How to Achieve Coast FIRE in Your 30s and 40s with Kids and a High Income”

Understanding Coast Fire: Balancing Lifestyle and Retirement Savings

In this episode of the Retire Early Retire Now podcast, host Hunter Kelly, a certified financial planner, delves into the concept of Coast Fire. This strategy helps individuals determine when they can ease off aggressive retirement saving while still ensuring a comfortable future. Kelly explains the mechanics of Coast Fire, emphasizing the importance of substantial early investments to allow for lifestyle flexibility later. He details practical steps, including front-loading investment, aggressive investing, balancing lifestyle, protecting against risk, and staying disciplined. This episode provides valuable insights for high-income earners in their 30s and 40s, navigating the trade-offs between current lifestyle enhancements and future financial independence.

00:00 Introduction to Coast Fire
01:04 Understanding the Concept of Coast Fire
01:59 Is Coast Fire Right for You?
07:03 Calculating Your Coast Number
12:23 Practical Steps to Achieve Coast Fire
23:32 Life After Achieving Coast Fire
25:53 Conclusion and Final Thoughts

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Transcript

0:00

and welcome back to the Retire Early Retire Now podcast. I'm your host, hunter Kelly, certified financial planner and founder of Palm Valley Wealth Management. And today we're going to expand on the idea of Coast Fire. This is the idea or the concept that we talked about last episode. And again, this is something that I've been thinking about, a lot lately, not only for myself, but for my clients. As well because they often come to me with this idea. They don't always call it coast fire, but maybe they like what they do, but they want to be able to, do just that. They wanna be able to coast. Can I take the foot off the gas of saving hard for retirement? increase my lifestyle, but still be okay. For retirement. So what does that trade off look like? Have I done enough, to maybe start coasting a little bit or do I need to continue, pushing the pedal to the metal? And so again, this is not a novel idea by me. it is something that, has come about over the last few years and. I really started thinking about this about a month ago when I read, the blog from of Dollars and Data. I want to expand on this idea and start giving the listeners, the audience a more, actionable item list that they can out and implement on themselves, or at least have something that You guys can think about. that's really what this podcast is gonna be about today is redefining, recapping what we talked about last week a little bit, but then giving you some action items to assess, Hey, where am I, in. This kind of pursuit to what Coast Fire is, am I going to be able to have that flexibility at some point to where I don't need, necessarily need to save 15, 20, 20 5% of my income. I can lower that down to theoretically nothing and still be able to allow my investments to grow and then have a Nice nest egg of money when I decide that, hey, I do wanna fully quit or retire from this income, that I currently have. Or that could be slowing down, whatever that may be. So if you're listening today and you're in your late thirties, mid thirties, early forties, you're married, maybe you have some kids, that are still in grade school and you're earning a healthy income of$250,000 or more, this is going to be a great episode for you to listen to. Because here's a hard question. How much do you really need to save or keep saving for retirement? Or is there a point where you can take the foot off the gas and stop maximizing every retirement account, brokerage account, 5, 2, 9, plan, whatever that may be, and still be able to reach your retirement goals? And so the answer is yes. It's called Coast Fire. And as I mentioned just a few seconds ago today, we're gonna break down exactly what that is, review it a little bit from last week, but then. Have a list of action items that we can, start to implement or at least think about and, allow us to assess where we are in this idea of coast fire. if you're unsure about, Hey, how do I start this, this journey of coast fire, I'm not sure where I am in my, financial journey. I know that I want to slow down and work, or, be able to increase my lifestyle a little bit or have the option to retire at some point, and not distant in, in my eighties. Whatever that may be. that's what I do at Palm Valley Wealth Management is I help clients achieve, their financial goals. And a lot of times it is this idea of coast fire or retiring early. So if you're one of those people and you're unsure on how to, start assessing that and implementing those types of things to help you get there, you can always go to my website, Palm Valley wm.com, look at the Palm Valley pathway. This is the system that I've created, that I've found that works. Best for helping clients achieve these goals, and we can start having that conversation, as well. And if you like this podcast and someone that wants to retire early or have that ability to, coast into retirement, go ahead and share this podcast with them and leave a five star review on. Your favorite podcasting app. So what is Coast Fire? Think about riding a bike up a big hill. At first, you've got to pedal hard. You've gotta put a lot of