Coast FIRE: Everything you Need to Know

The financial independence retire early (FIRE) movement has many subgroups of people who have further defined what retirement means to them. Financial independence is having enough money to be able to live independently of earned income. So, what is Coast FIRE?

Coast FIRE is the mathematical tipping point where the money you have invested is enough to grow to an amount sufficient for retirement without requiring additional contributions.

Let’s explore how coast FIRE works and how you may be able to achieve it.

What is Coast FIRE?

The goal behind Coast FIRE is to increase your savings rate early in your investing career by piling money into tax-advantaged savings accounts. Compound interest needs time and investment to reach its full potential. If you start early enough, you don’t need that much invested because you have decades worth of time ahead of you.

If you’re older, you would need to have more invested because you don’t have as much time. Coast FIRE aims to maximize both time AND investment. If you are able to achieve both of these then more power to you.

How Coast FIRE Works

A common rule of thumb is the 25x rule. If I want to have $50,000 per year in retirement income, then I need to save at least $1.25 million in my retirement accounts.

The reason the 25x rule or 4% rule is so important is that this number allows you to withdraw with the confidence that your retirement money will last for the next 30 years.

Coast FIRE allows you to get to your financial independence number much more quickly than any other FIRE movement variation, but it requires a much higher savings rate early on in your career. This may be difficult for a lot of people to achieve.

As you can see in the FIRE calculator below, if you have $100,000 invested by age 30 and stopped contributing (assuming a 95% stock/5% cash portfolio and an 8.1% annual ROI) you can reasonably assume to have $1.3 million by the age of 65. Technically, you would have achieved CoastFIRE by the age of 30.

It would be wise to continue to monitor and contribute during market downturns to ensure you remain on track.

Benefits of Coast FIRE

Compound interest is a powerful force and the two main ingredients are the amount invested and time. Coast FIRE takes both these to the extreme. The benefit of Coast FIRE is you are frontloading your investment contributions to take advantage of the power of compound interest.

By starting early, you can typically handle additional investment risk and recover from mistakes. You’re giving your money more time to work. You can achieve Coast FIRE at any age, but the amount you would need to be invested will increase the older you get.

CoastFIRE vs BaristaFIRE

Barista FIRE is when you reach your financial independence number and work a part-time job at a workplace that provides health insurance benefits like Starbucks. These FIRE movement variations are on opposite ends of the spectrum.

Those in the FIRE movement that achieve BaristaFIRE have usually already hit their Financial Independence number. For example, once I have $1.25 million in the bank by age 45, I could go to work somewhere just to have health insurance benefits and a social outlet.

If you can put your head down and make the sacrifices for 10 or 15 years, you can then pump the breaks and coast towards financial independence. You will then be on track to retire at a much younger age than the average American.

If you’re at the point where you’re fine-tuning HOW you want to FIRE, then I believe you're in the top 1% already when it comes to financial literacy.

CoastFIRE vs. LeanFIRE vs. FatFIRE

FatFIRE and LeanFire are varying degrees at which you decide to consider yourself financially independent and retire early.

LeanFIRE meaning that you have amassed just enough to withdraw the bare minimum annual expenses each year from your retirement savings.

FatFIRE being the opposite, you would want enough money in your retirement savings to withdraw much more than your annual expenses i.e 1.5X, or 2X your annual expenses would be considered FatFIRE.

You can have both, leanFIRE and CoastFIRE or FatFIRE and CoastFIRE. You would just adjust your CoastFIRE number to reflect the level of retirement you would like to have and at what age.

The retirement age doesn’t have to be 66, that’s just the arbitrary age I used. If you’re 30 years old and want to Coast-Lean-FIRE by the age of 55, then you would need to know how much you need to have invested by whatever age you choose to stop contributing to achieving your Financial Independence number at that age.

Negatives of Coast FIRE

The obvious negative to Coast FIRE is amassing a large investment portfolio by the age of 30. In my opinion and experience, this makes CoastFIRE one of the more difficult versions of the financial independence retire early movement.

In order to amass that amount of money, you have to make some sacrifices (unless you fall into some money). The amount of sacrifice required is directly proportional to your savings rate and how early you see yourself reaching financial independence.

In order to amass something like $100k by the age of 30 or $150k by 35 or whatever your CoastFIRE number is you will have to be very dedicated, steadfast in your decision making, and have your significant other on board (if applicable).

This is obviously a case-by-case situation, and only you can decide what level of lifestyle you want for yourself. Some will elect to live at home to save 90% in their 20’s and some will elect to take a less extreme approach.

How Much Should You Invest?

To achieve financial independence by way of Coast FIRE, you need to have this much invested by this age assuming an 8% return on investment (ROI). Why 8%? Because according to Investopedia, “The average annual return since adopting 500 stocks into the index in 1957 through 2018 is roughly 8%.”

Coast FIRE by AGE
Age 25 $50,000
Age 30 $70,000
Age 35 $100,000
Age 40 $148,000
Age 45 $215,000
Age 50 $315,000
Age 55 $470,000
Age 60 $680,000

The table to the right shows how much money you would need in your retirement account if you want to stop contributions and have $1 million at the age of 66.

If you were to just save $10,000 cash per year from the age of 20 to the age of 40 in your mattress, you would have $200,000 saved by the age of 40.

That is so achievable, it’s not even funny. If you add compound interest into the equation, you can reach that level even faster. That is what Coast FIRE is all about. You can do it!

You’ve Reached Coast FIRE, Now What?

The big draw to Coast FIRE and why I believe it will continue to grow in popularity within the FIRE movement is because of what happens when you reach your CoastFIRE number.

If I were to hit my Coast FIRE number and confidently know that I would have enough to retire on by the age of 66, I would consider myself financially independent.

To me, this means that I am no longer a slave to my current job or way of life. Knowing I could take more risks and opportunities, start a business, move across the country, whatever it is.

Reaching a Coast FIRE number would be a major relief and would allow me to live out my financial independence plan just as I would if I had already hit my financial independence number.

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