Coast FIRE: A Smarter Way to Retire Early Without Sacrificing Life
If you’ve ever heard of the FIRE movement—Financial Independence, Retire Early—you know it’s all about aggressively saving and investing to retire at a young age. But what if I told you there’s a more balanced approach that lets you enjoy your 20s and 30s and still retire early? Enter Coast FIRE—a concept that’s quickly gaining traction for its flexibility and realistic approach.
In this blog post, we’re diving deep into what Coast FIRE is, how it works, and why it might just be the game-changer you need to rethink your retirement strategy. We’ll also walk through practical calculations, share personal insights, and explore tools you can use to find your own Coast FIRE number.
What is Coast FIRE?
Understanding the Traditional FIRE Movement
The traditional FIRE movement is often characterized by extreme frugality and aggressive saving, sometimes at the expense of enjoying life. Many FIRE enthusiasts recommend living like a miser in your 20s and 30s, cutting out luxuries like dining out, social events, and travel. While this approach can work, it’s not for everyone—and frankly, it can feel pretty draining.
The Coast FIRE Alternative
Coast FIRE takes a different path. Instead of saving aggressively every year all the way through retirement, you invest a lump sum early on—enough so that with compound interest, your investments will grow on their own to support your retirement income later. After reaching this “Coast FIRE number,” you no longer need to contribute to retirement savings, but your money is still growing. You can then “coast” to retirement.
This means you can still earn money and spend on things that matter to you, pursue passions that may not pay as much, or even start a side hustle or business without the pressure to save every last penny.
Why Coast FIRE Might Be Better for You
Enjoy Your Prime Years
Marco, the host behind Whiteboard Finance, argues that traditional FIRE often robs young people of their prime years—their 20s and 30s—when travel, socializing, and trying new experiences are most enjoyable. Coast FIRE allows you to save enough early to stop stressing about retirement savings but still live a fulfilling life.
Avoid Becoming “Cheap Miser”
One common criticism of traditional FIRE is that it can encourage stinginess—skipping social events, refusing to buy rounds of drinks, or being overly strict with money. Coast FIRE promotes a more balanced lifestyle where you don’t have to sacrifice basic joys to secure your financial future.
Flexibility to Pursue Passions
Since you’re not required to keep contributing to retirement once you hit your Coast FIRE number, you can pursue careers or hobbies that may pay less but offer more fulfillment or creative freedom.
The Power of Compound Interest in Coast FIRE
What is Compound Interest?
Compound interest is the process where your investment earnings generate their own earnings. Over time, this snowball effect can turn relatively small investments into large sums.
How Compound Interest Works in Coast FIRE
With Coast FIRE, your initial investment grows over decades without additional contributions. The earlier you invest, the more time compound interest has to work its magic. This means you don’t have to save as aggressively later on, as your money is already working for you.
Visualizing the Coast FIRE Journey: The Wealth Spectrum
The Six Levels of Wealth
Marco refers to a personal wealth spectrum ranging from negative net worth to various stages of financial independence:
- Negative Net Worth: Debt outweighs assets.
- Zero Net Worth: Breaking even financially.
- Emergency Fund Stage: Building savings for unexpected expenses.
- Coast FIRE Stage: Enough invested to coast to retirement.
- Barista FIRE: Partial financial independence, often working part-time.
- Lean FIRE: Early retirement on a minimal budget.
- Traditional FIRE: Full retirement with modest expenses.
- Fat FIRE: Early retirement with a high standard of living.
Coast FIRE sits just before the traditional FIRE categories, making it an attainable milestone for many.
How Much Do You Need to Coast FIRE?
The Coast FIRE Number Explained
Your Coast FIRE number is the amount you need invested so that it grows to your retirement target without further contributions.
Factors Influencing Your Coast FIRE Number
Several assumptions go into calculating your Coast FIRE number:
- Annual Spending in Retirement: How much money you want to live on each year.
- Growth Rate of Investments: Typically estimated around 7-8% annually.
- Inflation Rate: Usually assumed at about 3% per year.
- Safe Withdrawal Rate: The percentage of your nest egg you can safely withdraw yearly without depleting your principal, often 3-4%.
Sample Calculations Using Real-Life Figures
For example, a 34-year-old wanting $100,000 a year in retirement at age 67 would need approximately $571,000 invested today to coast FIRE, assuming an 8% growth rate, 3% inflation, and a 3.5% withdrawal rate.
