Executive Summary
Many financial advisory clients might work for 40 years or more, ideally seeing their income – and capacity to save for retirement – increase over time as they advance in their careers. While many retire in their 60s (or even later), others with sufficient savings and/or guaranteed income sources might seek an earlier retirement, perhaps in their 50s. Still others, including adherents of the Financial Independence Retire Early (FIRE) movement, may hope to retire even sooner. But not every client may want to leave the workforce early. Some might prefer to retire at a more traditional age while gaining flexibility during their working years by switching to a lower-paying but more meaningful job, reducing their work hours, or taking occasional unpaid sabbaticals. For these clients, financial advisors can offer meaningful ongoing value by introducing and supporting a strategy known as "Coast FIRE".
A client reaches Coast FIRE when their retirement savings are projected to grow – without further contributions – into a portfolio large enough to support their anticipated future retirement spending needs. Which means they 'only' need to earn enough to cover their ongoing expenses while continuing to work, though their ability to keep saving can further strengthen their financial position, reduce risk, and provide additional flexibility. Determining when an individual has 'reached' Coast FIRE relies on a formula that calculates the current savings required to support income needs in retirement over the period that investments are expected to compound. Still, the strategy is often better viewed as offering a spectrum of possibilities, with clients adopting varying levels of commitment and risk.
While Coast FIRE might sound appealing to many clients, the best candidates will tend to have already accumulated sufficient savings earmarked for retirement and have relatively predictable expenses, since a sharp increase in future spending would require a larger portfolio to compensate. Such clients could include diligent savers (particularly those with additional savings outside of retirement accounts) or those who have received a windfall, such as from a workplace liquidity event or an inheritance.
Coast FIRE can be an attractive option for clients who value career flexibility, but the strategy also comes with both financial risks (e.g., changes to the client's spending, real rate of return, or retirement date) and psychological risks (e.g., stress from not necessarily contributing to retirement accounts) that could derail – or at least require adjustments to – a client's financial plan. This creates an opportunity for financial advisors to help clients assess whether Coast FIRE is sustainable (e.g., by stress-testing different scenarios) and to conduct regular reviews to determine whether adjustments may be needed.
Ultimately, while most clients won't tap into their retirement savings during their working years, those assets can still play a powerful role. By reducing the amount of income they need to earn, sufficient accumulated retirement assets can open the door to career changes, sabbaticals, or more flexible work schedules. This, in turn, allows financial advisors to add tremendous value – both by analyzing whether (and to what degree) Coast FIRE might be viable, and, at a more fundamental level, helping clients realize that they don't necessarily need to keep climbing the income ladder until the day they fully retire!
Financial advisory clients on a 'traditional' career path might work for 40 years or longer, ideally seeing their income (and capacity to save for retirement) increase over time as they advance in their careers. Along the way, those with sufficient income might choose to maximize contributions to retirement accounts (whether a workplace plan and/or an IRA) to the extent possible to benefit from the tax advantages of these accounts and build up a healthy nest egg for their expected retirement.
However, clients who are able to do so relatively early in their careers – or who experience a windfall such as an inheritance or workplace liquidity event – could find at some point (thanks to the expected compounding of their investments) that they might no longer 'need' to continue saving to meet their estimated retirement income expenses. Which presents opportunities for both the client (who may gain significant career flexibility) and their financial advisor (who can help determine appropriate savings needs and stress-test their plan over time).
How Coast FIRE Differs From Traditional Early Retirement
While many individuals will pursue a more traditional retirement starting sometime in their 60s, other clients with sufficient savings and/or sources of guaranteed income might seek to retire earlier, perhaps in their 50s. At the more extreme end of the retirement spectrum, the Financial Independence, Retire Early (FIRE) movement has gained notoriety in recent years, with some of its followers (those emphasizing the 'Retire Early' component of FIRE) seeking to leave the workforce many years, or even multiple decades, earlier than is typical by amassing sufficient assets to cover their expected lifetime spending needs (determining the amount needed by using the "4% Rule" or based on more flexible spending strategies).
