The Path To Coast FIRE

The Path To Coast FIRE

For years I’ve been motivated to reach financial freedom by 45. I started a side hustle to accelerate our savings goals, and eventually turned that into a full-time entrepreneurial pursuit. Now that I’ve left my day job and can work on my own terms, it feels like I can finally coast towards financial freedom.

I’ve never been a fan of the traditional FIRE movement – mostly because of the ‘retire early’ aspect of FIRE (plus the emphasis on extreme frugality). But the concept of Coast FIRE is something I can get behind.

Coast FIRE is when you have enough saved early in life that you can meet your retirement needs by simply leaving your portfolio alone to compound and grow. No more contributions needed. That means the flexibility to dial back work without the pressure of having to maintain a high savings rate. Work and earn enough to meet your spending needs while your investments do their thing.

This reminds me of the parable of the twins – a tale told by banks and financial advisors about the power of compounding.

One twin starts investing early, setting aside some amount every year from age 25 to 35 and then stops. The second twin doesn’t start until age 35, but then invests the same amount every year until age 65. Assuming an identical rate of return, who ends up with the larger portfolio? The first twin does, by far, thanks to compounding over a long period of time.

That got me thinking. I’ve saved a bunch of money already (by age 41). I left my 9-5 day job to do something I truly love. The nature of my work means I can take on as few or as many assignments and clients as I want. Is Coast FIRE for me?

My RRSP and TFSA are maxed out. My wife’s RRSP is maxed out and by next year she’ll have maxed out her unused TFSA room. We started investing excess business income in our corporate account last year. We expect this account to be worth close to $200,000 by the end of 2021. By then we expect to have a total of $900,000 invested across our various accounts. 

On the income side, we pay ourselves dividends from our business. Once my wife has caught up on her unused TFSA room we can scale back the amount we draw from the business. We have a sizeable emergency fund saved in cash to easily cover 10-12 months of spending. 

I shared in my recent net worth update that I plan to intentionally work less in the second half of this year. We also have big plans to re-create our cancelled 2020 trips (fingers crossed) in 2022. 

So I decided to run some numbers. I wanted to see what our financial plan would look like if we no longer contributed to our corporate investing account, and only contributed the annual amount to each of our TFSAs*, plus the kids’ RESPs**. That’s $17,000 per year saved on the personal side of our budget instead of the $56,000 we saved in each of the last two years (catching up on unused room). 

*Hey, I can’t stop filling up our TFSAs.

**Hey, I can’t turn down the 20% matching government grant.

I figured we could reduce our business revenue by 35% – 45% and still meet our business expenses and personal spending needs. Reducing revenue could be as simple as no longer taking freelance writing assignments, and/or limiting the number of new fee-only financial planning clients I take on in a year. 

net worth to 95

The result is a less hectic, more balanced lifestyle. I can still do what I enjoy doing – writing about personal finance and investing, and helping people with their financial goals and retirement plans. But thanks to our diligent savings and hard work over the past 10 years I can ease my foot off the gas pedal when it comes to earning and saving more money.

At the heart of the Coast FIRE movement is the concept of ‘enough’. When John D. Rockefeller was asked how much money is enough, his answer was “just a little bit more.” 

I’m pushing back against that idea. I don’t need to earn multi-six figures. I don’t need to build a corporate empire. I don’t need to save half my income for no good reason other than to grow the pile.

One of the reasons I left the hospitality industry early in my career was because I saw what happened to senior management and executives – they became burnt-out workaholics. That’s not for me.

So we’re going to allow ourselves to slow down. We’re going to let our sizeable and sensible investments ride for the next decade or more, contributing only modestly to our TFSAs along the way. We’re going to travel more (when we can), and enjoy more family and leisure time.

I have no intention of retiring early. I love helping people with their finances, both generally through the blog and also specifically through one-on-one financial planning. I feel like I have a lot more to contribute to the financial health of Canadians.

But the pressure is off now. I’m taking the Coast FIRE path from here on out.

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  1. Michael James on July 14, 2021 at 3:28 pm

    This sounds like a sensible plan for you. You need to build your savings to some target amount, and it’s fine to spread out the necessary earnings over more years if that suits you and the type of work you do permits (which it does in your case). In my case, I had a high-paying job that I either did full time or I didn’t do at all. I tried taking a month off unpaid (in addition to my vacation) but it was clear that my employer saw this as a lack of commitment. So, my choices were to stick it out until I hit my number or find other work. I chose to stick it out.

    I remember making sure that my target amount took into account the possibility of a poor initial sequence of returns. Instead, stock markets mostly went up crazily for the past 4 years. If I could have seen the future, I could have retired a couple of years earlier. But that’s the way it goes.

