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The financial independence, retire early (FIRE) movement has been around since the 1990s. But it had a resurgence since the onset of the COVID-19 pandemic, offering a path to early retirement. So it makes sense that there have since been offshoots that appeal to different types of people. Enter: Coast FIRE.

Here’s what you need to know.

What is Coast FIRE?

Coast FIRE is another method for getting to an early retirement (meaning before 50, so this can be flexible depending on your goals). The “coast” part refers to coasting to the finish line.

In other words, rather than saving up the amount you need to have for your entire retirement, and only then retiring, you’d save up the amount you think you need, and rely on investment returns to make up the difference.

Your Coast FIRE goal amount is based on an estimate of both how much you’ll spend in retirement and how much your investments will grow over time. So it’s the “just enough” approach to retirement, but following this plan will still likely have a big impact on your budget if you want to get to this elusive finish line.

You’d keep working once you met your goal, but you’d be able to reduce your working hours or choose a lower-paying, but more fulfilling, job. Because of this income reduction, you won’t be investing more during that time.

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Pros and cons of Coast FIRE

Coast FIRE’s main appeal is that you can retire early faster, with the added bonus of being able to slow down sooner, too. It can also be a motivator for prioritizing retirement contributions at a younger age, which means you’re more likely to qualify for any 401(k) match your employer offers.

But Coast FIRE ultimately comes with the same risks of the FIRE movement, plus additional risks since you’re aiming for the bare minimum required nest egg. For example, you may underestimate the amount of money you’ll need.

You could run out of cash during your retirement if you don’t get the expected annual returns (which is more likely when you’re on a shorter investing timeline). And if you do have to return to work, you may find it difficult to find a job since you’ve been out of the workforce for potentially years.

Both FIRE and Coast FIRE may require you to make major sacrifices to meet the artificial retirement deadline, which may not be worth it, especially if your income is relatively low. (Imagine nickel and diming every single expense, turning down party invites, and scaling back on general social activities that require cash.) After all, you’ll likely have to make much higher retirement contributions at a younger age, when you aren’t yet earning your full income potential.

Plus, if you live in the U.S., you may lose your benefits by retiring early, requiring you to use more expensive private healthcare. That could then impact your annual spending needs, pushing you back into the workforce.

Is Coast FIRE a good idea?

While Coast FIRE could work for some individuals — particularly those comfortable with risk who are willing (and able) to put in the necessary work to save up the funds needed to retire early. But it’s a risky bet that may not work out for many since it relies on estimates for future investment returns and living expenses.

These factors are important to consider when planning for retirement, but they’re ultimately unknowns. That’s why financial experts tell you to plan for more than you think you’ll need in retirement.

Investing is a long-term game, so while it can offer 10% (or even higher) annual returns on average, this is never guaranteed. In fact, there can be major swings in either direction from year to year. If your nest egg is hit by a downturn, or you have an unexpected major expense (like a medical emergency), a Coast FIRE approach could put you in a precarious financial position.

An example of a successful Coast FIRE plan

Let’s say you’re 30 years old, earn $120,000 a year, and spend about $80,000 a year. That means you’d have enough to max out your annual 401(k) and IRA contributions. If you also get a 2% employer match, you’d be contributing a total of $30,460 a year toward retirement.

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If you invest that amount each year for 15 years, that would come to about $967,000. This would leave you with 17 years to coast. Left alone, your nest egg could then grow to a total of nearly $4.9 million by the time you’re ready to retire at age 67.

Based on the 4% rule, you’d only need about $2 million to accommodate spending $80,000 a year in retirement. So this savings amount actually far surpasses that requirement.

This plan could work — but again, it’s risky. Changes to your lifestyle or income can have a big impact on your ability to stick to a Coast FIRE plan, as well investment gain fluctuations.

You’ll need to have fully funded emergency savings to ensure that you can handle unplanned expenses to stay on track. And you should plan for issues like health problems, which are more likely as you get older. After all, Coast FIRE is meant to provide a path to an early retirement, not a sabbatical.

Ultimately, though, Coast FIRE just isn’t a good idea for most due to its extreme risks.

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