Saving for retirement can be a lot simpler than most people make it seem. As long as you begin saving at an early age as well as staying committed and focused to a specific plan, you should be on track to coast into early retirement. The big question that many people who want to retire early usually have is how they are going to save a certain amount each year for the next x amount of years while still being able to afford their regular expenses? This is where the coasting savings strategy comes into play.
What is the Coast Strategy?
The coast strategy is structured around saving as much as you possibly can as early as you possibly can, and is ideal for people in their twenties and thirties. This strategy gives people the option to make a variety of life choices during their thirties such as some challenging family and career choices while still having a good amount saved up for retirement. Think of saving this money like riding a bicycle and starting at the bottom of a hill. It’s going to be some very hard work at first pedaling to the top of that hill, but once you reach your goal and save up to a certain amount, you’re going to coast for a long, long time.
Is This Strategy Right for You?
This strategy requires two steps. The first is that you have at least 30 years between now and the year at which you plan on retiring. Every year that you put off saving is one less year that you can coast towards retirement. This plan is geared towards forward-thinking adults on the youthful side of middle age.
The other step that is required is that you earn and save significantly more than you spend. This is by far the most important step to this strategy because without this, the whole thing becomes impossible. This plan is centered around putting away a lot of money when you are far from retirement, and the only way to do this is by saving much more than you spend.
You Need to be Willing to Live a Lifestyle Significantly Below Your Means
In order to stay committed to the coast strategy, you need to accept the fact that you’re going to live a much more frugal lifestyle than you would if you spent a majority of your income. For example, let’s say you earn 60k a year and out of that 60k, you only spend 20k. That would be considered living a frugal lifestyle, and that would be a huge step towards following the coast strategy.
You Likely Need to Have Little or no Debt; Barring That, you Need a Large Income. Having Both is Even Better.
If you graduate school with a lot of student loans while not receiving a high income, this strategy becomes very hard because between paying off your debt and paying all your expenses, you’re going to end up having little to none to save. On the other hand, let’s say you have little to no debt, and are earning a large income, you have a great opportunity to save a lot and end up coasting to early retirement.
Create Life Goals That Don’t Revolve Around Spending a lot of Money
If your current desires revolve around spending a lot of money on material goods, travel, and expensive “experiences,” then you’re going to find a “coast” strategy difficult to implement. Your personal desires are going to cause you to spend money on those things rather than your retirement plan. This is not necessarily a bad thing because different people have different ideas on how they want to live their lives at a young age. In my opinion, the best situation is to simply have life goals and ambitions that aren’t centered around spending money. This way you can focus on saving your money and achieve your goal of retiring early.
If you follow these steps listed above and you start saving a good amount of your income at an early age, you will have a great chance of coasting to an early retirement. This plan is available to almost everyone because although earning a larger income is an advantage, it doesn’t mean that earning less can prevent you from coasting to retirement. Most people that follow or want to follow this plan will most likely have to make some sacrifices here and there. However, if you learn how to accept those sacrifices and your goal is to retire early, then this is a great strategy for you!
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