Nevertheless, retiring early in the traditional FIRE sense (which tends to be more feasible for individuals with particularly high incomes and/or low lifestyle expenses) is not the only option to 'Financial Independence'. The more moderate "Coast FIRE" strategy may appeal to clients who want to remain in the workforce while gaining the flexibility to move to a lower-paying career or reduce their number of hours worked.
How Coast FIRE Works
An individual reaches "Coast FIRE" when their retirement savings are projected to grow – without further contributions – into a portfolio large enough to support their anticipated future retirement spending needs. At that point, they 'only' need to earn enough to cover their ongoing expenses while continuing to work, while their ability to continue saving can further strengthen their financial position, reduce risk, and provide additional flexibility.
Determining when an individual has 'reached' Coast FIRE is relatively simple and relies on a basic present value formula, which can be performed manually or using an online calculator designed for the task. (However, as will be discussed later, advisors can support clients by conducting a more detailed analysis to account for the many uncertainties and assumptions involved with this formula.) This formula calculates the current savings required to support income needs in retirement over the amount of time that investments are expected to be able to compound:
Example 1: Samantha is 50 years old and plans to retire at age 70. However, she would like to switch to a more rewarding and lower-stress career for her remaining working years.
Her financial advisor, Charlotte, projects that a portfolio of $1 million (in today's dollars) will meet Samantha's income needs in retirement (supplementing her Social Security benefits) and assumes her portfolio will generate a 5% real rate of return.
Using the Coast FIRE calculation, Charlotte determines that Samantha would currently need $1,000,000 ÷ (1 + 0.05)20 = $376,889 in savings today to meet this goal. Given that Samantha has already saved $500,000, she could be a good candidate for pursuing Coast FIRE.
Many clients, especially those with longer time horizons before retirement, may be surprised to learn that their current retirement savings, when combined with assumed investment growth, could already be sufficient to meet their projected needs. This realization can offer greater career flexibility than they might have expected. (Though, as will be discussed later, those with more years until retirement face greater uncertainties when it comes to the other elements of the Coast FIRE 'formula'). Potential opportunities with this newfound flexibility could include transitioning to a new position (or career field) that is more meaningful or less stressful, working fewer hours, and/or taking regular unpaid sabbaticals.
While the formula above identifies a single target number for achieving Coast FIRE, this strategy is better viewed as a spectrum of possibilities where clients can adopt varying levels of commitment and risk. For instance, 'classic' Coast FIRE involves halting retirement savings entirely, but many clients might prefer a hybrid approach, taking a lower-paying job that still allows modest contributions to retirement accounts (e.g., enough to capture an employer match in a company 401(k) plan), adding a margin of safety to their plan. Others may opt to pause retirement savings during especially costly life stages (e.g., when their children are in daycare or in college) and resume later when their expenses return to a baseline level.
Identifying Clients Who Might Be Interested In Coast FIRE
While Coast FIRE might sound appealing to many clients, the best candidates to pursue it will tend to have already amassed sufficient savings earmarked for retirement (whether in retirement accounts or taxable investment accounts) and who have relatively predictable expenses, since a sharp increase in future expenses would require a larger retirement portfolio to compensate.
One client avatar who might fit this mold is someone who receives a large windfall. For instance, business owners or employees with equity compensation who experience a liquidity event might suddenly have enough to support a Coast FIRE strategy. Similarly, an individual who receives a large inheritance could choose to earmark the proceeds for retirement, reducing their savings requirements during their working years.
Nerd Note:
While the Coast FIRE strategy is typically geared toward clients in the accumulation stage, advisors working with older clients who are considering how much to leave to heirs might also keep this approach in mind. For instance, a wealthy client may wish to provide financial support to a grandchild, but not so much that it eliminates their need to work. In that case, the client could consider giving an amount (perhaps with restrictions through trust provisions) that allows the recipient to pursue a more meaningful, lower-paying career, without receiving so much that they could leave the workforce altogether.
