The financial independence and retire early (FIRE) community has been around for at least a decade now, popularized by Mr Money Mustache, so early retirement isn’t a new concept anymore.

However retiring early at 40 is still seen as a stretch and most in the FIRE community will say that it requires you to make a lot of sacrifices. The FIRE community has however expanded from the strict “beans and rice” mentality and saving 50% of ones income to more relaxed FIRE styles such as Coast FIRE.

Our strategy is closest to Coast FIRE if we have to put our early retirement strategy in a box. In this post I’ll explain what Coast FIRE is, how much they say you should save for early retirement, and how we plan to approach it slightly differently to achieve our goal of retiring by 40.

What is Coast FIRE?

Coast FIRE is named this way because you can ‘coast’ your way to retirement by front-loading any retirement contributions while you’re young. When you’ve reached your coast FIRE number you can then work a job until retirement that only covers your annual expenses. Whilst you aren’t technically retired after you hit your coast FIRE number, you can switch to a lower stress, lower paying job so you don’t feel trapped in that unfulfilling high paying corporate job. This is seen as a less intense version of FIRE where you save until you fully retire.

For example, if you have a goal of reaching your coast FIRE goal by the age of 35 years old you would aim to invest the amount below:

  1. You would first work out how much you need in retirement. The rule of thumb is 25 times your annual expenses. If the person’s annual expenses are $40,000, then the person would need $1m saved up for retirement. 
  2. If you plan to fully retire at 65, this means you will have 30 years between the time you hit your coast FIRE number at 35 and your retirement age at 65 for your investment to compound. Many people use a 5-7% growth rate. Let’s be conservative and use a 5% growth figure – you would then use the following formula:

 Retirement amount / (1+growth rate) ^ years to retirement
$1m / 1.05 (30) = $231,377

That is, this is the amount you need to save up before you can quit your corporate job.

Now there are a few issues in relation to the above calculation.

First, the annual expenses should really factor in inflation. As we’ve seen recently, inflation can really eat into purchasing power. By the time you retire 30 years later, that $40,000 may only buy half of what you can today (which is a very real possibility given inflation is between 2-3% a year, meaning you will lose 100% of the value of your money within 50 years!) But it’s hard to predict as productivity gains mean the cost to produce things becomes lower. For example, the cost of electronics have come way down over the last decade as factories get better at producing them. Further, preferences also change – think social media, Netflix, Youtube which has only come about in the last decade or so.

Second, being obsessed with a savings number just isn’t healthy. Money should never be the main goal in our opinion – health and relationships are far more important. It can also create a lot of anxiety in your day to day if you are not meeting your savings target for one reason or another meaning you are not living in the moment.

Money should never be the main goal in our opinion – health and relationships are far more important.

How we plan to retire by 40

Our plan doesn’t involve numbers. Now we know what you are probably thinking – how do you plan for a goal that isn’t specific?

The truth of the matter is, life is complicated. The world is complicated.

Inflation rates change, interest rates change, life circumstances change. The idea that you can plan for your life 60 years in advance is just insane to us. How many things have happened to you that you didn’t expect to happen even a year ago? Sorry to be morbid but who knows when you will die – you could be hit by a car tomorrow (fingers crossed you won’t)!

Instead our plan revolves around a few key principles – one might call these our Ten Commandments:

#1 Always prioritise your core values

Money is never the end goal for us. Our core values are health and family. We will always avoid sacrificing those in order to achieve our financial freedom. 

This means we will never accept a dangerous job, a job that involves a lot of travel or crazy hours in order to earn a few extra bucks. We’d simply rather work for longer than sacrifice the things that are the most important to us.

#2 Stop caring about what other people think

This is a very important one. Think about how many times you’ve been peer pressured into buying clothes or eating at a certain restaurant, living in a particular area, or sending your kids to a certain school.

These can cause us to get caught up in trying to keep up with the Jones’ and put undue pressure on our finances.

We decided to move about an hour away from the CBD in order to buy a house with land which we could repay by the time we were 40. We were prepared to travel further to work, take longer to travel to meet up with friends and family as we figured the extra time it takes to earn more in order to live closer far outweighs the additional travel time. 

#3 Own house and car outright

Housing is an essential need and not having a house paid off means you are at the mercy of rising rents in your retirement. This isn’t something we want to expose ourselves to when we have limited income.

Having also rented for a while, the benefits of home ownership can’t be overstated. The ability for us to do projects around the house without having to think about our landlords or neighbours who share a wall has been liberating. The sense of security of being able to stay for as long as we want without no-fault eviction is also reassuring.

Having a car is also critical now that we live in the suburbs in order to get around. We haven’t gotten anything fancy – our car is very fuel efficient (uses about 5L of fuel/100km) and we bought a demo car allowing us to save money.

