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For example, suppose an individual is able to have $100,000 invested in broad stock market index funds by age 30. Even if they make no additional contributions, this $100k will blossom into $1,067,658 (assuming 7% ann. returns) by time they turn 65, making them a millionaire at retirement without investing a dime after age 30.

This individual could then use more of their income to enjoy their lifestyle during their 30’s, 40’s, and 50’s instead of putting it towards retirement contributions.

There is actually a name for this investment & lifestyle approach: Coast FIRE. The whole idea is to accumulate enough money at an early enough age that you no longer need to invest any more to achieve financial independence by age 65 (or whatever you define as a retirement age). Once you have enough money invested, you can simply “coast” your way to retirement.

In this post, I want to share some fascinating data around investment growth and the idea of Coast FIRE, including:

How much will each $1 you invest be worth 30 or 40 years from now?
How much do you need invested by age X to have $1 million by age 65?
How much could investment returns impact these calculations?

Traditional retirement says you need to work at a soul-sucking job for 40 years.

Early retirement says you need to work at a soul-sucking job for 10-20 years, depending on your savings rate.

Coast FIRE says you need to work at a soul-sucking job for as little as 4-8 years.

The benefit of Coast FIRE is that you can leave a shitty job as fast as possible and still be able to fully retire one day. And while you still have to earn income to cover your expenses on the road to financial independence, you can often do so by working at a less stressful job.

This allows most people to gain a better work-life balance quickly, rather than waiting a decade or two until they have enough to be completely financially independent.

If you don’t find the traditional retirement path appealing, you may want to consider early retirement.

And if you don’t find the early retirement path appealing, you may want to consider Coast FIRE.

Barista FIRE: Withdraw 4% of your portfolio each year to cover a percentage of your expenses and work at a job you enjoy (e.g. as a barista) to cover your remaining expenses.
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By using this approach, she could quit her full-time job and enjoy much more freedom in her daily life long before she achieves financial independence. Best of all, by only withdrawing 4% of her portfolio each year, there’s a high probability that she will never deplete her portfolio.

Things to Keep in Mind
If you do choose to pursue Barista FIRE, keep the following things in mind:

1. You have to strike a balance between sticking it out at your job to build your portfolio and leaving sooner to gain freedom.

The longer you remain at your job, the higher your portfolio value will be when you quit, which means you’ll have to earn less money through active work to cover your remaining expenses.

If your job is soul-sucking, it may make sense to leave sooner rather than later. On the other hand, if you enjoy your day job and you have a healthy work environment, it may make sense to stick it out longer to build up your portfolio.

2. If you want to achieve complete financial independence at some point, you’ll need to earn more than just “enough” from your barista-type gig.

In our example from earlier, Jessica could quit her day job with $400k and withdraw $16,000 from her portfolio each year while earning just $24,000 to cover her yearly expenses.

However, she would need to earn more than $24,000 per year if she slowly wants to add to her portfolio each year so that it could eventually grow to a point where it could cover all over her expenses.

Pepeco escribió: ↑

Lun Feb 24, 2020 11:32

Tengo un blogroll muy interesante, saco un hueco, lo exporto y lo comparto.

Jm2t escribió:Super interesante. Gracias por el aporte. Me gusta mucho este otro artículo en el que habla del coast FIRE:

Traditional retirement says you need to work at a soul-sucking job for 40 years.

Early retirement says you need to work at a soul-sucking job for 10-20 years, depending on your savings rate.

Coast FIRE says you need to work at a soul-sucking job for as little as 4-8 years.

The benefit of Coast FIRE is that you can leave a shitty job as fast as possible and still be able to fully retire one day. And while you still have to earn income to cover your expenses on the road to financial independence, you can often do so by working at a less stressful job.

This allows most people to gain a better work-life balance quickly, rather than waiting a decade or two until they have enough to be completely financially independent.

If you don’t find the traditional retirement path appealing, you may want to consider early retirement.

And if you don’t find the early retirement path appealing, you may want to consider Coast FIRE.

No conocía este concepto y me parece interesante, sobre todo para los que tenemos la suerte de que nos encante nuestro trabajo.

Depe escribió: ↑

Lun Feb 24, 2020 20:34

Jm2t escribió:Super interesante. Gracias por el aporte. Me gusta mucho este otro artículo en el que habla del coast FIRE:

Traditional retirement says you need to work at a soul-sucking job for 40 years.

Early retirement says you need to work at a soul-sucking job for 10-20 years, depending on your savings rate.

Coast FIRE says you need to work at a soul-sucking job for as little as 4-8 years.

The benefit of Coast FIRE is that you can leave a shitty job as fast as possible and still be able to fully retire one day. And while you still have to earn income to cover your expenses on the road to financial independence, you can often do so by working at a less stressful job.

This allows most people to gain a better work-life balance quickly, rather than waiting a decade or two until they have enough to be completely financially independent.

If you don’t find the traditional retirement path appealing, you may want to consider early retirement.

And if you don’t find the early retirement path appealing, you may want to consider Coast FIRE.

No conocía este concepto y me parece interesante, sobre todo para los que tenemos la suerte de que nos encante nuestro trabajo.

Me acabo de enterar de que desde que pedí le reducción de jornada hago Coast FIRE!

Mucho más cool que decir que no quería trabajar tantas horas, jeje.

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