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Published: Jan 26, 2024 10 min read
A tidal wave made up of dollar bills while a retiree is surfing it comfortably and relaxed
Rangely García for Money

If you’ve stumbled upon any financial independence, retire early (FIRE) influencers on social media, you’ve likely noticed similar themes: Escaping from the 9-to-5 grind. Traveling to exciting locations. Saying au revoir to the "Sunday scaries" because there's no work week to worry about.

Some influencers say they’ve successfully retired in their 30s or 40s thanks to the FIRE movement. “I thought I had to work hard until I was 65 and then I could finally retire,” said FIRE enthusiast Catie the Millennial Money Honey in a popular TikTok video. “Then I learned about financial independence and early retirement. I realized I could actually retire by the time I was 35.”

In the background, a video montage shows her eating fancy seafood dishes, hiking through a flowery hillside, boating with her friends and drifting lazily in a lake on an inflatable unicorn, all in vastly different, dreamy locales.

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I hate to break it to you: But this is likely not going to reflect your FIRE journey. The well-manicured lifestyle videos on social media belie a very difficult period of austerity and belt-tightening needed to achieve early retirement that, frankly, most people aren’t cut out for.

While it is indeed possible to follow FIRE guidelines and retire early in comfort, it's extremely helpful if you have a six-figure income, naturally frugal habits or maybe some seed capital to get you started — or ideally all of the above. Many early retirement aspirants don't have these advantages, however, so it's understandable that there's plenty of online chatter indicating that savers are giving up on FIRE due to the extreme measures often required in the penny-pinching lifestyle.

But from the ashes of FIRE, a new iteration of movement is taking form: Coast FIRE, a less intense, more sustainable retirement-savings method that allows participants to enjoy their lives more during the savings period.

What is FIRE (financial independence, retire early) exactly?

The FIRE savings method is one popular pathway to retirement long before you turn gray, but it’s not for everyone. The early-retirement strategy is centered around saving and investing a large portion of your income during the prime of your career while living far below your means. The goal is to stop working at a young age.

“There are different forms of FIRE, but the general idea is to save as much as you can, around 50% of your income,” explains Randall Watsek, a financial advisor at Raymond James who advises some FIRE savers. Then you heavily invest the savings, for example, by maxing out your 401(k), individual retirement account and health savings account.

Tracing its roots to a 1992 book titled Your Money or Your Life, co-authored by the couple Vicki Robin and Joe Dominguez, the FIRE movement has been around for decades. But early retirement and financial freedom have been in the American psyche for much longer, Watsek says, stemming as far back as Benjamin Franklin’s The Way to Wealth published in 1758.

It wasn't until the pandemic, though, that interest in FIRE really started to, well, catch fire. The subreddits r/FIRE and r/financialindependence boast more than 2.5 million members combined, with membership more than doubling since 2021. The popularity spike in FIRE communities roughly coincides with The Great Resignation, when fed-up and burned-out workers quit their jobs en masse in search of greener pastures. Many have been drawn to the FIRE movement as an appealing alternative to the traditional prospect of dealing with the daily grind well into their 60s or 70s.

Warning: FIRE may cause burnout

A slew of recent articles and forum posts suggest many FIRE savers are now burning out due to the frugal lifestyle it often requires. This probably shouldn't come as a surprise.

Watsek likes to compare FIRE to crash dieting. Some folks, he said, are naturally cut out for it. They can easily make drastic lifestyle changes and keep up with it. Similarly, naturally frugal people may have a better shot at retiring early after tightly restricting their spending. But for most people, extreme dieting — like extreme saving — does not come easy.

Another major detail that’s often left out of the initial FIRE pitches is that a lot of successful FIRE savers already are high-income earners. The movement is especially popular among software engineers and physicians, for example.

Watsek says his successful FIRE clients tend to be the ones already making "hundreds of thousands of dollars." After all, it's much easier to save a substantial portion of your income if you're making, say, $250,000 a year.

But for average workers, saving upwards of half their income can be onerous if not impossible.

“Let’s say your after tax income is $40,000. You’re saving $20,000 and only spending $20,000,” Watsek says. “That won’t even get you a studio apartment in New York.”

Of course, you can live in a lower-cost area. But the reality, he notes, is maybe you’ll have to get a bunch of roommates or live with your family for an extended period of time. You'll likely need to cook your meals at home and limit your travel expenses, too — missing out many social activities and adventures because they cost too much.

“Unless you’re at a pretty high income point, you do have to make a lot of sacrifices,” Watsek says.

Possibly stemming from that wave of pandemic-FIRE newbies, we're now starting to see an uptick in reported burnouts among FIRE savers who want to be able to enjoy their pre-retirement lives.

Luckily, the "Coast FIRE" trend might offer some solutions.

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What is Coast FIRE?

As its name implies, Coast FIRE is like a less intense sibling of regular FIRE. With Coast FIRE, the emphasis is on sustainability. Instead of resorting to drastic lifestyle changes, participants save prudently upfront and "coast" smoothly into retirement.

According to the r/CoastFIRE subreddit — which launched at the end of 2019 and has already gained 51,000 members — “Coast FIRE is when you have enough saved and invested that with no additional contributions, your net worth will increase with compounding growth to support a traditional retirement.”

The key components of Coast FIRE are time, your rate of return and compound interest.

While Coast was not explicitly created as an alternative for FIRE burnouts, some traditional FIRE savers now find themselves coasting. As opposed to regular FIRE, where folks race to retire decades earlier than normal, Coast FIRE is all about front-loading your retirement savings by investing as early and often as possible in your career to reach your “Coast FIRE” savings goal. (Savings calculators can help you determine the amount you need to save each month to hit your goal, which is based on how much money you’d like to live off of in retirement.)

Watsek says the key to Coast FIRE is to get to a point where the average return on your nest egg is greater than the amount you could realistically ever save in a given year. As an example, let’s say your goal is $500,000. Once you hit that number — aided by compound interest along the way — you can stop saving for retirement.

“If your average return is 6%, you’re talking about a $30,000 addition to your savings,” he says, “which is far greater than the amount you could actually save.”

While your nest egg starts growing on its own, you work an easy job or a passion project to cover your basic living expenses based on whatever quality of life you'd like to have before officially retiring at a more traditional age, like in your 60s.

Though it's an offshoot of FIRE, the emphasis with Coast FIRE is less on retiring early. Instead, you're knocking out your retirement savings early, which allows you to take your foot off the gas much sooner and enjoy your life in the meantime, all while coasting into a comfortable retirement.

“The difference is a shorter period of savings but a longer period of work,” Watsek says. “So for people who are susceptible to burning out, the Coast FIRE method is more likely to work for them.”

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