energy into getting that bike up the hill. Get that momentum going, but once you crest the top, you don't have to pedal nearly as hard. You can just coast your way down, right? The momentum, the gravity is all pulling you down that hill. And so that's the idea of coast fire It's when you've invested enough money early on that if you stop contributing today and just let it grow, you still reach full retirement age with enough money to fully retire. You're not retired yet. You're still, you still need to cover living expenses, but you don't have to stress about whether you're saving enough. Your nest egg is already working in the background. The beauty. The real beauty of Coast Fire is flexibility. If you've got kids, like many of my clients do, it's, it means you can start living life a little bit more intentionally now instead of waiting until you're 65 to enjoy yourself. Right? again, this is a very, very common theme that I see throughout my, wealth management practice. talking with friends that aren't clients of the firm, and people that are in their, call it mid thirties to early forties. they want to be able to ha have that balance of, Hey, I want to be able to retire at a certain age, whether that be retire early, or, retire at 65. But I do want to balance some of that, that lifestyle now. So how do I do that? And so one of the things that we'll talk about today is, Upfront saving, pretty heavily so that now I can get those dollars working because the old saying goes, the more time you have in the market is way better than timing the market. So the earlier you can start investing, the earlier these dollars can start working for you and the less you have to do later on. Right? So we're gonna talk about that idea. And so that's what Coast Fire is, is doing the heavy lifting up front so that. In my forties, my mid forties, my early fifties, I don't necessarily have to save 25, 30% to make sure that I'm meeting those retirement needs, right? That compounding interest can kind of start working for itself. I can maybe lower my savings rate because of that. Add to my lifestyle. Enjoy time with my kids, enjoy my hobbies. Whatever that may be. Take a sabbatical, lower my hours, so just lower my income in general, I can keep my same lifestyle, because now I'm not having to save 20 or 30% of my income, whatever that may be. And you can kind of coast into retirement, right? the first thing you really want to do, from a math standpoint is calculate your coast number or retirement number, right? And so how do you know if you're there? How close are you? Right? And so that's where the coast number comes in, or the retirement number comes in. Let's use an example. Let's say you and your spouse are 38 years old. You've run the numbers and you de, you have decided that about$4 million is what you need to retire at 65. So now, if you've already saved about$750,000 today at age 38, and it grows at, let's say a conservative 7% a year, you'll hit that$4 million target at around 65 years of age. So even if you don't contribute another dime, you'll have about that, about$4 million in your nest egg to retire. That's what you need to do. You need to say, okay, this is point A. Where am I at at point A? Where do I want to get at point B? And if I don't contribute on another dime, what does point B look like? And if it's enough for you to retire at that point, then now you can start to look at either backing back. backing down your hours or your income, maybe going PRN if you're a physician, working less hours. If you're an attorney, what? Maybe getting a new job that makes you more fulfilled, that you enjoy more, that maybe may not pay as much, whatever that may be. If you have enough saved up already. If that can work for you over time and still allow you to hit those goals, then we can start to look at implementing some of these lifestyle changes that, uh, that we talk about in Coast Fire. Right? And so now let's say you're not there, right? And so now you have to start building. that plan, well, how much do I need to save, to get me there by, let's say for 38, how much do I need to save to get me there by 45? Right? Can I, can I accelerate that savings process for let's say five to seven years and then be able to coast from age 45 to 60 or 65? Right? What are the things that I need to do to get there? And so that is coast fire. You build enough of a snowball that compounding interest is going to carry it the rest of the way downhill, right? get those dollars in there. Again, it's about time in the market, and that's really what this, this concept is about. Let's front load our savings. Maybe you don't have kids yet. Maybe you're, you have an excess of income, that you don't necessarily use. Whatever that may be, start getting that into your account, your investment accounts, whether that's your 4 0 1 Ks, brokerage accounts, IRAs, things of that nature, and allowing that to start compounding earlier, so that you can coast later. Right? So doing the dirty work up front and coasting later, right? And so once you've hit that coast number, the conversation shifts. You don't have to stress about you. Stress about squeezing every dollar into your 401k or redirecting money toward other goals or. You don't have to stress about squeezing every dollar into your, your retirement plans and things of that nature. You