There\u2019s little doubt that Generation Z and Millennials view life experiences very differently from their Gen X and younger Baby Boomer parents \u2013 and retirement is no exception.<\/p>\n
Younger workers in their 20s are contributing to their workplace retirement plans earlier than their parents and grandparents and for many the goal is early retirement.<\/p>\n
Must Read <\/p>\n
According to a 2026 Northwestern Mutual study, (1) on average Gen Zers started saving for retirement at 22, with the goal of retiring by 61. That\u2019s compared to Millennials who began saving at 28 and plan to retire at 64 and Gen X, who started saving at 32, with the goal of retiring by 67.<\/p>\n
Saving as early as possible expands lifestyle opportunities <\/p>\n
With their sights set on early retirement<\/a>, younger workers are taking more aggressive approaches to savings, particularly their long-term savings plans.<\/p>\n The FIRE movement,<\/a> short for \u201cfinancial independence, retire early,\u201d is among the most aggressive saving plans. The most intense version requires someone to save or invest the majority of their income, as well as doing things like finding new streams of income or delaying life milestones.<\/p>\n The plan is, of course, deeply restrictive and has paved the way for a newer retirement savings plan called \u201cCoast FIRE.\u201d Young people are taking a page from the FIRE movement but with a major caveat.<\/p>\n In a nutshell, Coast FIRE (2) is a simple middle-ground strategy between the more aggressive FIRE and traditional retirement-plan strategies.<\/p>\n The idea behind Coast FIRE is simple: save and invest aggressively when you\u2019re younger, until your retirement portfolio reaches a certain size. Once you hit that \u201cCoast FIRE number,\u201d there\u2019s no longer a need to make significant retirement contributions. Instead, you let compound growth do the heavy lifting while continuing to work to cover current living expenses.<\/p>\n Unlike the traditional FIRE savings model, where a career professional exits the workforce in their 40s, Coast FIRE emphasizes reaching a financial savings point where your retirement is essentially on autopilot, giving you more flexibility to work fewer hours, change careers, launch a business or side gig and, perhaps most importantly, curb any lingering financial stress about retirement savings.<\/p>\n \u201cCoast FIRE works best for young investors in their 20s and 30s,\u201d Michael Martin, vice president of market strategy at TradingBlock, told Moneywise. \u201cTo build wealth, you have to start early.\u201d<\/p>\n The key is getting started as soon as possible. \u201cIf you begin saving in your early 20s, there\u2019s a good chance that by your late 30s your portfolio will be making more from market gains in a typical year than you\u2019re adding through new contributions,\u201d Martin noted. \u201cThat\u2019s when the power of compounding becomes apparent.\u201d<\/p>\n The Coast FIRE roadmap <\/p>\n The Coast FIRE roadmap is clear-cut, prioritizing early investing with old-fashioned savings discipline.<\/p>\n For example, let\u2019s say Leslie, a project manager at a technology firm, is 35 years old and wants to retire at 65. Leslie estimates she\u2019ll need about $1.5 million saved up by retirement.<\/p>\n Assuming her investments grow at roughly 7% annually, Leslie calculates that she needs approximately $200,000 invested today to reach that future goal through compound growth (via accelerated interest) alone.<\/p>\n Once Leslie reaches that $200,000 mark, her life choices expand significantly. Not only does she no longer have to contribute to her 401(k) or IRA, but she can also remain on the job and earn enough cash to cover her mortgage, groceries, travel and other living expenses. Meanwhile, Leslie\u2019s retirement portfolio, now on autopilot, continues growing untouched for the next 30 years.<\/p>\n If the stock market does its job and delivers a 7% average annual return, that $200,000 could grow to more than $1.5 million by age 65 without another dollar of retirement contributions.<\/p>\n Read More: About 1 in 5 Americans over 50 has zero retirement savings. Here’s why it’s not too late<\/a><\/strong><\/p>\n Coast FIRE often comes with risks, too <\/p>\n One potential downside of Coast FIRE is that the market doesn\u2019t carry its end of the deal and produce the needed investment results.<\/p>\n \u201cFor the S&P 500, annual returns have averaged roughly 10% over the past 50 years,\u201d Martin noted. \u201cIt\u2019s important to keep in mind, however, that valuations are currently meteoric by historical standards.\u201d<\/p>\n The primary risk is that most Coast FIRE calculators assume a 7% nominal annual return, which, after 2% inflation, is roughly 5% in real terms.<\/p>\n \u201cYet if the decade right after you stop contributing delivers 2% real instead of 5%, the compounding base never recovers, because there are no fresh contributions to dollar-cost-average through the dip,\u201d Jahanzeb Nawaz, founder and market analyst at FinBrieft told Moneywise. \u201cA Coast FIRE number that pencils out to $1 million at 65 with a 5% real return drops to closer to $700,000, and that savings gap is not recoverable by working a few more years coasting.\u201d<\/p>\n Another criticism of Coast FIRE is that it may underestimate major future expenses, such as healthcare costs, caregiving responsibilities, housing and child support.<\/p>\n Martin said the most overlooked expense tied to Coast FIRE savings is inflation. \u201cMost investors do a decent job estimating things like housing, healthcare, and childcare, but fail to appreciate how much inflation compounds over time,\u201d he noted. \u201cIf inflation averages just 3% per year, $2 million today will have the purchasing power of only about $1.1 million in 20 years.\u201d<\/p>\n Time can set your retirement plan on fire <\/p>\n Perhaps the biggest factor with Coast FIRE is that some of the biggest expenses people face later in life are also the hardest to predict.<\/p>\n \u201cCoast FIRE can be a little like buying a house and assuming it won\u2019t need any major repairs for the next 30 years,\u201d Tom Buckingham, chief growth officer at Nassau Financial Group in Hartford, Conn., told Moneywise. \u201cThe plan may be sound, but life rarely unfolds exactly as expected.\u201d<\/p>\n Whether it\u2019s healthcare expenses, caring for aging parents, helping adult children, changes in housing needs, or simply living longer than expected, today\u2019s projections can look very different decades from now, Buckingham noted.<\/p>\n \u201cOne of the easiest things to underestimate is time itself,\u201d he added. \u201cThe longer the time horizon, the more opportunities there are for expenses and priorities to change.\u201d<\/p>\n You May Also Like <\/p>\n Join 250,000+ readers and get Moneywise\u2019s best stories and exclusive interviews first \u2014 clear insights curated and delivered weekly. Subscribe now.<\/a><\/strong><\/p>\n Article Sources <\/p>\n We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines<\/a>.<\/p>\n Northwestern Mutual (1<\/a>); Business Insider (2<\/a>)<\/p>\n This article originally appeared on Moneywise.com<\/a> under the title: Young Americans are using an investing method that allows them to save for retirement without extreme restrictions.<\/a><\/p>\n This article provides information only and should not be construed as advice. It is provided without warranty of any kind.<\/p>\n","protected":false},"excerpt":{"rendered":"There\u2019s little doubt that Generation Z and Millennials view life experiences very differently from their Gen X and…\n","protected":false},"author":3,"featured_media":883554,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[15],"tags":[64,307060,72954,358767,255,700,16341,164397,67,132,68],"class_list":["post-883553","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-business","tag-coast-fire","tag-fire-movement","tag-michael-martin","tag-personal-finance","tag-retirement","tag-retirement-plans","tag-retirement-savings-plan","tag-united-states","tag-unitedstates","tag-us"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/116790433241481451","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/883553","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=883553"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/883553\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/883554"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=883553"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=883553"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=883553"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}