Notably, a major windfall isn't necessarily required to pursue Coast FIRE. Diligent savers (particularly if they have relatively low and consistent spending needs) might find that they have saved enough as they approach the middle of their careers.
Example 2: Ted and his wife Robin are both 45 years old and have been diligent savers, each contributing an average of $15,000 per year to Roth-style retirement accounts over the past 15 years. They have amassed a combined portfolio worth $800,000 (including investment gains).
Their advisor, Barney, projects they will need $1.5 million (in today's dollars) to meet their spending needs once they retire at age 65, assuming a real rate of return of 5%.
Using the Coast FIRE formula, Barney calculates that Ted and Robin would need $1,500,000 ÷ (1 + 0.05)20 = $565,334 today to be able to stop contributing. Which means that, with $800,000 already saved, their current portfolio is expected to provide them with a sufficient cushion to pursue Coast FIRE.
Clients who might not be ideal candidates for Coast FIRE include those who got a relatively late start to retirement saving, since they'll have fewer years to allow their retirement savings to compound. It can also be more difficult for clients with very high expenses, as they would need a much larger portfolio to support their lifestyle. Finally, those with highly variable lifestyle costs may find it challenging to predict how much income they will need to earn or draw from their portfolio each year in retirement.
Nerd Note:
Many financial advisors might consider whether Coast FIRE is an attractive opportunity not only for their clients but also for themselves. For instance, a firm founder who has reached Coast FIRE and has greater control over their workload might choose to grow their client base more slowly – or even maintain a steady headcount – to reduce the number of hours they work. This can be especially compelling given that the data from Kitces Research on Advisor Wellbeing suggests a positive correlation between advisor wellbeing and the number of hours worked per week! Alternatively, employee advisors who have reached Coast FIRE might feel more confident starting their own firm (or taking a lower-paid but less stressful position), knowing they only need to cover their ongoing expenses rather than contribute additional savings toward retirement.
Nevertheless, while financial advisors with clients still in the accumulation phase might find that many have already saved enough to potentially pursue Coast FIRE – or could reach that point given their current trajectory – pursuing this strategy is not without financial and psychological risks, considerations that advisors can help clients navigate thoughtfully.
Addressing The Financial And Psychological Risks Associated With Coast FIRE
On the surface, Coast FIRE can be an attractive option for clients who value career flexibility. It doesn't require as much upfront savings or spending restraint as full early retirement (i.e., leaving the workforce altogether), making it particularly appealing to those still decades away from traditional retirement age. Nevertheless, Coast FIRE comes with both financial and psychological risks that could potentially derail – or at least require adjustments to – a client's financial plan.
The Financial Assumptions Involved In The Coast FIRE Calculation
While the Coast FIRE 'formula' discussed earlier is relatively simple, each input involves assumptions that may not hold over time. If any of these elements change unexpectedly, a client's ability to meet their financial goals could be jeopardized either during their remaining working years or in retirement.
To start, the formula estimates the portfolio balance required to support a client's retirement income needs. Clients who are only a year or two away from retirement may have a better idea of their future spending, but for those a decade or more out, estimates are inherently less certain. Which means that if a client's expenses increase after they slow down or stop retirement contributions, their previously assumed portfolio target may no longer be sufficient.
Example 3: Rose, age 50, is interested in pursuing Coast FIRE. Her advisor initially expects that she will need $1.5 million (in today's dollars) to retire at age 70 and assumes a real rate of return of 5% on her investments.
Based on the Coast FIRE formula, Rose would need $1,500,000 ÷ (1 + 0.05)20 = $565,334 today to stop retirement savings.
However, if Rose's lifestyle expenses increase and she instead needs $2 million to support her retirement, the required amount today would be $2,000,000 ÷ (1 + 0.05)20 = $753,779.
Next, the formula assumes a real (inflation-adjusted) rate of return. This embeds assumptions about both the inflation rate and the client's investment returns, each of which can vary significantly from expectations over a 10–20-year period.
