Listen to The Money Vault - Coast Fire
In this episode of The Money Vault, we revisit a classic discussion on Coast FIRE, an accessible and balanced alternative to the traditional Financial Independence, Retire Early (FIRE) movement.
We explain the mechanics behind this approach, including how to reverse-engineer your financial goals to find your unique Coast FIRE number. We also discuss how recent increases to UK pension allowances mean this strategy is not just for those in their 20s and 30s, offering a highly effective path to long-term financial independence for business owners and those in their 40s.
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The Money Vault - Coast Fire
Summary:
We look at an alternative to the traditional FIRE movement known as Coast FIRE. With standard FIRE requiring strict frugality and a rigid focus on the 4% withdrawal rule, many find the journey restrictive and difficult to maintain when life throws a curveball. We explain how Coast FIRE offers a more balanced approach by focusing on aggressive early saving, followed by a period of "coasting" where compound growth builds your wealth in the background
Key Insights:
- The traditional FIRE movement is demanding - Standard FIRE relies on four pillars - earning more, spending less, investing the difference, and knowing your limits—to build a pot 25 times your desired annual income.
- Frugality has its limits - The intense frugality required for traditional FIRE can feel restrictive and lacks the flexibility needed for unexpected life events.
- Coast FIRE relies on compound growth - Instead of saving constantly until the day you retire, Coast FIRE involves saving aggressively early in your career to reach a smaller target milestone.
- Coasting provides lifestyle flexibility - Once your initial target is reached, you stop aggressive saving and let compounding grow the pot over the next few decades, allowing you to switch to a less stressful or lower-paying job.
- Reverse-engineer your goals - To find your Coast FIRE number, calculate the total amount you need at your desired retirement age, then work backwards using an assumed growth rate to see what lump sum you need to achieve today.
- It is not just for the young - Older savers can also utilise this method by maximising their pension contributions; with the current £60,000 annual allowance, it is possible to pump significant funds into a pension over a short period.
Resources
Links referred to in the podcast:
- Sign up to our weekly newsletter
- Take out a free trial of 80-20 investor
- MTTM - Savings and investments calculator
- Debunking the 4% withdrawal rule
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