Legal Disclaimer:This post is not financial advice. It is intended for educational purposes only. Consult with your financial advisor or a certified financial professional for guidance on investment choices.

Intrigued by “financial independence, retire early” (FIRE) culture, but don’t want to work yourself to death? Just like a car, there’s a way to set up cruise control with your money so you can take your foot off the gas. 🚗

It’s called Coast FIRE, and it’s one of the first benchmarks you hit in your financial independence journey. In Coast FIRE, you aspire to reach a net worth at which your existing investments will eventually compound to your target net worth without having to make any additional contributions. This frees up money you would normally continue depositing into a retirement or brokerage so you can enjoy it now, guilt-free.

Key Takeaways

  • Becoming financially independent is different from retiring.
  • In FIRE lifestyle, you aspire to have enough money such that your passive income sources fund your lifestyle, without depleting your nest egg.
  • Pursuing Coast FIRE lets you be more aggressive with saving now so you can relax later.
  • This freedom could let you transition to a lower paying job, and is more achievable than regular FIRE – especially if you’re young.

Technically, the correct terminology for this wealth benchmark would be Coast FI, not Coast FIRE, because your aspiration is not necessarily to retire early. We’ll use both terms interchangeably throughout this article.

Here’s what Coast FIRE is, how it works, and how to calculate your “Coast FIRE number” in your financial goals.

What Is Coast FIRE (Coast FI)?

Coast FIRE is a unique approach to financial independence in which individuals reach a certain level of savings and investments early on in their careers, then let their investments grow on their own without making additional contributions. Instead of continuing to aggressively save and invest, Coast FIRE practitioners "coast" along with their existing investments and let time work its magic.

For some, Coast FIRE is just about peace of mind. They want to know the money they’ve invested so far will be enough for them to live off of in the future. For others, the benchmark is more intentional; you want to hit this milestone now so you can downshift to a less stressful career or free up money to pursue the things in life you love.

How Does Coast FIRE Work?

The key difference between Coast FIRE and traditional FIRE lies in the approach toward saving and investing.

Traditional FIRE requires individuals to save a substantial portion of their income, often 50% or more, and invest aggressively to build a substantial nest egg that can sustain them in retirement. In contrast, the type of financial independence Coast FIRE practitioners concentrate on involves building a solid foundation early on, then allowing investments to grow over time with minimal additional contributions.

To be clear, reaching Coast FI is not about early retirement. You will need to define a target retirement age in order to calculate your Coast FI number. Let’s do that now.

How to Calculate Your Coast FIRE Number

To calculate Coast FIRE and path to financial independence, first calculate your regular FIRE number. This is the number you’ll need to hit to live off of interest from invested assets alone.

A (very) approximate formula to calculate your FIRE number is to take your expected annual expenses in retirement and multiply by 25.

FIRE Number = Annual Expenses x 25

To calculate your Coast FIRE number, first, calculate how much time your invested assets will have to compound, and their approximate rate of return. Then divide your FIRE number by this figure to arrive at your investment portfolio target.

Coast FIRE Calculator

FIRE Number / (1 + (Annual Rate of Return %))^(Years until target retirement age)

In this formula:

  • “FIRE number” can be calculated with the 4% rule (annual expenses x 25).
  • “Annual rate of return” is the rate of return you expect annually on your investments. This number will always be an estimate, since investments rarely compound evenly from year to year.
  • “Years until target retirement age” is based on an age you define. If I am 35 and want to retire at 60, this number for me would be 25 (60 minus 35 equals 25).

Let’s look at an hypothetical investor whom we’ll call “Sarah”.

  • Current Age: 25
  • Target Retirement Age: 60
  • Expected Annual Expenses In Retirement: $50,000
  • FIRE Number (estimate): $1,250,000

If Sarah wanted to hit Coast FIRE by 30, and retire at 60, her investments will have 30 years to compound.

Her Coast FIRE number will be $217,638 in investments, assuming a 6% annual rate of return.

Over 30 years, this $217,638 would compound to $1,250,000, even if Sarah never puts another penny into her accounts. Pretty impressive!

She could also be less aggressive and aim to hit Coast FI by 35 instead. This would give her investments less time to compound – 25 years instead of 30 – so she’d need $291,248 invested to reach Coast FI.

If she aims for 40, and still wants to retire at 60, her Coast FI number jumps up to $389,756.

Younger doesn’t necessarily mean better in Coast FIRE. It’s more about the number of years your investments will have to accrue compound interest. There are a lot of factors, both positive and negative, that make a FIRE number somewhat unpredictable, but this gives us a start.

The Benefits of Coast FIRE

One of the major benefits of Coast FIRE is the reduced financial stress during the working years.