#4 Be debt free (or fully offsetted)

Being debt free, including the mortgage, is important for us to give us the sense of security for retirement. 

Neither of us even have credit cards as aside from our mortgage and student debt, we don’t believe in spending money that we don’t have on personal purchases. Whilst credit card point hacking is common in the FIRE community, it encourages spending behaviour that we don’t want to tempt ourselves with, and requires a lot of planning which is time we’d rather spend doing things we enjoy.

We are big believers of cash is king. Sometimes emergencies happen and we would rather have cash to spend in those situations rather than pay off my debt. Our solution? We will consider our mortgage fully repaid once we have fully offset my debt in my offset account.

This means we will continue to slowly repay our loan over the next 20-30 years in line with the repayment schedule but no interest will be charged because our offset account will offset the loan entirely. This means we’ll still have access to the balance of the loan just in case we ever have an emergency.

#5 Have a job that covers expenses in early retirement

Similar to Coast FIRE, we’d like to ensure we have some kind of work that covers our expenses so we don’t have to dig into our investments to fund our retirement.

Ideally this would be a business we can run together as that would give us ultimate flexibility and allow us to spend more time with each other. However if that doesn’t work out, our next best alternative is to find a lower stress part-time job.

Given the Australian tax rate is progressive, being a low income earner over many years as opposed to earning a high income in a few years is more tax effective. This means more money in your pocket even if your headline salary overall is the same. So really the tax system incentivizes Coast FIRE!

#6 Have a passive income stream

For peace of mind in early retirement, a passive income stream is a must. Whether that’s a business that runs on its own, rental property or high yielding dividend stocks.

As work may be patchy in retirement, having the safety net of a passive income stream will help tide us over in times of low income.

#7 Spend consciously

So many high earners live pay check to pay check because they don’t control their spending. 

We don’t consider ourselves frugal or cheap but we do spend consciously. For example, we now rarely buy drinks when we go to restaurants because they can add 50% to the bill whilst adding unnecessary calories to the meal and often were only being ordered ‘just because’. However we’ve happily splashed out on a home theatre system because we enjoy watching movies at home on a large screen and find the experience unbeatable compared to the cinema. 

#8 Stay flexible

If we decided to retire early and something suddenly happened which meant we needed more money then we would need to be open to change.

For example, this could look like going back to work full time, finding another source of income or cutting back our living arrangements.

We recognise fully that early retirement is not set in stone as the world is too complex to make plans that long in advance. Instead being comfortable with going with the flow means we can meet challenges as they come and not feel anxious about not meeting goals based on a future that may not arise.

#9 Plan to always work

This might sound like it defeats the purpose of early retirement but what we mean by this is that feeling fulfilled in life includes always providing value to others in some way.

Many have gone into retirement suddenly losing their sense of purpose and we don’t want that to happen to us.

Whether it be trying to make a passion project a business or raising kids, having something to do in early retirement rather than just binge watching TV shows will give us more meaning.

#10 Appreciate the now

A lot of the time the word ‘sacrifice’ is associated with working towards a financial goal. Cutting back spending can feel like a sacrifice but it is your choice in terms of how you want to react to it.

Finding joy in learning a new skill or working towards a goal can be as fulfilling as buying something. It is also helpful not to focus on everything you are missing out on but rather, the peace of mind you are gaining as a result.

Realise also that it’s important to still spend money on things that are important to you. Some experiences or opportunities may never come up again in your lifetime so it’s not worth saving a few pennies to miss out on something priceless such as going to your best friend’s wedding or celebrating a milestone with a dinner or gift.

Warning! Unpopular opinion ahead…

You will notice that we haven’t mentioned contributing to superannuation above.

The Australian superannuation system is similar to the US 401k retirement account. It is a compulsory system which employers must contribute 10% of your salary into an investment account which you can’t access until your retirement age (i.e. when you turn 67).

You can also make additional contributions each year, up to a limit, which are tax deductible. If you try to access your super early, you get penalised with the highest marginal tax rate (47%).

There are obviously tax benefits to contributing to superannuation, which is why people do it, however we’ve decided against contributing to superannuation outside of our compulsory contributions for the following reasons:

  1. There is a lot of legislative risk with superannuation. The Government has a track record of constantly tinkering with the superannuation system to make it more and more restrictive.
  2. The money you contributed to superannuation could have been used to invest in other things which have more immediate benefit to you – like your home – saving you interest costs.
  3. The fact you can’t access your money until 67 again goes to our discomfort with saving for so far into the future when you don’t even know if you’ll live that long.

We both have a modest superannuation balance thanks to compulsory contributions by our employers however we invest all our additional money outside of the superannuation system as that gives us maximum flexibility in case of changing circumstances.


We hope this post provides a bit of insight into how we plan to retire by 40 and what we think we need to do to get there. We’d love to hear how this compares to your retirement strategy – leave a comment below!

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