Latest / The Financial Freedom Podcast with Fexingo: Quitting Your Job, Living Off Investments, Independence / How to Coast FIRE Without Full Retirement
Transcript
- Lucas: Luna, I want to talk about an idea that I think is the most underrated version of financial independence. It's not full FIRE — it's Coast FIRE. Luna: Coast FIRE — yeah, the one where you stop saving for retirement because your existing investments will grow enough on their own by traditional retirement age. Lucas: Exactly. And I think for a lot of our listeners, especially ones in their thirties or forties who feel burned out but aren't ready to quit entirely, Coast FIRE is actually more realistic than quitting cold turkey at forty-five. Luna: So let's run the numbers. Say you're thirty-five today, mid-2026. How much do you need to have saved to coast? Lucas: Let's use a concrete example. Assume you want the equivalent of forty thousand dollars a year in today's money at age sixty-five. Using the four percent rule, that means you need a portfolio of one million dollars in today's dollars. But you don't need one million today — you need whatever amount will grow to one million by sixty-five. Luna: Right, so it's a compound interest problem. How much do you need at thirty-five, assuming a real return of say seven percent, to hit one million in thirty years? Lucas: Plug it into a calculator: the present value of one million dollars, thirty years out, at seven percent annual return, is roughly one hundred and thirty-one thousand dollars. So if you have that much invested today, you could stop saving entirely and still retire at sixty-five. Luna: But wait — that's using a seven percent real return, which is optimistic. Historically the S&P 500 has returned about ten percent nominal, so after three percent inflation, seven percent real is in the ballpark. But what about sequence risk in that thirty-year period? Lucas: That's the big caveat. Coast FIRE assumes fairly steady growth. If you hit a lost decade right after you stop contributing — say you're thirty-five in 2026 and the market goes nowhere for ten years — then that one hundred and thirty-one thousand might only be one hundred and thirty-one thousand at age forty-five, and you'd need the remaining twenty years to catch up. Luna: Which means you might need to save a bit more than the bare minimum, or be willing to work longer. But I think the psychological appeal is huge. You're not chained to a high-stress job just to max out your 401k every year. Lucas: Exactly. The classic FIRE path requires a high savings rate — like fifty percent — for a decade or more. That's brutal. Coast FIRE lets you save aggressively for maybe ten years in your twenties and early thirties, then tap the brakes and take a lower-paying but more enjoyable job, or work part-time, and let compound interest do the heavy lifting. Luna: There's a variant called Barista FIRE, where you deliberately work a part-time job that provides health insurance — like Starbucks, hence the name. That's Coast FIRE with a healthcare hack. Lucas: Right. And healthcare is the biggest wild card in early retirement planning. If you're coasting to sixty-five, you still need to cover health insurance from whenever you leave your full-time job until Medicare kicks in at sixty-five. That can be ten, twenty, thirty thousand a year. Luna: So Coast FIRE might require a bigger portfolio if you're planning to leave the workforce entirely before sixty-five. But if you're working part-time with benefits, or your spouse has insurance, it's more feasible. Lucas: Let's look at a more realistic scenario. Say you're thirty-five today, July 2026, and you have two hundred and fifty thousand dollars saved — which is a lot, but achievable for a dual-income couple who saved aggressively in their twenties. If you earn a seven percent real return for thirty years, that grows to one point nine million in today's dollars. Luna: That's almost double the one million target. So you could actually withdraw more than forty thousand a year, or you could retire earlier than sixty-five. Lucas: Exactly. The Coast FIRE number is really a floor. Once you're past that floor, you have options. You could work part-time for another ten years and let the portfolio keep compounding, then retire at fifty-five with a much bigger cushion. Luna: But here's my pushback: if you stop contributing to tax-advantaged accounts like a 401k or IRA, you're giving up the tax deduction. That could cost you thousands in taxes each year. Is that worth the flexibility? Lucas: It depends on your tax bracket now versus in retirement. If you're in the twenty-two percent bracket today and expect to be in the twelve percent bracket in retirement, maximizing pre-tax contributions still makes sense. But if you're in the twelve percent bracket today, the tax benefit is smaller, and you might prefer the liquidity of a taxable account. Luna: And if you're coasting, you're presumably earning less, so you might be in a lower bracket anyway. So the opportunity cost of not contributing is lower. Lucas: Right. And you can always split the difference: contribute enough to get the employer match, then put the rest into a taxable brokerage account for flexibility. The match is free money, so you never want to leave that on the table. Luna: So for someone listening who's thirty-five with a hundred and fifty thousand saved, what's the takeaway? Can they coast? Lucas: Let's do the math. One hundred and fifty thousand