How to Reach Coast FIRE (The Relaxed Way to Retire!)

Summary

BiggerPockets Money Podcast: Episode Summary

Title: How to Reach Coast FIRE (The Relaxed Way to Retire!)
Host: Mindy Jensen and Scott Trench
Release Date: August 5, 2025

---

Introduction to Coast FIRE

The episode delves into the concept of Coast FIRE, an alternative path to financial independence that allows individuals to retire comfortably without the intense saving strategies typically associated with FIRE (Financial Independence, Retire Early).

Mindy Jensen kicks off the discussion by introducing Coast FIRE:

“What if I told you there was a version of FIRE where you could stop saving for retirement in your 30s and still retire comfortably at age 65? It sounds too good to be true, but it's called Coast FIRE...”
[00:00]

Scott Trench clarifies that Coast FIRE is not about relocating to a coastal area but about achieving a financial milestone that ensures traditional retirement is secure:

“...Coast FIRE is when you have enough saved that traditional retirement is funded with a high probability of certainty such that you can, at your discretion, optionally spend everything you earn or earn less to just cover your living expenses today.”
[00:29]

---

Understanding Coast FIRE

Scott elaborates on the mechanics of Coast FIRE, emphasizing the importance of early savings and long-term growth:

“If you have $300,000 saved in your 30s and your goal is a $100,000 a year annual expense profile, then you're almost certainly at a 7% long term annual return rate going to $2.5 million...”
[01:11]

This explanation highlights how a relatively modest amount saved early on can grow substantially over time, reducing the pressure to amass large sums quickly.

---

Calculating Your Coast FIRE Number

Mindy introduces the Coast FIRE calculator developed by The Finance COAST FIRE team:

“At age 30, if you want to retire at 65, you would need $169,000 in your bank right now. That is so much more approachable and so much more attainable...”
[06:29]

She demonstrates how the calculator adjusts required savings based on different retirement ages and return rates, making the goal more realistic for various financial situations.

---

Age-Specific Coast FIRE Targets

The hosts break down Coast FIRE targets across different ages, illustrating how long the money needs to grow to reach the $2.5 million mark by traditional retirement age (65):

• Age 27:

  “You need $191,000 saved up...”
  [07:50]

• Age 35:

  “At age 35, you would need $536,000 to retire at 55...”
  [13:25]

• Age 50:

  “By age 50, to amass a $2.5 million portfolio with a 6% return, you would need to have $1,043,000.”
  [17:09]

• Age 20:

  “If you had $181,000 by age 20, you could safely assume that you would be retiring at age 65 with a 4% withdrawal rate...”

[19:07]

These examples demonstrate the increasing feasibility of Coast FIRE the earlier one starts saving, reducing the required amount as time for compound growth increases.

---

The Role of Passive Income

Scott and Mindy discuss how passive income, particularly from rental properties, can significantly lower the Coast FIRE number. Scott mentions:

“Our $500,000 rental property ought to produce $30 to $40,000 a year...”
[09:33]

By generating passive income, the required savings for Coast FIRE can be substantially reduced, making the goal more attainable.

Mindy further explains how passive income impacts the Coast FIRE calculation:

“Your FIRE number dropped from 2.5 to 1.7... that's so much more attainable.”
[09:43]

---

Structuring a Coast FIRE Portfolio

Scott outlines the ideal investment strategy for achieving Coast FIRE, recommending a highly aggressive portfolio for young individuals aiming for long-term growth:

“This should be a highly aggressive portfolio... 100% in an aggressive portfolio concentration, including equities.”
[27:51]

As retirement age approaches, diversification becomes crucial. Scott suggests transitioning to a more balanced portfolio:

“Another answer to that is when you're about 80% or five years away from your target retirement date, it's time to begin building that more diversified portfolio.”
[28:45]

Mindy echoes the importance of research in portfolio allocation, advocating for stability as one nears retirement:

“The risk parity portfolio that Frank walked us through was just really eye-opening...”
[29:40]