can redirect money to other goals like saving money for your kids', college family vacations, or even just giving yourself breathing room. And so again, now these other priorities can take place because you know that you're ahead of the game for that retirement at some point down the road. Right. And the. The thing here is that the other, popular topic is just, financial independence, retire early, where you're trying to retire as early as possible. So one, your number is going to need to be higher. Quicker, right? and two, your, Your flexibility kind of goes away there because you're, you're condensing your timeframe, whereas this coast fire is like, Hey, I know I enjoy working. Maybe I just don't wanna work as much, or I wanna have a little bit more balance, or I want to increase my lifestyle early on, and I can do that while working. But I do want to be able to be financially independent by age, let's say 65, right? this is going to allow you to have a little bit more balance, and not fill that time constraint of something like financial independence. Retire early. Not that that's wrong, some people may enjoy that. but from my experience and my practice, most people have. most people struggle with the idea of, giving up, a lot more, upfront to be able to quote unquote, retire early. Versus in this scenario, you're not necessarily giving everything up so that you can retire at 45, and not have a sourcing, and things of that nature. Right? And so a lot of this is semantics, but, and your kind of, your mindset around it. And so really what we're getting at is optionality. We want to be able to have options to, if I wanna keep slamming hours and, and making income, I can, if not, if I wanna take a few years off or, Cut my hours or work a different job that doesn't pay as much. This is, this plan would give you the option to do that. Right? And so what are some practical steps to achieve coast fire? So how do you actually get there? Especially when you're in that 35 to 40 age range, making a strong income and raising kids life is busy, especially when you're raising kids. You're in the prime of your, your workforce years, so you're probably the busiest that you're ever gonna be. just thinking about my situation over the last couple weeks, school's back in the, to the fold of things. We, have two sports going on and dance for my daughter. so there's a lot going on. I have some personal things going on as well that I want to, to do. my wife has her personal things that she wants to do, that we have things that we want to do vacation wise, as a couple. And so. It's really hard to start to juggle, all of these things, at once, right? And so sitting down, and making a plan, can help you kind of walk through and think through these things. And sometimes that is, cutting things out of your life, right? and it is, it's not necessarily a bad thing, but, again, with all the things that are going on in my life and, and my clients that are kind of in the same, Timeframe or same season of life, if you wanna call it, It's almost ah, my, my plate is so full. I, I almost need to cut some things out. And so this, this, again, is going to, this Coast Fire Method will, help you be more intentional about that. So if, if the things that you are doing do not support, this plan of action. Then it's easy to say, okay, maybe I don't need to, to do this extra silly trip a year that we don't necessarily get anything out or, or eat at these fancy restaurants.'cause we're not really foodies, we're just kind of being, as out of convenience or whatever. Right? And so it allows you to be more, intentional. so how do we achieve fire? What are the practical steps? First, the idea is to front load your investing. So as early and as often as you can, we want to be investing. So when you're in your highest earning years, like you probably are now, if you're hitting that age 35 to 40, you've been working for 10, 15 years, at a career. likely. And so you are really humming as far as making that money, right? And so we want to take advantage of that. Maxing your 4 0 1 ks out, doing your backdoor Roth IRAs using your HSAs saving 20 to 25. If you're lucky enough, 30% of your income for about eight to 10 years, right? if you've already done a good job of saving, in your mid thirties and things of that nature, you may not have to do the full eight to 10 years. Maybe you can do a little bit less, or if you're behind, you might have to do a little bit more, right? And so the idea is to really. Save more upfront so that compounding interest will do more work on the backend. So this is time. So step two would be invest aggressively, right? let the equities do what equities do. Own equity and companies, whether that's through mutual funds, ETFs, or buying single holdings. my, thought process is make it easy. use your ETFs, your index, and things of that nature. Don't make it harder than it needs to be, but everybody's a little bit different. So obviously consult a professional in that. But this is a time where you can really lean into growth because you don't need. Necessarily this money, or you don't have plans that need this money for another 25 to 30 years, right? And so Coast Fire is going to allow you to, or being able or not needing this money for 30 years is going to allow you to be very aggressive. Right. And so a year, like