The Traditional FIRE movement has gotten a lot of attention on the internet. But I which type of FIRE is better – Traditional FIRE or Coast FIRE?
Coast FIRE
FIRE stands for Financial Independence (FI), Retire Early. It’s a movement aimed at achieving financial independence and the option to retire early through aggressive saving, investing, and frugal living.
The goal is to be able to quit the rate race by quitting your job as soon as possible.
But not all people seeking FI have the same goals. Maybe you’re aiming for a high savings rate and a very low spending level, so you can retire in your 30s or 40s. This is known as Traditional FIRE which requires extreme discipline.
But maybe you want to go for a more balanced approach where you save and invest a significant amount but still get to enjoy life. You can do this by working part-time or switching to a less stressful career. This is known as Coast FIRE.
Why Coast FIRE is Better
With Traditional FIRE, you’re supposed to save 50% or more of your income. This sounds impressive, but it’s hard to do. How many friends do you know who can do this?
To save this much, you’d have to make some serious sacrifices, like living in a tiny apartment, driving an old car, or eating rice and beans every day. And forget traveling.
In fact, in pursuing Traditional FIRE, you may end up feeling deprived or pissed off. And most likely, you’ll miss out on some amazing experiences life has to offer such as traveling and meeting cool new people.
However, Coast FIRE is more realistic and sustainable. With Coast FIRE, you live a more enjoyable lifestyle while still being financially responsible. You can spend money on things that matter to you and not feel guilty.
Coast FIRE is More Flexible
Traditional FIRE relies on a lot of assumptions and projections. Things such as how much you need to save, how much you can withdraw from your portfolio, how long you’ll live, and what the market will do.
The problem is that life happens, and things can change quickly.
The stock market could crash. You could lose your job. You could get sick and get hit with massive medical bills. Or your relationship fails and you split up. That’s when you realize that you’ll need more money than you planned to maintain your desired lifestyle.
With Coast FIRE, you’re able to adjust your spending or income without jeopardizing your entire financial plan.
Coast FIRE is More Fulfilling.
Traditional FIRE is a means to an end – you work hard now so you can stop working later. The problem is that for most people, once they stop working, they stop having a purpose in life.
You start feeling bored or restless after you retire early. And most of your friends are still working. By then, your kids are already in college or have graduated and are living their own lives without you.
How many days of binge watching Netflix and sports before it all just feels meaningless? In the worst case, you could lose your identity or sense of self-worth altogether.
But with Coast FIRE it’s about balance and doing work you enjoy. You’ll still be able to pursue hobbies or “do good in the world” if you choose.
Steps to Coast FIRE
- Save money to cover your future retirement expenses. You’ll first need to calculate how much money you’ll need in retirement. Project your expected spending level and inflation rates.
- Invest your savings and invest in the stock market. The S&P 500 has delivered an average return of around 10% over the long run.
- Find a way of making income that covers your current expenses but also gives you work-life balance. This could be a part-time job, freelance work, or a side hustle.
For instance, you’re 35 now with a $350k nest egg in retirement funds and brokerage accounts, and your yearly spending is around $45k.
If you keep expenses under $50k through raises and maintain a 25% savings rate (down from say, 40%), your nest egg is projected to hit $1 million at around age 50.
From there, if you assume only a 5% average return on your investments, your portfolio would increase by about $50k annually from capital gains and dividends.
So reaching your initial Coast Financial Independence (FI) number of $1.2 million would take only 2–3 more years without needing any more contributions on your part.
At that point, you could choose to keep your career and remain flexible, retire entirely, or go part-time.
The beauty is that you’ll be able to achieve FI along with having job choices by your early 50s.
Final Thoughts
My advice is to first play around with Coast FIRE calculators and see what your own FI could look like. To me, financial freedom is about a dollar amount or age—it’s a sustainable life where you can quit the rat race yet, still have options.