---

Investment Order of Operations for Coast FIRE

The hosts discuss the strategic order in which to prioritize different investment accounts to optimize Coast FIRE:

1. Emergency Fund:

   “First build out your $1,000 emergency fund...”
   [32:07]

2. High-Interest Debt:

   “Then pay off any high interest rate debt.”
   [32:07]

3. Employer 401(k) Match:

   “Take your 401k match from your employer.”
   [32:07]

4. Employee Stock Purchase Plan:

   “Take advantage of employee stock purchase plans...”
   [32:07]

5. Health Savings Account (HSA):

   “Fully fund your HSA...”
   [32:07]

6. Retirement Accounts:

   “Fully fund the 401k, then the Roth IRA...”
   [32:07]

7. After-Tax Brokerage:

   “Extra cash can go into an after-tax brokerage.”

[32:07]

Scott emphasizes flexibility in choosing between traditional 401(k)s and Roth IRAs based on individual tax strategies:

“There could be a bias towards the 401k because implied in Coast Fire is a low-cost lifestyle...”
[33:23]

Mindy adds that the choice between account types should align with personal financial goals and tax considerations:

“Whatever you're doing, whatever order of operations you're putting your finances in, just do it on purpose.”
[34:27]

---

Conclusion

The episode concludes with Mindy and Scott encouraging listeners to utilize the Coast FIRE calculator to assess their financial standing and plan accordingly:

“I encourage everybody to go over to thefioneers.com and download their free CoastFi calculator and just play around with it.”
[36:09]

Scott reiterates the significance of Coast FIRE as a mental and financial milestone, offering a more relaxed approach to achieving long-term financial independence.

---

Key Takeaways:

• Coast FIRE offers a less aggressive path to retirement by leveraging early savings and long-term investment growth.
• Calculations vary by age, with earlier savers needing to set aside smaller amounts due to compound interest.
• Passive income from sources like rental properties can substantially lower the required Coast FIRE number.
• Investment strategies should be aggressive in the early years and gradually diversify as one approaches retirement.
• Strategic use of retirement accounts (401(k) vs. Roth IRA) can optimize tax benefits and align with personal financial goals.
• Utilizing tools like the Coast FIRE calculator empowers individuals to tailor their savings plans effectively.

This episode provides a comprehensive overview of Coast FIRE, offering practical advice and actionable steps for listeners aiming to achieve financial independence without the typical high-pressure saving regimes.

Transcript

[Mindy Jensen]

What if I told you there was a version of Fire where you could stop saving for retirement in your 30s and still retire comfortably at age 65? It sounds too good to be true, but it's called Coast Fire, and it might be the most achievable path to financial independence that nobody's talking about. Hello, hello, hello, and welcome to the BiggerPockets Money Podcast. My name is Mindy Jensen and with me, as always, is my name, not Coastal co host Scott Trench.

[Scott Trench]

Thanks, Mindy. Great to be here and great to discuss how we can help people peak their net worth. Not the coast, it's the mountain peak here on BiggerPockets Money. I'm so excited to get into this topic today. No, Coast Buy is not when you go and live by the beach. It is when you have enough saved that traditional retirement is funded with a high probability of certainty such that you can, at your discretion, optionally spend everything you earn or earn less to just cover your living expenses today. It's a very freeing milestone, mentally and psychologically.

[Mindy Jensen]

Okay, Scott, let's get into that a little bit more. What happens in your finances that allows you to coast? What does coast fine really, really mean?