this year where in April we saw a pretty aggressive pullback, that should be no problem to you. that is a buying opportunity because I know I have time to let that recover. Now, if you're retiring next year and you're, you're experiencing a 30 or 40% pullback, well that, that may be a big deal. Right? But if you're 35. It's a 40 and you aren't touching this money for 20 to 30 years. Let that thing be volatile, get the money in, and as the the time goes on, the stock market will continue to increase, as it has for the lifetime of the stock market. Now, is there a possibility that it won't? Of course there's always that possibility, but, these companies are gonna continue to try to be profitable and grow, especially if you're investing in these growth type companies. And so that's why you let, these ETF managers, mutual fund managers do that batting for you versus you having to do all the research on these companies. Step three, balance kids and lifestyle. This is the hardest one, that. That I see parents and clients deal with, right? So I wanna retire, or I wanna do this, or I wanna do that, but I know, my kids have private school because that's, that's important to us. Or, travel sports or family vacations. There's all these things that we want to do now. and how do we tr how do we, Analyze those trade offs. Like if I do this family vacation that I want to do every year and spend the$10,000 or$20,000 or whatever amount of money you wanna spend on vacations, how does that affect my retirement, later on? And so sometimes that's hard to think about. I think this is where a financial advisor can really come into play is, okay, well if I built this pool in this outdoor kitchen and I spent$150,000,$200,000 on this from my house. How is that gonna put me back as far as retirement and being able to coast later on down the road. And so all of these things actually matter. They're important. I don't think buying a pool or going on a extravagant fa, family vacation is a bad thing. I think both of those are great things, but we have to be realistic and go, okay, what's the trade off here? And is that trade off worth it? Right? And so Coast Fire isn't about saying no to everything. It's about being intentional, right? And that's what I'm all about. If you listen to me talk about goals and financial planning and things of that nature, I just want people to know what's important to them. And build their financial situation around that to support those things that are important. That doesn't mean they can't change over time, but as you grow and mature and, go through life, I wanna make sure that we're making decisions with our money. That support the things that are important to us. So that at our, last few days of, of life, as hard as that is to think about, I don't want then people thinking, oh, I should have done this, or I should have done that, or this was more important. I want people to be fulfilled with their life using money as a tool. Right? And so maybe you don't do everything right now, but the things that, but you do things that bring you most joy. I. Everything is about being intentional. So maybe you don't do everything right now, but you do the things that bring you most joy and alignment with your values. So again, we just wanna make sure that we're making choices, about our life that, align with the things that are most important, whether it be kids, family, lifestyle, things of that nature, right? Step four is the most underrated or under thought. Point here, and that is protect against risk. And so if you're married and you have kids and you're the breadwinner, you need life insurance. Life insurance, and you need disability insurance, you definitely should be meeting with an attorney about estate planning. I've done a number of podcasts on each of these topics. But you don't want an unexpected event or injury or death wiping out years and years of planning, especially toward the end, right? take your time, meet with a professional if you need to, but understand how much life's insurance you actually need. Disability insurance. What do you have through work? If you have anything, what does it cover? Is it. 50%, is it 60%? But it caps out at a certain dollar amount. what is the definition of a disability?'cause that can play a big factor if you're a physician or a specialized, occupation of some sort. And so we wanna make sure of that. And then estate planning document just makes. Things much more streamlined, for you, and your family, after you have passed. again, not fun things to think about, but they are super important to protect your family and protect you against the risk that can easily wipe out any financial plan, that you can come up with. Step five is the hardest one, right? And that is staying disciplined, once you hit your coast number, right? So this is a big one. It's the hardest one. doing the repetition over over and over and over again. making sure that you're saving properly, upfront, things of that nature. don't overfund your retirement account. If it doesn't need to be. And so on the back end, it can be hard to go, okay, I've hit the number that I've wanted to hit so that we can coast into retirement. Maybe I'm 45 or 50 now. we have a a, we're more, we're. We're ahead of most everyone else in our same demographic. I feel good about the rate of return we can