    • Robb Engen on July 14, 2021 at 5:58 pm

      Hi Michael, thanks for your comment. Your situation sounds quite similar to some of the more traditional FIRE paths where there’s a high skill, high corporate salary – but not a lot of flexibility. I can see why a lot of people in that situation might burn out, and so they’re attracted to the FIRE movement as a way out. The problem then is figuring out what’s next.

    • Brenda on July 14, 2021 at 8:22 pm

      I feel like I’m in a similar situation as you Michael. How did you check that your target amount would take sequence of returns risk into account for CoastFIRE? All of the materials and calculators that I’ve tried say that I should be okay but I’m struggling against “one more year” at the current state. I know this is mostly behavioural and I probably just need to go for it. Since I’m not sure about the “what’s next” part, I end up coming back to the path of least resistance which ends up being the status quo.

      • Michael James on July 14, 2021 at 8:56 pm

        Hi Brenda, I simply assumed the stock market would crash immediately after I retired. I don’t remember offhand what percentage I used, but lets say 25%. So, I assumed stocks would beat inflation by 4% per year after the initial 25% drop, and I made sure the amount I could spend each year was high enough.

        I understand the one-more-year thinking. It was hard to give up a fat salary, and my wife wasn’t convinced by my calculations. I was fortunate that the company had a big shake-up that didn’t affect my position, but made it easier for me to leave and let them start afresh.

        • Brenda on July 15, 2021 at 1:23 pm

          Hi Michael, thanks for the information. I think I need to model sequence of returns risk myself and that will help with taking action. I have a spouse to convince as well 😀

  2. Manish Shah on July 14, 2021 at 4:51 pm

    Great article Robb. We are also diligent about saving. I had a question for you about Wealthsimple Trade fractional shares buying that was recently launched.
    What is your view on this and I believe trades are commission free.

    • Robb Engen on July 14, 2021 at 6:01 pm

      Hi Manish, thank you. I don’t advocate for picking individual stocks, but yes WS Trade does now offer fractional shares for a select number of stocks (Shopify, RBC, Apple, Amazon, Tesla to name a few). This can certainly help some investors buy stocks that are priced quite high. Shopify shares trade at $1,800, which is quite the hurdle for most investors.

      Of course, buying an index fund is also a great way to own a tiny slice of a bunch of different companies 🙂

  3. Kristen on July 14, 2021 at 5:06 pm

    Congratulations on reaching Coast FI, Robb! That’s exciting for two reasons: 1) You know that you have enough saved for a future retirement and 2) You can spend your money now on travel. Happy for you and your family!

    • Robb Engen on July 14, 2021 at 6:02 pm

      Thanks so much, Kristen – I appreciate your support!

  4. Ron Arsenault on July 14, 2021 at 5:23 pm


    I cannot talk from experience, but I have heard of entrepreneurs talking a salary in order to qualify for CPP, but only enough to maximize CPP. Anything over this amount was taken as dividends. Have you considered this or was this advice wrong?

    • Robb Engen on July 14, 2021 at 6:07 pm

      Hi Ron, yes – taking a salary vs. dividends (or a combo) is something I’ve wrestled with for the last year or two. There are pros and cons, but taking a salary up to the CPP YMPE ($61,600 this year), and then topping up with dividends if needed is a sensible approach. It also creates more RRSP room (18% of salary), whereas dividends do not.

      I’d have to pay both the employer and employee share of CPP contributions if I went that route.

      • Ron Arsenault on July 14, 2021 at 6:57 pm

        Hi Robb,

        Thanks for your response. I should have realized that as is often the case, there is not a clear cut answer, but a series of pros and cons that one needs to consider. I am sure you will figure out what works best for you.



  5. Stephanie on July 14, 2021 at 6:21 pm

    Hi Robb,

    Now that you have a canadian corporate account (CCPC) as well. What do you think of someone who holds VGRO in it. My advisor says it’s not optimal but I find it so easy. I figure I have to pay taxes sometime, so I might as well use it to make my life easier. No rebalancing, etc.

    • Brenda on July 14, 2021 at 8:17 pm

      Hi Stephanie, did your advisor give reasons for why holding VGRO in a CPCC investment account is not optimal? That is all I hold for my CPCC’s investments and it’s great for the simplicity 😀

  6. Stephanie on July 14, 2021 at 8:33 pm

    Hi Brenda,

    It’s all the hand waving about lower MER, tax loss harvesting, Norberts gambit etc. He does not realize that I don’t want to do any of that.

    I want to be able to hold VGRO and some cash when I retire. Then my husband and I can travel and if we forget to look at things, it will just tick along.

    That is worth paying more taxes on the premium bonds, higher MER, etc.

    My husband is tempted to make this things more complicated but I am adamant I don’t want that.