[Scott Trench]

I think it's this concept of if you have $300,000 saved in your 30s and your goal is a $100,000 a year annual expense profile, then you're almost certainly at a 7% long term annual return rate going $2.5 million, and many people use 7% return rates to include assumptions around inflation, for example, you're almost certainly going to have that $2.5 million inflation adjusted net worth by the time traditional retirement hits. If we perform anything like what we've seen performance wise in the overall financial markets over the next 30, 40 years. And so that's the idea here, is if you are able to stockpile that wealth, especially early in life and just leave it untouched in your retirement accounts until that point, you should be set for your traditional retirement again, assuming long term average trends. And that can be a very freeing milestone to break. It's. It's much more achievable to think about those numbers and hitting those numbers early in life than it is to building a $2.5 million portfolio in your 30s that can distribute at $100,000 a year, which can be a very, very overwhelming obstacle for many.

[Mindy Jensen]

Did you say you could be set for life with coastfi?

[Scott Trench]

That is what I said, I guess. What a, what a pun.

[Mindy Jensen]

Okay, so what I like about coastfi is that you are saving a more nominal Amount instead of this push like you said, to get to the 1 million or 2,5 million or whatever it is that you have, your fine number now I've taken care of my 65 year old self if I don't wish to work anymore.

[Carl]

Let's say you're in a super stressful.

[Mindy Jensen]

Job and this job pays really well, you'd rather not work there anymore. You can still go out and get a different kind of job, cover your current living expenses, but not have to worry about being able to save for retirement. You've already taken care of your retirement. Or now you can start stepping back your retirement. Let's say you're in a job you like or you don't actively hate, you can continue to work there, continue to save for retirement. And now retirement isn't 65, it's 62. And a couple years later it's 58. And a couple of years later it's 52. And then you can really start stepping back and creating the life that you want. Creating your retirement timeline on your own timeline where you're not doing this all out mad dash to grab as much money as you can, save it now so that you can retire now.

[Scott Trench]

And again. I think that comes back down to that freeing concept. I think a lot of people who are in the FIRE community really obsess over this goal of financial independence, perhaps to an unhealthy degree, and they attempt to break that again. I use this number, 2.5 million, because that's around the midpoint of what Biggerpocket's money listeners say is their desired target for financial independence. Their FIRE portfolio has $2.5 million, thus allowing them to spend $100,000 a year, adjusting for inflation, indefinitely into the future. You know, there's a whole bunch of concepts here. You know, I think Mr. 1500, Mindy's husband came up with the concept of the death march to fi. And that is a, you know, a phenomenon that people feel. But it's much, it can take a lot of pressure off if you're like, wow, I am just going to be so set here at 30 or 40 with just the amount that I have in my retirement accounts. That's going to compound so nicely over the next 30 to 35 years that I don't really have to crush it and keep grinding it out, ease off in a pretty meaningful way and really begin to enjoy the benefits of the wealth that I've built up over this time. So that's the concept of coast fire. It's a relatively niche or Niche, depending on where you're from concept in the fire community. I don't think you're going to see this as a particularly popular strategy where people are actually beginning to change things. But it's a major mental milestone and you should feel great if you've hit coast fire, even if you're far away from actually being able to today live off of your asset base alone because it means that you fully funded your retirement in a traditional sense or you will have a fully funded retirement in traditional sense by the time you hit traditional retirement age.

[Mindy Jensen]

So I'm going to push back on you a little bit. Scott, you said you don't think it's for everybody. I think it is for everybody. I think anybody on the path to financial independence should open up a coast fi calculator and just run the numbers. I think there's so much comparison to people like Carl and I share our numbers over on his website and people will see that and be like, oh, I'm not there. Well, don't compare the beginning of your journey to the well past the end of my journey. Look at where you're at in comparison to, you know, your Coast Phi number. The pioneers have a calculator, a coast by calculator where it's already got some numbers entered in there just to show you what you're supposed to put in there. And at age 30, if you want to retire at 65, let's actually do it right. Scott, I'm going to share my screen with you. This is the copy of the Finance coastfi calculator. It's a Google sheet. It's super easy to use. You're literally just plugging in a bunch of different numbers. Your current age, age 30, your target retirement age of 65 is where we'll start. These are some assumptions. The 4% safe withdrawal rate and an inflation adjusted growth rate of 7%. I think 7% is a little low. I'm going to Change that to 8. Scott. And then annual expenses in retirement 100,000. Passive income, income 0.