Example 4: Rose, from Example 3 above, still needs a $1.5 million retirement portfolio, but higher-than-expected inflation and lower-than-expected investment returns reduce her real rate of return to 3%.
This means Rose would need $1,500,000 ÷ (1 + 0.03)20 = $830,514 today in order to stop retirement savings contributions, substantially more than the $565,334 assumed in her original plan.
Finally, the Coast FIRE formula includes the number of years until retirement. While clients may have a target age in mind, unforeseen circumstances (e.g., health challenges) can accelerate that timeline, reducing the number of years available for compounding.
Example 5: Rose, continuing from the earlier examples, is forced to retire at age 65 instead of 70 due to an unexpected health event.
This reduces her retirement timeline from 20 to 15 years. With all other assumptions unchanged, she now needs $1,500,000 ÷ (1 + 0.05)15 = $721,526, a meaningful jump from the $565,334 in the 'baseline' scenario.
Beyond the elements of the Coast FIRE formula, other financial variables may influence the amount that a client needs to have saved today. For instance:
- Changes in tax rates. Rising tax rates could reduce net income from retirement accounts, especially for clients relying on traditional accounts subject to ordinary income tax treatment.
- Job loss or reduced income. Losing employment during the Coast FIRE period could create strain if clients don't have sufficient liquid assets outside retirement accounts as a buffer.
- Social Security uncertainty. Future changes to the Social Security benefits – either due to income changes or legislative reform – could increase the amount clients need to draw from their portfolio.
Psychological Challenges Of Pursuing Coast FIRE
In addition to the financial risks of slowing down or stopping retirement savings, Coast FIRE can come with psychological challenges, particularly for clients who stop retirement contributions completely.
For lifelong savers, it may feel unsettling to turn off the savings 'switch' and rely solely on compounding for portfolio growth. This can be particularly challenging during market downturns, when they're used to 'buying the dip' with ongoing contributions.
Nerd Note:
While Coast FIRE typically applies to retirement, a similar strategy can be applied to other long-term savings goals. For instance, a client might contribute enough to a Health Savings Account (HSA) that compounded growth could cover their anticipated health costs in retirement. Similarly, front-loading contributions to a 529 plan early on might lead to balances (through growth alone) that meet education expenses.
While some clients may still prefer to contribute conservatively (given uncertainty around future healthcare and higher education costs), evaluating the growth potential of current balances can help clients feel more confident reducing these contributions, freeing up income for high-priority needs today.
Coast FIRE may also challenge a client's sense of identity. Those who associate their self-worth with their earnings might experience a hit to their self-esteem when reducing their hours or taking a lower-paying job, even if the new path is more personally meaningful.
There can also be tension between spouses or partners. One partner might be ready to downshift while the other isn't, especially if the higher-earner feels they're now carrying more of the financial burden. This mismatch can create stress, particularly if one partner continues contributing to retirement accounts while the other reduces their income. A potential compromise is for both partners to wait to pause retirement contributions until they've each reached a Coast FIRE threshold.
While Coast FIRE offers meaningful lifestyle flexibility, it also introduces a range of financial and psychological challenges that shouldn't be overlooked. Fortunately, financial advisors have a variety of tools available to help clients assess these trade-offs and provide guidance on how they can move forward with confidence.
How Financial Advisors Can Provide Ongoing Value For Clients Interested In Coast FIRE
Given the number of variables involved in the Coast FIRE calculation, many of which are challenging to estimate, financial advisors can add tremendous value by helping clients determine whether Coast FIRE is sustainable for them. In some cases, advisors may be the first to introduce the concept to clients who have expressed interest in changing careers or scaling back work hours.
Further, because Coast FIRE comes with both financial and psychological risks, advisors can continue to offer meaningful support over time, helping clients stay on track as markets, expenses, and life circumstances evolve.