By front-loading their savings and investments, individuals can experience the peace of mind that comes from having a substantial financial cushion. This can provide the freedom to make career choices based on personal fulfillment, rather than financial necessity.

Furthermore, Coast FIRE allows individuals to strike a balance between enjoying their youth and actively pursuing their financial goals. By reaching a comfortable savings milestone early on, they can choose to scale back their work hours, take sabbaticals, or explore different career opportunities without jeopardizing their long-term financial stability.

Considerations and Potential Risks

While Coast FIRE presents numerous advantages, it is important to consider the potential risks and challenges associated with this approach. Relying solely on existing investments without making additional contributions may expose individuals to market risks. Economic downturns or sudden market fluctuations can also significantly impact portfolio performance.

It is also essential to ensure that the initial savings milestone is sufficient to sustain the desired level of living expenses in retirement. Regular evaluations and adjustments may be necessary to ensure the continued viability of the Coast FIRE strategy.

Alternatives to Coast FIRE

Coast FIRE is particularly appealing to individuals who have well-paying jobs early in their careers or have the ability to save a significant portion of their income. It requires discipline and the ability to live within one's means during the accumulation phase.

But let's be clear: Coast FI is not early retirement. The FIRE number is too low. If you actually want to become work-optional, consider one of these other FIRE strategies instead.

Coast FI Vs. Barista FI

Barista FI (also known as Barista FIRE) is a nod to Starbucks, which offers employees health insurance if they average a 20-hour work week.

In Barista FIRE, you have enough money saved up that you can downshift at work, but not retire completely. Think of your investments as supplying a passive income stream that can help you decompress your career. Many Barista FIRE adherents maintain a job just for health insurance coverage, which is expensive in the United States.

Coast FI Vs. Lean FIRE

Lean FIRE is a form of FIRE that gets you out of the workforce sooner by living very frugally.

In online forums, this benchmark is defined as having $40,000 or less in annual expenses, which means a FIRE number of less than $1 million, but these benchmarks were established in the 2000s and may no longer be accurate.

Coast FI Vs. Fat FIRE

Fat FIRE is a version of FIRE for people who expect to need a higher budget in retirement.

Usually, Fat FIRE is defined as needing more than $100,000 a year to cover your expenses. This might be because of lifestyle choices, but also applies if you're retiring while still raising kids, taking care of family members, or want to live in a more expensive city.

infographic of types of fire financial independence retire early

Frequently Asked Questions

What Is Considered a Traditional Retirement Age?

Traditional retirement age in the United States is 65. Proponents of the FIRE movement want to buck traditional retirement age norms and retire years or even decades ahead of schedule.

How Much Money Do You Need to Achieve Coast FIRE?

The amount of money you need to reach Coast FIRE will depend on your age. The younger you are, the lower your Coast FIRE milestone will be, since your money will have more time to compound. Your Coast FIRE formula will help you figure this out.

What is CoastFI?

“CoastFI” is shorthand for Coast FIRE, a wealth benchmark in the FIRE movement. It refers to saving enough money that your investments can get you to financial independence from compounding alone without any additional contributions.

How Do I Calculate My FIRE Number?

An exact FIRE number requires careful planning. A theoretical ballpark figure can be calculated by multiplying your expected annual expenses in retirement by 25.

What Is Barista FIRE?

Barista FIRE refers to having enough invested assets that your annual interest gains become an income stream. Some people don’t want to retire fully, but they want to downshift in their careers, ideally in ways that still have health insurance. The name Barista FIRE is a hat tip to Starbucks, which offers health insurance to employees who average a 20-hour work week.

What Is the Difference Between Coast FI and Barista FI?

In Coast FI, you are continuing to work full-time while your investments compound. In Barista FI, some of your monthly income is produced by investments, whereas other income is active income.

What Is the Difference Between Coast FI and Lean FIRE?

Coast FI focuses on hitting a wealth benchmark, but continuing to work. Lean FIRE focuses on simplifying your lifestyle so that your expenses are very low in retirement, in order to retire sooner.

What Is the Difference Between Coast FI and Fat FIRE?

Both Coast FI and Fat FIRE are benchmarks on the path to pursuing financial independence. In Fat FIRE, you plan to stop working altogether, and expect annual expenses of $100,000 or more in retirement.

Can You Reach Coast FIRE on $500K?

Your Coast FI number varies depending on how old you are. The question will be whether your $500,000 has enough time to compound the rest of the way to financial independence without further contributions.

Is The FIRE Movement Right For You?

Coast FIRE offers an alternative path to financial independence, emphasizing front-loading savings and allowing investments to grow over time.

By achieving a significant savings milestone early on, individuals can enjoy a sense of financial security and strike a balance between work and personal fulfillment. ◆

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