[Carl]

Fine.

[Mindy Jensen]

Number 2.5 million at age 30. To retire at age 65, you would need $169,000 in your bank right now. That is so much more approachable and so much more attainable, especially for somebody who's just starting out, who might not be making a ton of money, who's thinking to themselves, how am I going to save $2.5 million? You don't need to. You only need to have $169,000 at age 30. But what if you don't want to retire at 65. What if you want to retire at 55? Well, let's see what that says. Now at age 30, you need $365,000. Playing around with this calculator just gives you some ideas of how easy it's going to be. Maybe I'm 35. Okay, at age 35, if you want to retire at 55, you need $536,000. That's still a whole lot less than 2.5 million. So this CoastFi idea is such a brilliant idea. I've been in the FI community for a really long time and in the beginning it was all about frugality and getting to the end as fast as you can. And now let's say it takes you 10 years to get to FI with the all out approach. Those are 10 pretty miserable years and I know this because I did it. But what if it took you 11 or 12 really awesome years? I'd rather have an 11 or 12 year journey that was pleasant than a 10 year awful journey.

[Scott Trench]

I think that while this should be good news for everyone, this concept of coast fire I think think it's particularly powerful for young people. Right? So you know, you're 27, let's put a 27 year old in there wanting to retire at 65 and this, this person, you know, let's put that return profile at 7% per year, which again is a more conservative approximation to this. I mean, because you have so long between now and that retirement date and then that you only need $191,000 saved up at 27 to never have to contribute again to your retirement accounts. This is assuming not another dollar goes in to get to your coast fire number you are likely with. If the, if the while goes anything close to historical averages or even a little worse, with the 7% assumption, you are likely to have this $2.5 million inflation adjusted terminal net worth at 65 and be able to withdraw $100,000 in inflation adjusted dollars in those, what, 38 years. So it's a pretty powerful concept. It's actually quite achievable. I think for many. It's still a lot of work to get $191,000 saved up by 27, of course, but that's a very achievable amount of money I think for a lot of folks. Compared to when you hear about all these folks that are trying to get into millions of dollars in their late 20s or early 30s and achieve a true early retirement level of wealth at that point in time, this person can spend the rest of their life spending every dollar they make or working a much easier job that's much less demanding and making less money and not have to contribute. And so it's a very powerful concept, I think, especially for younger folks as a milestone in that journey.

[Mindy Jensen]

Absolutely. And Scott, we haven't talked about passive income yet. You've got rental properties. Give me a number for annual passive cash flow on a rental property. Let's say somebody has one or two rental properties.

[Scott Trench]

Our $500,000 rental property ought to paid off produce 30 to $40,000 a year. So let's use $30,000 as a conservative approximation.

[Mindy Jensen]

$30,000 in annual passive income. Oh, look at that. Your phi number dropped from 2.5 to 1.7. Or coast phi number is now only 133,000 at age 27. And you said paid off rental properties. I want to extrapolate on that. Scott is talking about at age 65. This will be paid off.

[Scott Trench]

All right, we are going to coast into our first ad break. After this, we're going to break down exactly how much you'll need saved in your 20s, 30s, 40s and beyond to achieve coast buy.

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[Mindy Jensen]

Thanks for sticking with us.

[Scott Trench]

Let's do this. Let's have a 35 year old. And this 35 year old has just bought two rental properties. So in the time from 20 to 35, they were unable to amass two rental properties. Those are not generating any cash flow today. We're not assuming any cash flow whatsoever today, but just over 30 years, there's two 30 year mortgages on them. By the time that they're 65, this will generate $60,000 a year in passive cash flow, right? These could be two house hacks between the ages of 23 and 35, for example. Now this person, you know, just needs, what is that, 130 grand in their retirement accounts and they're done. Their retirement is a $2.5 million spending level. Retirement is done, not counting Social Security, any other types of benefits, any other type of wealth building. If they just have 131,000 in 401, for example, and two rental properties that are beginning that amortization journey, the amortization of the loan, they're done.