    • Robb Engen on July 14, 2021 at 9:19 pm

      Hi Stephanie, it’s perfectly sensible to hold VGRO in your corporate account. Yes, there are taxable distributions, but the all-in-one ETF is a pretty good trade-off.

      One compromise would be to switch to something like HBAL – Horizons’ one-ticket ETFs have a swap-based structure where the underlying securities are actually held by a counter party who receives the taxable distributions and then “swaps” the total returns back to Horizons. Investors avoid taxable income from distributions and would just pay capital gains when they sell.

      There are a few things to keep in mind, however. HBAL is a 70-30 portfolio, not 80-20 like VGRO. It’s less diversified (tracking smaller indexes) and has a tilt towards tech stocks (NASDAQ). There are also regulatory risks to consider, as the government could potentially disallow this swap-based structure in the future.

      Dan Bortolotti has a good write-up on this here:

      All that said, again, nothing wrong with holding VGRO for the reasons you’ve indicated. I hold VEQT in my corporate account, which pays an annual distribution.

  7. Dave on July 15, 2021 at 3:22 am

    Thanks for this! We’re in a similar boat (I’m 44, we’ve got enough saved for Coast FIRE if not full FIRE). We just moved from the US to Canada, though, so I’m taking a year to make sure our spending is more or less the same (so far, so good). Next summer, I’m planning to ask my employer if I can go to 75%. For me, personally, I don’t think I want to go from 100% to 0% in terms of work (mostly for mental health reasons). I think I’ll do better easing into it — 75%, then 50%, then 0% or perhaps a little contract work.

  8. Burt on July 15, 2021 at 8:15 am

    I think this is traditionally known as FU money. 🙂

  9. GYM on July 15, 2021 at 2:43 pm

    Wow! Congrats on coast fire and just committing to contributing to your kids accounts.

    Some times entrepreneurship can be double edged sword you can’t ease off the gas pedal unless you tell yourself to and realize you’re getting burnt out.

    Once I reach my phone portfolio goal in a few years I am going to ease a bit off on the gas pedal too.

    Speaking of traveling you’re probably aware of the transfer bonus for HSBC to Avios until end of the month? Thought it might be useful for your Europe trip.

  10. Tawcan on July 15, 2021 at 2:51 pm

    Love it Robb. Coast FIRE would allow you to step back a bit and spend more time with the family. A win win in my book.

  11. Mr. Dreamer @ on July 15, 2021 at 3:50 pm

    I hope you can achieve your goals especially the 2020 trips! We are going for a 2 months trip next month. Hopefully nothing goes wrong!

  12. Steve Oliver on July 15, 2021 at 6:32 pm

    Hey everyone. Your investments will not grow forever. Ive witnessed two 50% declines. The dotcom crash was when I was 44 and it took about 6 years to recover and at 10 years later about the same. Then in 2008 another 50% crash. It took at lesst 5 years to recover. Has anyone here heard of the lost decade that became two decades in Japan? Market returns were zero. Plan that into your scenario and see if stopping working is a good low risk plan. Do what Robb does, he can turn up the work anytime he wants to and adjust to his investment circumstances.

    We stopped working at age 57. I learned to drive older cars. I love discovering gems and driving them from year 5 to year 10-12. I spend less than half the cost my young daughter does leasing her new SUV. I shop around my home and car insurances. I never buy nice clothes at list price. We dont drink wine and booze anymore. Wine costs were over $100 a month at only 1-2 bottles a week and it only made me feel tired and got headaches! We just recently fired TD Insurance for better rates and value with Allstate. Saved about 35% in total on home and two cars. That was about 5-10 hours work of researching 3 company offers.

  13. Chris on July 16, 2021 at 4:13 am

    Our net worth increased by almost exactly $5 million in the ten years between ages 40 and 50. We have now slowed our contributions but have created many different ways for our wealth to increase (own a business, commercial property, vacant land, etc). We are also on track for our highest household income year ever. Overall I’m very happy we worked hard in our 30’s and 40’s to build our investment portfolio, kill debt and think about how to build wealth. It’s worked and on track for very substantial NW by 60. Could retire anytime but waiting until 55 or so as we still have kids at home and current work/life balance is excellent. Starting early is the biggest key to our success.

  14. Johnny Aruba on July 16, 2021 at 8:48 am

    Hey Robb

    Good on you ! Enjoy life, after all we work to live, not live to work. Enjoy the freedom.
    I couldn’t wait to retire, and that was after 43 years. When I look down the road now, I have maybe 22 years left, and the last 5 may not be great as my health will be declining. So my enjoyment is going to be encapsulated in 17 years. Not bad, but not 30+ like you will probably enjoy. BTW I was a workaholic averaging 60 hours a week!

  15. Dividend Power on July 22, 2021 at 7:01 am

    Retire early is a dream that most people have but can’t make happen. They with don’t plan or they just want more.

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