Coast FIRE vs classic FIRE: which question are you really asking?

Classic FIRE, which is what the term FIRE originally referred to (financial independence, retire early) requires you save a high % of your income (40-50% is commonly cited), for long enough, so that your investment portfolio will be enough to cover your expenses for the rest of your life.

Coast FIRE refers to the point when you have saved enough aggressively that your investments should grow into a sufficient nest egg by the time you plan on traditional retirement. You’d continue working (and covering your expenses with income), but you would no longer have to save aggressively.

Which should you go for? Well, they’re optimizing for different things. With classic FIRE you can stop working completely sooner, with coast FIRE you get out of saving mode sooner. I think that Coast FIRE doesn’t get enough credit.

Which FIRE Approach Is Right for You?

There are some questions you need to ask yourself though

Can you bear saving X% for another Y years? Obviously with coast FIRE you’re getting out of that situation sooner, which is why it can be attractive. Saving 40-50% is no easy feat and may require both a higher income and lower expenses (or a varying degree of each). Maintaining that for over a decade could be rough. If the idea makes you queasy your FIRE number better be pretty attainable!

What will you be giving up? This is mostly applicable to Classic FIRE, since Coast FIRE by definition requires that you continue working. If you’re trying to fully retire at 40 what happens when the market tanks that year? Would you consider part time work? How much income would you need?

When can you get health insurance? This one goes for either situation and is a common mistake I see people make when planning for early retirement. Health insurance can be expensive if you leave too soon, which could sour either situation.

Can you coast on part time income? This one applies to either situation, but is another common mistake I see people make when they think they’ll be coasting, but find that a part time job without employer-provided insurance means that their income doesn’t even cover rent.

How will this help? What’s your goal here? Classic FIRE means you’ll be able to not have to work. Coast FIRE means that you’ll be able to reduce stress, take a lower paying job you enjoy more, work part time, etc. If the idea of having the option to say no to a bad boss or say yes to a great opportunity excites you, then Coast FIRE may fit you better than full FIRE.

Crunch the Numbers

Next you’re going to want to crunch some numbers

How much do you spend in a year (in today’s dollars)? (yes this means you need to do this part first)

Classic FIRE: use this to figure out your FIRE number. This step often times involves using a withdrawal rate (WR), which is really a rule of thumb and shortcut (not a guarantee!)

Coast FIRE: figure out your target age to retire traditionally and figure out how much you would need at that age. Work backwards from there using a reasonable return on investments to determine what you need today.

Watch Out for These Common Mistakes

The formulas are pretty straightforward. It’s the inputs where people go astray. I’ve seen some common problems people run into.

I’m coasting but still need to save a ton...forever? Chances are you’re not coasting.

I can coast on practically nothing! You’re underestimating how much you need. See the part-time income question above.

I’ll retire at ___. Fill in the blank. This one could be that you picked a number without figuring out what you actually needed. Or, this could be the opposite problem that you picked a number you saw online, didn’t dig deeper and may find you need more.

The inputs are very situation and timing specific. Have a kid and your timeline may slip a few years. Move to an expensive (or inexpensive) city and your timeline will shift. Improve your health insurance situation or find a job you love and your timeline may change too. Update your numbers often.