[Mindy Jensen]

Of course, these are all assumptions. We can't see into the future, but these are safe assumptions. These are not crazy assumptions. I actually don't like the 7%. I'm going to go to 8%.

[Scott Trench]

You go to 5%.

[Mindy Jensen]

I can go to 5% in a minute. But right now, assuming you have $60,000 in annual cash flow, your Cosfi number at age 35 is now $99,000. And that at 5% return, it bumps up to 231,000 dol. $1,000. That's why I like this. Financiers calculator so much. They did all the math for you. All you have to do is change these numbers and go back and forth and play. Oh, okay, I'm 35, I've got two rental properties. I'm only making 5% and I want to retire at age 55. Now I need $376,000 as my coast Phi number. And again, that's so much more attainable and so much more realistic than 2.5 million at age 35.

[Scott Trench]

Let's do a couple of other maneuvers here. Can you make the rental property passive cash flow go to zero?

[Mindy Jensen]

I sure can.

[Scott Trench]

And let's make the retirement age 65 and let's make a 35 year old. By the way, we're not, we're choosing 35 intentionally for two reasons. Right? One is this is my age. I'll be, I'll be 35 shortly here. And second, this is about the midpoint of the age for people listening to this podcast. So right, right around that, that level here. So if a 35 year old is very conservative in their assumptions, they're very scared about the future and they say we're just going to get a 5% return over the next 30 years. They would need $600,000 saved in their IRAs at the age of 35 to feel comfortable about retiring. Mindy, let's go to your more what I think is more realistic assumption that we're going to get closer to 8% return over 30 years. Now you need $250,000. So either way, 250 or 600, very different than the $2.5 million net worth at age 35 target. Both are much more realistic, much more achievable for many of the people, not everybody, but many of the people who listen to this or watch this podcast.

[Mindy Jensen]

And remember this is if you get to this age and never put another dime in, you will be comfortable retiring at age 65 with 2.5 million. And you would need the 250,000 in your accounts at age 35 if you continued to contribute to your retirement accounts, your retirement age just steps back, marches towards you. You've got your money up front and you're now you're marching your retirement age back. As you continue to contribute a little bit more so you can be 35 and live a great life. You're covering your expenses. As long as you're not going into debt, you've got your retirement covered. You don't really have to save anymore and invest anymore. What we did, Carl and I, once we hit retirement of course, we didn't believe that Bill Bengan was correct. Even though he is, we continued to save. Now it's just a game to us. How much can I amass by creatively investing in these other things? We've got our safe investments, you know, index funds is I think 50% of our portfolio. And then the other 50% we're like.

[Carl]

Well, let's see what we can do with this.

[Scott Trench]

One thing to note is that the concept of coast fire, I think is really more of a concept that applies to young people. Right. The concept of Coast Fire becomes less relevant as one gets older or closer to their target retirement age. And that's because there's less time to compound. You need to be adding to the portfolio pretty aggressively. If you're starting from scratch and want to build a portfolio like this $2.5 million mark if you're starting at age 50, for example, to illustrate that, let's actually put this in there. And I think because you have a shorter time horizon sequence of return and investment risk in the near term is more of a concern. I think you have to bring down your assumption on the long term growth rate a little bit or the investment growth rate in order to be conserv enough if you are starting later. So, Mindy, I would put this growth rate at 6% for this particular one. And then I'd say we're starting at age 50. What does that look like from a Coast Phi number?

[Mindy Jensen]

All right. Age 50. To amass a $2.5 million portfolio with a 6% return, you would need to have $1,043,000 at age 50.

