What is the Coast FIRE movement for retirement?

There are many different strategies for retirement planning. The Coast FIRE movement - an alternative to the traditional FIRE movement (which stands for Financial Independence Retire Early) - is one of them.

Unlike the traditional FIRE movement, which focuses on reducing expenses and saving aggressively so you can achieve financial independence at a young age, the Coast FIRE movement focuses on taking care of your retirement savings needs early on so you can work at a job you'd like without worrying about saving for your golden years. Here's what to know.

What is the Coast FIRE movement?

The FIRE movement involves living frugally to help facilitate early financial independence. The goal is to save very aggressively by living on less and pocketing as much of your salary as possible. If you can avoid spending most of what you earn and free up cash for savings, you may be able to retire by your 30s or 40s — especially if your financial needs are low.

The Coast FIRE movement works a little differently, though. With Coast FIRE the goal is still to save aggressively early on. However, you aren't trying to invest so much that you can retire after just a decade or two of work. Instead, the goal is for the investments you make when you are young to be large enough to compound over time and grow the nest egg you need as a retiree.

Once you've invested enough that your current account balance — with no further contributions — will grow over time to build a nest egg that's sufficient to support you as a senior, you can stop worrying about investing for retirement. Instead, you can use your current income to live on. In other words, you coast into retirement with your early investments doing all the hard work.

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What are other ways to save?

If Coast FIRE isn't for you, there are other approaches that can help you ensure you're prepared for a secure retirement. Here are some options.

1. Follow the 50/30/20 budget rule
2. Refinance mortgages and student loans
3. Debt consolidation
4. High-yield savings accounts

1. Follow the 50/30/20 budget rule

This approach simplifies budgeting by dividing your money into three categories. Fifty-percent of your income should be devoted to needs; 30% to wants, and 20% to savings. By living on this budget, you'll be setting aside enough income for the future that you should be able to build a generous retirement nest egg.

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2. Refinance mortgages and student loans

Reducing your loan payments can free up more money to save for retirement. With today's record-low interest rates, it may be possible to do that by refinancing your mortgage or student loans, or both.

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If you are able to refinance and reduce your monthly bills, you can divert the extra funds to your retirement accounts.

3. Debt consolidation

Debt consolidation is another technique used to free up money that can be used for retirement investing. It involves securing a personal loan at a low-interest rate to pay off multiple existing debts. You can use this technique to switch from multiple costly monthly payments to one lower monthly loan payment that fits easily into your budget.

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4. High-yield savings accounts

Investing in the stock market is a key part of earning interest and building retirement wealth but you don't necessarily want all of your money in equities as this presents too much risk.

If you have the money you need for the short-term, you may wish to put it into a high-yield savings account to eliminate the chance of losses that could occur with most other investments while still earning the largest return possible.

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What are the benefits of Coast FIRE?

COAST Fire involves sacrificing early on to be able to do more with your money later. The earlier you start saving, the easier it is to amass a large nest egg because of compound interest.

If you are aggressive about investing when you're young, you can invest far less over your working life and still end up with plenty of money for retirement. This happens because your money will be earning returns over the years, which are reinvested and also earn returns for you.

Coast FIRE not only gives you the peace-of-mind of knowing early in your career that your retirement needs will be met, but it also allows you more flexibility throughout your working life if you save and invest aggressively. If your investment accounts are large enough by age 30, compound interest alone ensures they'll support you as a retiree and you won't have to worry about saving anymore.

Without the need to continue investing for retirement throughout your career, you can spend more of your money on other things or you can choose to work less. If you have a drop in income or unexpected expenses, you also won't have to be concerned about the impact this could have on your retirement since your invested funds will be safely working for you.

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