Determining Whether A Client Has The Financial Wherewithal To Pursue Coast FIRE
As discussed earlier, the Coast FIRE calculation is relatively simple, but selecting the right inputs is far more complex, given the unknown future path of market performance, inflation, and other factors. Advisors can support their clients not only with estimating these values, but also with tailoring assumptions to fit the client's risk tolerance.
To start, while clients might know their current spending, and possibly estimate how much it might change in retirement, determining how much they need to support that spending is trickier. One option is to apply a static withdrawal method like the 4% rule (i.e., withdrawing 4% of the portfolio's value during the first year of retirement, then withdrawing the same dollar amount adjusted for inflation in each subsequent year). For instance, a client expecting to withdraw $100,000 in their first year would need a portfolio of $100,000 ÷ 0.04 = $2,500,000.
However, for clients open to potential retirement spending adjustments, flexible withdrawal strategies (e.g., income guardrails-based approaches) may allow for higher initial spending rates, meaning they could potentially retire with fewer assets to generate the desired income.
When estimating the real rate of return, advisors might begin with historical inflation data and the expected performance returns of the client's asset allocation. However, advisors could go a step further by using Monte Carlo simulations to model a variety of outcomes, including scenarios with higher inflation or lower-than-expected market returns.
This analysis can also incorporate variables like an earlier-than-expected retirement date, allowing clients to see how different paths could affect the feasibility of Coast FIRE. Risk-averse clients may want a higher probability of success before making a change, while others may feel more comfortable with a lower probability, especially if they recognize that their advisor will be monitoring their plan and conducting this analysis on an ongoing, rather than one-time, basis).
Rather than providing a definitive answer on whether Coast FIRE is feasible, this analysis can help clients make informed decisions. For instance, those with a high probability of success across a range of possible outcomes might be comfortable fully engaging in Coast FIRE, completely stopping retirement contributions. Those with a lower probability of success might decide to grow their retirement portfolio a bit more before making a career move.
The most challenging decision may come for clients whose assets equal (or come very close to) the best-estimated threshold of the Coast FIRE formula. For this group, fully stopping retirement contributions can be more risky, especially if any of the key assumptions (e.g., investment returns, inflation, or expenses) turn out worse than projected. Even so, some may be comfortable moving forward if they're confident in their ability to increase their income again or reduce spending if needed. Others might take a more limited approach, at least initially, by shifting to a lower-paying role that still allows them to make some level of retirement contributions, preserving flexibility while building a margin of safety.
Serving Clients Throughout Their Coast FIRE Years
For clients who move forward with Coast FIRE, advisors can continue adding value by continually ensuring that clients remain on a sustainable path and updating the plan with potential adjustments to their income and/or spending as needed.
At the financial level, re-running the Coast FIRE calculation each year, accounting for changes in portfolio balance, spending patterns, and time before retirement, can provide a quick pulse check on whether the strategy still works. Going deeper, updated Monte Carlo projections (with refreshed inflation and performance assumptions based on updated economic context) can offer a clearer view of the client's trajectory. If projections show signs of strain, advisors can help clients weigh adjustments, such as reducing discretionary spending or temporarily resuming retirement contributions (even though this might be painful!).
Advisors can also help clients navigate the emotional journey of Coast FIRE. While some may find new energy in the freedom that comes with reduced work hours or extended sabbaticals, others may struggle with replacing the sense of meaning that came from their previous work life (or filling their time after the initial excitement of their newfound flexibility wears off). In these cases, advisors can serve as a sounding board, exploring options like returning to full-time work, volunteering, or redefining what an ideal retirement might look like based on their evolving goals.
Ultimately, while most clients won't tap into their retirement savings during their working years – given the taxes, penalties, and lost compounding involved – those assets can still play a powerful role. By reducing the amount of income they need to earn, retirement assets can open up possibilities for career changes, sabbaticals, or more flexible work schedules.
This opens the door for financial advisors to add tremendous value for clients both by analyzing whether (and to what degree) Coast FIRE might be possible, and, at a more basic level, helping clients realize that they don't necessarily need to keep climbing the income ladder until the day they fully retire!