[Scott Trench]

Yeah, and that seems really scary. You do not need to have a million dollars at age 50 in order to retire with 2.5 million. Doll clear. You need to have a million if you don't want to continue adding to your retirement accounts and have $2.5 million under this set of assumptions. But your Coast Fire is a much higher number. So a 50 year old with a million who wants to retire with 2.5 million would be Coast Fire. But if they had zero, they could retire at 2.5 million. Even if you're starting from zero, they just have to be very aggressive about how much they're contributing to the retirement accounts. And that would be a tall order.

[Mindy Jensen]

But possible very aggressive. Okay, let's change that now to age 40. Scott. At age 40, we are cut almost in half. $582,497 that you would need to have at age 40, assuming a 6% return to have 2.5 million at age 65.

[Scott Trench]

The reason it's not cut by a little bit more than half is because we're using a 6% return ratio instead of the rule of 72 at a 10% growth rate here. But yes, you would need half as much in this scenario as you would at 50. So it's really a young person's number here, this coast fire calculator, someone that is very far away from traditional, their target retirement date to determine this number.

[Mindy Jensen]

Okay, and since we're doing this with 40, let's do it with 30 again, slightly more than half. $325,000 at age 30. And just for fun, Scott, let's do age 20. $181,000. So if you had $181,000 by age 20, you could safely assume that you would be retiring at age 65 with a 4% withdrawal rate, with a $2.5 million portfolio if you had $181,000 invested at age 20.

[Scott Trench]

And I think it's even more unfair than that unfair of an advantage to the young person because I think you can get a little bit more aggressive with your long term growth assumptions at that point in time. So I think you can bump that growth assumption to 8% in this particular example for a 20 year old. And that was going to give us a shockingly low number, $78,000. And look, there are a good chunk of 20 year olds who will amass something in this ballpark. Or by 25, you know, if you, for example, are working through college or able to fund college for a very low cost or for free and are working through high school, I mean, this is an amount that is hard but possible for some of the Gen Z generation to accumulate. They could be coastfi by the time they graduate college in some of these cases.

[Mindy Jensen]

Well, let's do that. Age 22 on the CoastFi journey, you need $91,000 in order to allow that to grow at an 8% rate, which I think is very conservative to 2.5 million. This is something that's so interesting. I'm gonna make my girls watch me walk through this calculator with them and they are going to be like, mom, we don't care. And I'm gonna be like, you need to watch this one. This is awesome.

[Scott Trench]

One nitpick I have with you, Mindy, on this and I want to see how you resp this observation. But remember that the growth rate of 8% is an inflation adjusted growth rate. If we assume inflation is going to be at this 3% mark, then we're really assuming an 11% nominal return, which many people do attribute to very long term stock market performance. But I'm not convinced that the 8% return profile, which again is inflation adjusted, is actually a conservative. I think it's more realistic and something that you could use for a 22 year old, but not one that I'd be comfortable with using for somebody that's later in their journey or does not have the full 30, like a full very long term outlook to go ahead.

[Mindy Jensen]

And realize, okay, I think that's fair. I said conservative, I meant realistic, I think is the word that I did, but I popped it down to 7% and now we're at 136,000. I think for a 22 year old that might be a bit of a stretch. But if you go to, you know, 25, age 25 now you need 166,000. I think that's kind of doable, especially if you're, you know, 20 with that. What do we say 20 was 119,000 with at the 7% rate. I just think this calculator is so much fun because you can plug in all these different numbers. It instantly does the math for you and it really makes this seem way more possible. We truly believe financial independence is attainable for everyone no matter when or where you're starting. And. But the earlier you start, the easier it's going to be. And all these kids, I know, Scott, you had a presentation at Biggerpockets where you were just sharing the concept of financial independence. They said, but I'm young, I want to live my life right now. And I thought now is the best time to be saving.

[Scott Trench]

Mindy always thinks that, though.

[Mindy Jensen]

I do, I do think when's the best time to save money Right now. After our final ad break, we will break down how a Coast 5 portfolio should be structured.

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[Carl]

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[Mindy Jensen]

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[Mindy Jensen]

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[Mindy Jensen]

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[Scott Trench]

Let'S jump back in.

