rob Carrick from The Globe and Mail that you always need some cash when travelling (subscription).

“My thinking is that roughly $200 in Canadian dollars or the foreign currency equivalent is a good starting amount of cash to carry for situations where paying with plastic isn’t an option. You can always get more from ATMs, but that usually involves fees. Ideally, cost-efficient prepaid and credit cards will carry most of the weight when you pay for things while away.” – Rob.

Save, Invest, Prosper!