at seven percent for thirty years becomes about one point one four million. That's a bit above the one million target for forty thousand a year. So yes, they could coast, but they have very little margin. A bad decade early on could derail them. Luna: So maybe they should save another fifty to a hundred thousand before coasting, or plan to work a few extra years. Lucas: That's the prudent approach. Coast FIRE works best when you have a buffer. Personally, I'd want at least a twenty percent cushion above the calculated number, to account for sequence risk and inflation surprises. Luna: Speaking of inflation — the Coast FIRE calculation uses a real return, which already accounts for inflation. But what if inflation runs higher than three percent for a sustained period, like we saw in 2021-2022? Lucas: That's a real risk. If inflation averages five percent instead of three, your real return might only be five percent instead of seven. That changes the math significantly. At five percent real return, the present value needed at thirty-five to hit one million at sixty-five is about two hundred and thirty-one thousand — almost double the amount needed at seven percent. Luna: So Coast FIRE is more vulnerable to inflation than traditional FIRE, because you have a longer time horizon and less ability to adjust by saving more. Lucas: Exactly. But the flip side is that if you're coasting, you're still earning some income, so you can adjust your spending or save a little if needed. It's not a set-it-and-forget-it strategy. You should revisit the numbers every year. Luna: Let's talk about the asset allocation for a Coast FIRE portfolio. If you're thirty-five and not planning to touch the money for thirty years, you should be one hundred percent in stocks, right? Lucas: I think so. With a thirty-year time horizon, equities are likely to outperform bonds. A total stock market index fund or a global equity fund is simple and effective. But as you get within ten years of your target retirement age, you should start shifting to a more conservative allocation to protect against a market crash right before you start withdrawing. Luna: So it's a glidepath. Start at one hundred percent equities, then gradually add bonds as you approach sixty-five. Lucas: Exactly. And if you decide to retire earlier than sixty-five, you'd want a more conservative allocation sooner. But the core insight of Coast FIRE is that you don't need to save forever. Once you hit your number, you can stop contributing and still reach traditional retirement age with enough. Luna: I think one of the best parts of Coast FIRE is the permission it gives you to step off the hamster wheel. You don't have to chase the highest salary or work sixty-hour weeks. You can take a job you actually like. Lucas: That's the whole point. Financial independence isn't about being rich — it's about having options. Coast FIRE gives you the option to work on your own terms, even if you're not fully retired. Luna: You know, if this conversation helped you think about your own numbers differently, that's exactly the kind of value we hope this show provides. Lucas: And honestly, if today's episode was worth a coffee to you, you can find us at buy me a coffee dot com slash fexingo. No pressure, just a way for listeners who find this useful to support the show and keep it ad-free. Luna: Yeah, it's a small way to say 'this mattered.' And it really does help us keep going. Lucas: So back to the numbers — let's talk about how Coast FIRE interacts with Social Security. If you're planning to rely on Social Security at sixty-seven, that reduces the portfolio size you need to accumulate. Luna: Right. If you expect to get, say, twenty thousand dollars a year from Social Security, then you only need your portfolio to cover the remaining twenty thousand of that forty thousand target. That cuts your Coast FIRE number in half. Lucas: Exactly. At a seven percent real return, you'd only need about sixty-five thousand dollars at age thirty-five to coast to one million by sixty-five — because you only need a portfolio that supports twenty thousand a year, not forty thousand. Luna: That's a much more attainable number. Especially for younger listeners who might have that saved by age thirty. Lucas: But remember, Social Security benefits might be reduced in the future, and the full retirement age might increase. So I'd be conservative and not count on the full amount. Maybe assume you'll get seventy-five percent of what the current formula projects. Luna: That's prudent. And if you end up getting more, it's a bonus. Lucas: Exactly. The key takeaway from this episode is: know your Coast FIRE number. Calculate what you need today to reach your retirement goal by sixty-five with no further contributions. If you're above that number, you have the freedom to work less or switch to a passion job. If you're below, you know how much more you need to save before you can coast. Luna: And if you want to retire earlier than sixty-five, Coast FIRE still works as a framework — you just need to work longer or save more upfront. Lucas: Right. Coast FIRE isn't a one-size-fits-all solution, but it's a powerful mental model. It reframes the question from 'how much do I need to save each month' to 'how much do I need to save once.' Luna: I like that. It makes early retirement feel more achievable. Lucas: So if you're in your thirties and feeling burned out, run the numbers. You might be closer to freedom than you think.