Coasting to Financial Independence

Not too hot, not too cold: A new retirement strategy that’s just right.

Photo by Mateus Campos Felipe on Unsplash

re·tire (verb): “withdraw to or from a particular place or leave one’s job and cease to work.”

I used to want to retire early, but now I’m not so sure.

The more I read and write about retirement, the more I wonder: is it a good idea? Don’t get me wrong — I’m all about financial independence. But I’m not convinced that retirement is all it’s cracked up to be.

Are we really wired to retire? There’s an overwhelming amount of research showing that many people struggle to find purpose and experience social isolation in retirement, leading to loneliness, gray divorce, and increased anxiety and depression. Add it all together, and you find that you’re likely to live longer if you retire after 65.

Here’s a different option: coast to financial independence.

What is coasting to financial independence (coast FI)?

Coasting to financial independence is a new retirement strategy.

Coasting means you have enough money invested to cover your future work-free years. You’ve saved everything you need to save — now you can just let it grow and compound. It means that you can pursue flexible, part-time, seasonal, or any other work arrangement that covers your current living expenses.

Coasting realizes that you don’t want to retire — you just want flexibility in your work.

You want work that lights you up — work you’re passionate about, even if it means you’ll make less money. And when you’re coasting, it’s okay to make less money because you’ve already covered your future retirement needs. All you is to cover your current living expenses.

For me, coasting meant I could step away from my corporate job and pursue a career as a freelance writer.

It allowed me the freedom to take risks in my career, knowing that my future retirement expenses would be fully covered. If I hadn’t found this alternate path, I’d still be grinding out 60-hour weeks from my home office, juggling daily standups vs. time with my daughter, and wondering how long until I could live off of my investments entirely.

Coasting is a reframe: instead of focusing on the destination of financial independence, it puts the focus on the journey.

Coasting to financial independence relies on time and compounding.

Coasting works so well because of the power of compound interest.

The longer you have to grow and compound your wealth, the easier it is to reach coast FI. So if you’re young and pursue this strategy early, there’s no reason you can’t be coasting by your late 20s or 30s. You just need to figure out how much you need saved right now to cover your work-free years in the future — whenever you decide that will be.

How to figure out your coasting number.

The Walletburst blog has a solid Coast FIRE calculator you can use for free, and I think it is the best out there.

Just put in the following:

• Current age

• Target retirement age

• Target annual spending in retirement

• Current invested assets

• Monthly Contribution

• Investment growth rate (7% default)

• Inflation (3% default)

• SWR Safe Withdrawal Rate (4% default)

Then, your coast FI number is in the box listed Coast FIRE at Current Age. That’s the amount you need right now to be coasting to financial independence. Below is how long it will take you to reach coast FI.

This calculator does not factor in Social Security. To factor in Social Security, just reduce your annual spending in retirement by the amount you think you’ll receive in Social Security Benefits during retirement in today’s dollars. You can use the Social Security quick calculator to give you a back-of-the-envelope estimate.

Is coasting to financial independence a good strategy?

After a decade of studying, exploring, and being a part of the financial independence community, coasting is the best strategy I’ve found — for me.

That doesn’t mean it’s the best for you, but here’s what I like about it:

• It’s a middle-of-the-road strategy. Financial writer Morgan Housel once wrote about the desire to avoid the extreme ends of financial planning. It hit home as he explained that if your plan is on the extreme end of the spectrum, it becomes very hard to shift as your goals change, which they will. I like coasting for that reason. I’m not aggressively pursuing FIRE at all costs, but I am also not failing to prepare for retirement at all. I’ve got my ducks in a row as I slow down and enjoy the journey.

• It follows the Pareto principle. The Pareto principle says that 80% of your results come from 20% of your efforts. I think coasting gets you 80% of the benefits of financial independence but only requires you to put in 20% of the effort. You aren’t attempting to move mountains with this retirement strategy — you’re letting time and compounding do that for you. And in the meantime, you get to pursue work that excites you, even if it means taking a pay cut.

• It helps you live a good life. In the book Drive, author Daniel Pink examines what motivates us. He finds autonomy, mastery, and purpose to be three consistent motivators. Coasting provides freedom over your time by giving you many of the benefits of financial independence. It allows you to continue working, mastering your craft, and improving your skills over time, rather than retiring. And it will enable you to find purpose by pursuing work that’s meaningful to you and tapping into something bigger than yourself — instead of just working for a paycheck