Achieving financial independence is a goal for many. As you work toward this goal, however, you might cross a benchmark that allows the later years of your financial independence, retire early (FIRE) saving journey more comfortable.

This benchmark is called CoastFI (sometimes Coast FIRE), and it’s the point at which your retirement savings are sufficient to coast the rest of the way toward your retirement goal without any additional contributions.

A Coast FIRE calculator can help you determine your “CoastFI number”, the amount you need in invested assets today to reach full FI in the future without additional 401(k) or IRA contributions.

Key Takeaways

  • Coast FIRE offers more flexibility than regular FIRE.
  • With Coast FI, you only need to save and invest aggressively in the early part of your career to build up your retirement nest egg.
  • Once you hit your Coast FI number, you can scale back to just covering your expenses, knowing your existing investments will grow to fund a traditional retirement timeline.
  • This allows you to pursue lower-paying passions, switch to part-time work, or take mini-retirements much earlier in life.

How to Calculate Your Coast FIRE Number (CoastFI)

To measure your Coast FIRE number, you’ll first estimate what will be enough money for you to become work-optional (your FIRE number), then work backward using the compound interest formula.

First, the FIRE number. Write down your target retirement age, expected annual return on investments, and how much you plan to spend annually in retirement. Multiply your annual spending by 25 to get your FIRE number:

FIRE Number = E x 25

Where E is your expected annual expenses.

Editor’s Note:The 25-year figure comes from the 4% rule for retirement, which states that withdrawing 4% of investments per year will very likely last for 30 years without running out of money. It wasn’t tested past 30 years, though, so if you’re planning to be work-optional for longer than that, you might need to factor in additional inflation.

From here, we can reverse-engineer our CoastFI number. To determine when the coast could start, we need to know our end wealth target (FIRE number), our expected rate of return on our investments, and how many years those investments would passively compound at that expected rate of return.

That formula would look something like this:

CoastFI Number = F / (1 + r) ^ t

Where F is your FIRE number, r is the annual return (expressed as a decimal, so 6% would be 0.06), and t is the number of years you have until you want to stop working. The result is the amount you need to coast.

The big idea behind CoastFI is that you’re hustling harder in your early years to create more flexibility in midlife. Once you’re reached the CoastFI benchmark, you know that, based on historical returns, your money would grow the rest of the way to your FIRE number, which is traditionally built on the 4% rule and therefore has inflation factored in.

Key Concept :“How will I know how much things cost when I’m 60?!” You don’t need to know that, because the 4% rule has inflation factored in (for time horizons of 30 years or less). Therefore, you can project future expenses in today’s dollar values. You will, however, need to periodically recalibrate your FIRE number so it doesn’t become obsolete.

Remember that you’ll need to recalibrate your FIRE number periodically to maintain accuracy, which means you’ll also need to recalibrate your CoastFI number from time to time.

How Much Do I Save to Reach My Coast Fire Goal?

How much you need to save to reach Coast FI depends on several factors. These include your current age, desired retirement age, expected annual retirement expenses, and projected investment growth rate. Online calculators crunch these numbers to give you a personalized Coast FI target to work towards. They can also show how small changes, like retiring a few years later or living on less, impact your Coast FI number.

Ultimately, Coast FIRE calculators illustrate the power of compound growth over time. By frontloading your retirement savings in your 20s and 30s, you give your money decades to snowball before you actually need it. Jumpstarting your investing while time is on your side is key for coasting to an early retirement.

The Origins of Coast FIRE

The FIRE movement traces back to the 1992 book Your Money or Your Life by Vicki Robin and Joe Dominguez. The concepts behind Coast FIRE started appearing on FIRE forums and blogs in the mid-2010s under names like Barista FIRE and RV FIRE. The actual term "Coast FIRE" seems to come from a 2016 ChooseFI podcast episode with entrepreneur Sam Dogen.

Over the past 5 years, Coast FIRE has become much more mainstream. Major media outlets like CNBC, MarketWatch, and Bloomberg have all published articles explaining Coast FIRE. Coast FIRE is particularly appealing to young adults who have the time and energy to hustle now, but don’t want to do that for decades. Since they have a lot of compounding time on their side, their CoastFI number is much lower.

Why Coast FIRE Matters

Coast FIRE offers a more balanced, flexible approach to financial freedom that benefits a broad range of people. For ambitious young professionals, Coast FI creates the option to downshift into a lower-paying but more fulfilling career after reaching their Coast FI number. Those who like their career can keep working, but also save less aggressively and still have peace of mind that they’re on track. Coast FI is also ideal for anyone wanting to retire early but unwilling or unable to maintain an extremely high savings rate for a decade or more.

Knowing your Coast FI number gives you a motivating, yet attainable, intermediate financial goal to target. This enables you to make different life choices, like starting a family or business, traveling, working part-time, or going back to school. Essentially, Coast FI buys you freedom and flexibility much earlier in your career journey.

Coast FI also offers a helpful framework for retirement planning. Many people find it daunting to calculate how much they need to save for future expenses. Coast FI breaks this into a two-step process. First, you figure out your Coast FI number to secure a traditional retirement. Then you work on closing the gap between your Coast FI age and the age when you want to reach full retirement.

If you're looking for a balanced approach to building long-term wealth that doesn't require extremely frugal living or a decades-long corporate grind, calculating your Coast FI number is a great place to start. ⬥