[Mindy Jensen]

Okay, Scott, so we've talked about how much money we need. Where is this money going to be? How should a CoastFI portfolio be structured?

[Scott Trench]

I think a Coast 5 portfolio for the young person that I think the topic is truly meant for should be a highly aggressive portfolio. This is something that's going to be hitting us at traditional retirement age. For most people using this term, it's going to be a long way off, perhaps more than 30 years. And I'd probably be 100% in an aggressive portfolio concentration, including equities. If there's money lost, then that person could potentially add to that portfolio to some degree. Most people are not going to truly stop adding in the entirety if they're looking for this coastify number. I think it'd be very aggressive. That's also why I think you can use a little bit more of an aggressive or more realistic, very long term assumption. For those portfolios, the closer one is to their target retirement date, the more important it becomes to diversify that portfolio and get to something that has some more safety in it. A traditional answer to that is more bonds. But I think an answer that we like much better than that bond portfolio is the risk parity or golden ratio portfolio we recently learned about from Frank Vasquez. I know both you and I have personally now set up portfolios like that that includes a mixture of stocks, bonds, gold, managed futures and international funds, cash or private equity or some other alternative that's uncorrelated with the four previous assets. That type of the time to move towards that more diversified portfolio is you can do it gradually. Some people have target date concentrations or those types of things that can handle that. And I know there's some portion of the community that doesn't love the concept of target date funds, but it is an answer to that question about how to allocate the funds over this time period. Or another answer to that is when you're about 80% or five years away from your target retirement date, it's time to begin building that more diversified portfolio.

[Mindy Jensen]

Yeah, I think that there is a lot of benefit to really researching portfolio theory and portfolio allocations. I agree with you. The aggressive portfolio, the earlier you are and the more conservative portfolio, the closer you are to retirement. The risk parity portfolio that Frank walked us through was is just really eye opening to see how kind of stable it's going to be. I'M super excited to follow along with that and just check in on it. I'm actually. I never understood why people were so obsessed about checking their numbers all the time. And this one I am obsessed with. I check it multiple times a day. I just leave the Fidelity app open on my computer.

[Scott Trench]

Nice. Love it. Yeah. So I think that regardless of how often you check it, it's that concept of though the aggressive accumulation at the beginning and then the diversification as you approach your target number or you're within a few years of your target date. So that's the, the key.

[Mindy Jensen]

Okay, Scott, now that we know where we're putting our money, what accounts are we putting this in? What is the investment order of operations for CoastFi adherence?

[Scott Trench]

If you're pursuing Coast Fire, then you can leave all this money in retirement accounts. And we want to take advantage of the full range of options available to us and let them grow there. So I think this is a very consistent process with a traditional order of operations for Fire, which is first build out your $1,000 emergency fund, then pay off any high interest rate debt. Before you pursue coast fire, take your 401k match from your employer. If you have an employee stock purchase plan or similar offering where you can arbitrage stock immediately for a gain, take that for the employee stock purchase plan. Then we're going to fully fund our emergency fund with three to six months of expenses. Three months if you have a more stable income stream and six months if you're maybe on more entrepreneurial or have potentially more risk in your cash position in the near future. The sixth order of operations step is going to be to fully fund your hsa, which Mindy and I believe is a retirement savings super account for most people. Then we're going to fully fund the 401k, then the Roth IRA and then from there we're going to take care of any other expenses like 529 plans and any extra cash can go into an after tax brokerage at this point in time. I probably wouldn't be. If I was pursuing Coast Fire, paying off low interest rate debt, I'd probably begin building up long term assets because by definition we're mostly talking about people who are younger who are pursuing Coast Fire.

[Mindy Jensen]

Okay, I think this is pretty similar to the investing order of operations that we suggested in the past. Just because you're pursuing Coast Fire doesn't mean that your investment accounts are any different.

