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4 Benefits to CoastFIRE in Considering Early Retirement

By Sam Swenson, CFA, CPA – Sep 9, 2020 at 9:18AM

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Consider a less stressful professional environment before quitting forever.

The FIRE (Financial Independence, Retire Early) movement encourages its adherents to save as much as possible in the early stages of their careers, invest in low-cost index funds, and live frugally in an effort to enjoy a long, blissful period of non-work. This methodology can and does yield mixed results, however, in that people with the motivation and wherewithal to attain great career and financial success often have significant trouble adjusting to permanent lives of leisure.

This is why it's important to look at CoastFIRE -- the notion of transitioning to a less demanding job while allowing your nest egg to grow -- as a viable alternative to the idea of quitting work forever. Here are four benefits of the CoastFIRE strategy.

1. It will be easier on your psyche

Let's face it -- if you're a pragmatist and/or a realist, it's not difficult to accept that a paycheck coming every two weeks does provide peace of mind. Yes, even if you have enough money to retire. Yes, even if you think it won't bother you to draw down on your investments.

Those who do accumulate enough to retire early -- say, at least one million dollars in a high-cost-of-living area -- typically are quite intelligent, hardworking, and financially self-aware. Retiring is expensive, and retiring early is very expensive.

It's never easy to take from your money pile, even when you have done every stress test. Knowing that you have some earned income on its way to your bank account can provide a tremendous amount of comfort in living a more balanced and relaxed life. 

2. You'll have access to health insurance (maybe)

Of course, the most common way to access your own, low(er) premium insurance plan is to have the option provided for you via an employer. If you do choose to retire early, you may be faced with purchasing an expensive government-provided health insurance plan that does not cover many of the doctors or services you ultimately use. If you're married, you may have the option of joining your spouse's employer-provided plan, or perhaps you could take courses at a local university to take advantage of a student health insurance plan.

If you're in your 20s, 30s, or 40s, with no chronic conditions, you might be tempted to go without health insurance, but this is simply an unnecessary risk that could seriously jeopardize an early retiree's plan. The fact remains that coverage through an employer is a very valuable stake in the ground on which you can rely if you develop a chronic condition. Taking a less stressful job will provide more work-life balance and won't leave you worrying about ballooning healthcare costs. 

3. Your investments will have time to grow even more

Let's revisit the basics here: If you have some earned income coming in the door every month, you need to rely less on your portfolio to live. Even if you can cover half of your expenses from working, you're still reducing stress on your accumulated assets by only withdrawing a little to cover any deficits.

Every dividend you earn can be reinvested back into the investments you already own, rather than paid out to your bank account and immediately spent. Someone who has amassed enough to consider retiring early knows the vital effect of time on a portfolio, and the more you avoid the urge to touch your investments -- much less spend them -- the better off you will be in the long run. 

Man drinking from mug and looking at laptop

Image source: Getty Images.

4. You will keep your skills sharp

If you decide to quit forever, it's possible that your previously honed skills will begin to fade over time and the value of your human capital will fall. This is not only bad if you decide you want to go back to work one day, but it can also be very deleterious to your self-esteem to see your professional identity diminish.

There is something powerful about knowing you are being compensated for your skills -- that you're objectively rewarded for what you bring to the table. I suspect that many of those unhappy and stressed at their respective workplaces would feel a similar unhappiness with nothing to do all day and without a paycheck. The solution here, I propose, is to keep your mind strong and engaged through some type of paid work, but in a role that provides ample time for you to truly enjoy your life. 

Give CoastFIRE a look

I'm an ardent supporter of the FIRE movement and believe it has much to offer young to mid-career professionals in terms of its message and underlying tenets. It's certainly valuable advice to view life as a mosaic of several components (family, work, hobbies, friends, etc.) and not simply as a medium for endless professional obligation.

In considering the different flavors of FIRE, I've come to believe that CoastFIRE is a stable middle ground that doesn't quite go to the heights of extreme retirement but still allows for a very enjoyable existence. 

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