get. Um, and I want to turn off that savings, but it's hard to do because for the last 10, 15 years I've been saving 20, 25% of my income. that's a really hard switch to make. I see this in retirees all the time, and it doesn't really matter what age, you've been saving all of your life, and it's hard to go, all right, I'm gonna go from a saving mindset to a, a spending mindset. with some of my clients that are, retired within the last few years, I had to remind them like, Hey, you can go out and spend money. you can go buy the RV that you want. You can go on these, vacations and trips that you've been wanting to do. Give to your favorite charities a little bit more, whatever that may be for them, right? not only do you need to be consistent in saving upfront, but you need to have a good mindset about when you're there and you know you're there. Having that mindset shift of, okay, now we can kind of funnel these other funds to things like lifestyle, maybe helping your kids out a little bit more, padding up the brokerage account, to give you a little bit more flexibility if there's nothing imminent that you want to spend that money on, or sim if simply, improving your lifestyle, whether that be through home renovations, buying a new home, what, whatever that is for you, right? And so the trick is once you hit that number. You have to let the money grow. So again, don't tap into it early. That should be go without. That should go without saying, and don't panic when the market goes down. So again, you may hit that number when you're 45. And again, that money is going to fluctuate, especially if you're fairly aggressive in the market. It's going to fluctuate over time, but over time it should and most likely will grow to whatever you need it to grow within reason obviously. And so. Now life after coast fire. So what does life look like? What does life look like when you actually hit your number? It could mean working a few hours, fewer hours, changing careers. Simply having more time with your family. I've worked with a number of clients that they get to this number, and I recently had a client that she was a preschool teacher. Her husband is retired military and works for local government. They have recently kind of hit this number where I said, Hey, like you guys can. You kind of coast retire, at a, this certain age. for them it's 55. you can kinda do what you want. And what she did is she quit her job and she's going back to school to get a degree and do something that she feels, will give her more fulfillment and life and things of that nature. it's, it's gonna look different for, for everyone, right? And so in that case of my client, she is. going back to school. she's in her early forties and she's going to get a, a new degree and start working. I think it's a ministry. So, she's gonna start working in ministry and. And doing that. And it's obviously not gonna pay her as much. and so it doesn't matter. She can do what she wants to do because she has hit these numbers and they have done really good job upfront of saving, things of that nature. Some people like to cut back, right? And so whether that's, staying in the same job and working three days a week versus five days a week, so that you can spend more time, with your kids or, your spouse doing whatever you want to do. there's all different types of directions that you can take. This once you hit that number. And so others have redirected their savings into a brokerage account. So maybe they have hit their number, but they have something a little bit more imminent that they wanna spend on. Or maybe they just don't wanna take, make any radical changes yet. They just fill. Feel peace that they have hit this number, or maybe they're saving up for a midlife sabbatical or a more extravagant family trip, whatever that may be, right? And so your number isn't always about retiring early. It's about living the life on your terms, giving that flexibility, earlier than you thought possible, right? So I hope this was useful today. we talked about coast fire. We identified or, define what that is. Kinda recap from last year and, talked about, hey, we need to save more upfront, but in the long term you can coast, and maybe cut back hours. And not have to save as much, moving forward. And so if you're in that 35 to 40-year-old range, you're earning a high income and you want to know exactly what your coast number is, that's where I can help. At Palm Valley Wealth Management, I walk clients through these calculations and help them create a plan that balances financial independence with living a meaningful life. And so if this resonates with you and you're unsure. And you want to reach out to me, you can reach out through Palm Valley wm.com, schedule a call. Again, you can click on the Palm Valley Pathway. This shows you the process of how I work with clients. and you can schedule a free call. We can talk and see if that makes sense for you. keep tuning in to the Retire Early Retire Out podcast. I really appreciate everyone listening. Share this with a friend and leave a five star review and we'll see you in the next one. This podcast is for educational purposes only. It is not meant to be financial or investment advice. Do not make decisions solely based on this podcast alone. Please seek professional help when considering your own situation.