If you want to spend less annually or retire later, your Coast FIRE number decreases. Conversely, retiring earlier or aiming for a higher annual expense increases the number.
How to Calculate Your FIRE Number and Coast FIRE Number
Step 1: Determine Your Annual Retirement Spending
Estimate what you’ll need annually in retirement, factoring in housing, healthcare, food, travel, entertainment, and other expenses.
Step 2: Choose a Safe Withdrawal Rate
Most experts recommend using a withdrawal rate between 3% and 4%. A 4% rate means you’ll need 25 times your annual spending saved (e.g., $50,000 annual spending × 25 = $1.25 million).
Step 3: Calculate Your FIRE Number
Divide your annual retirement spending by your safe withdrawal rate.
Example: $50,000 ÷ 0.04 = $1.25 million. This is your target nest egg.
Step 4: Use a Coast FIRE Calculator
Tools like the one from WalletBurst let you input your age, retirement age, current savings, monthly contributions, expected growth rate, inflation, and withdrawal rate. The calculator estimates how much you need to save now to achieve Coast FIRE.
Real-Life Example: Marco’s Coast FIRE Calculation
Marco uses his own numbers to illustrate the concept:
- Age: 34
- Desired retirement age: 50
- Annual retirement spending goal: $100,000
- Current investments: $125,000
- Monthly contribution: Varied from $2,000 up to $11,000
- Expected investment growth: 6%
- Inflation: 3%
- Safe withdrawal rate: 4%
Using these values, Marco calculates that he needs to invest about $1.55 million to coast to retirement by 50. Increasing monthly contributions can help reach this goal faster, but the key takeaway is that starting early and letting compound interest work is crucial.
The Golden Middle: Balance Between Saving and Living
Marco emphasizes that Coast FIRE encourages a balanced approach:
- You don’t have to live like a monk or deprive yourself of simple pleasures.
- You can still enjoy social activities, travel, and dining out.
- You avoid extreme sacrifices commonly promoted by traditional FIRE advocates.
- This approach fosters a more sustainable and enjoyable journey to financial independence.
Practical Tips for Achieving Coast FIRE
Start Early
The younger you start investing, the less you have to save monthly. Time is your greatest ally thanks to compounding.
Know Your Numbers
Use calculators and budgeting tools to understand your spending habits and retirement needs.
Invest Consistently
Make regular contributions to your retirement accounts, even if you aim to reach your Coast FIRE number with a lump sum.
Adjust Your Retirement Age
The later you retire, the smaller your Coast FIRE number becomes because your investments have more time to grow.
Don’t Forget Inflation
Plan for rising costs of living to ensure your retirement savings maintain purchasing power.
Common Questions About Coast FIRE
Can I Coast FIRE If I Have Debt?
It’s best to pay off high-interest debt before focusing on Coast FIRE savings. Debt can heavily impact your ability to invest and grow wealth.
What Happens If the Market Crashes?
Coast FIRE assumes average market returns. Be prepared for volatility and consider diversifying your portfolio to manage risks.
Can I Still Work After Reaching Coast FIRE?
Absolutely! Many people work part-time or pursue passion projects after reaching Coast FIRE, since they no longer need to save for retirement.
How Is Coast FIRE Different From Barista FIRE?
Barista FIRE involves working part-time jobs to cover living expenses, while Coast FIRE means your investments alone will cover your retirement, allowing you to work without saving more for retirement.
Final Thoughts: Is Coast FIRE Right for You?
Coast FIRE offers a refreshing alternative to the often harsh and restrictive traditional FIRE path. It’s more realistic, flexible, and allows you to enjoy life while still building wealth for an early retirement.
If you want to:
- Stop stressing about saving every penny,
- Enjoy your prime years,
- Have the freedom to pursue passions or less lucrative careers, and
- Retire comfortably without extreme sacrifice,
then Coast FIRE might just be your best bet.
Start by calculating your Coast FIRE number today, invest wisely, and let compound interest do the heavy lifting. Remember, the goal is a balanced life, not just a fat bank account.
Thank you for reading! If you found this helpful, share it with friends who might also want a smarter way to retire early. And hey, don’t be shy to enjoy life a little on your way there!