[Scott Trench]

I will say that in the context of this discussion for Coast Fire, I bet you we're going to get some folks who are like, well, shouldn't they be maxing out the Roth because we're talking about a younger person who's maybe in their lower income years potentially or in a lower tax bracket. And I would say I'm totally fine flipping the 401k versus Roth prioritization, but I do think that for a Coast Fire participation there could be a bias towards the 401k because implied in Coast Fire, I believe, is a low cost lifestyle where one is maybe traveling a lot, living like a local or whatever in their 20s and 30s and they may have some very low income years which may allow them to take the dollars they've put into their 401s and convert them into a Roth conversion ladder, convert those funds in a 401 into a Roth in some of those low income years in a very low tax bracket. So they may be able to save money on taxes and still end up at traditional retirement age with that money in the Roth if they're pursuing Coast Fire. So I would bias slightly towards the 401k versus the Roth in the situation, but teach their own and wouldn't really make a big difference. I don't think if you flipped it.

[Mindy Jensen]

Okay, now this is where I think it's very interesting because you and I were contributing to 401k plans at our company, but you were contributing to the Roth and I was contributing to the traditional because I was looking to reduce my taxable income. And now you're flipping and saying, oh, I think they, that they could do the traditional 401k. I would be more inclined for especially the younger Coast Phi pursuers to be in the Roth simply because then you're not converting down the road, you're paying the taxes in your lower tax bracket. I think it's six of one and half a dozen of the other. I really want people to think about where they're putting their money more so than what account they're putting it in in just off the bat. Oh, I am specifically doing it in a Roth because I believe my income will be higher or because I believe, you know, something will go on down the line or I am reducing my taxable income and I'm doing this on purpose. So whatever you're doing, whatever order of operations you're putting your finances in, just do it on purpose. Not just because Scott said or because Mindy said.

[Scott Trench]

Yeah, it's all about guessing where you, what you think is going to happen in the future. And you know, to answer, I think an implied question there, Mindy the reason that I invested in the Roth even in a high income tax bracket is because of a fear of the government raising taxes over long periods of time in the future, a belief that the Roth's promise of distributions and gains being tax free will be kept over the long term, and then in arrogance that I will be in a high income tax bracket for the duration of my life, given my real estate, estate, business and investment interests over time. That was one of the reasons why I contributed to the Roth even in a high income tax bracket. That may be an expensive choice for me, who knows? But that's why I did that.

[Mindy Jensen]

I think it's funny that you used to be Roth and now you're like.

[Carl]

Oh, traditional is good too.

[Scott Trench]

I am a big Roth proponent and I will also say that we polled the BiggerPockets money audience and I think a lot of textbook answers to which account to prioritize would bias you towards the 401. But half of the people listening to BiggerPockets money prioritize the Roth about a quarter the 401k and about a quarter of the HSA. The last bucket being they don't prioritize the accounts at all.

[Carl]

Oh, interesting.

[Mindy Jensen]

Okay, again, this sounds like people who are answering these questions are doing it on purpose. Whatever their choice, it's because it's on purpose, not because somebody heard something from someone one time or read it in a book somewhere. So I just, I love that people are thinking, yay, our listeners are so smart.

[Scott Trench]

Yeah, sorry. Roth is 46%, 401k, 30 HSA 19 and 5% either. Do not prioritize retirement accounts. Prioritize something Besides the Roth HSA, 401k or their equivalents. As I've raised the question, Scott, I.

[Mindy Jensen]

Think we have done a pretty good job, if I do say so myself, of covering coastfi what it is, how to calculate it out. I encourage everybody to go over to thefioneers.com and download their free CoastFi calculator and just play around with it. See where your number is versus where you're at right now. Your Coast Phi number could be closer than you think. Should we get out of here?

[Scott Trench]

Let's do it.

[Mindy Jensen]

That wraps up this episode of the Bigger Pockets Money podcast. He is Scott Trench. I am Mindy Jensen saying bye bye Coast Phi.