CoastFIRE is one of several Financial Independence Retire Early (FIRE) types. Coast FIRE is defined as having enough money invested early in life to stop contributions and still cover a traditional retirement. This allows you to work only to cover current expenses.
Let’s explore CoastFIRE as an alternative route to regular financial independence; retire early (FIRE) and see if it’s right for you.
What is Coast FIRE?
Coast FIRE is when you aim to invest enough money to let it grow without any further contributions and have that money be sufficient to cover a traditional retirement.
This growth would come from capital gains and dividend reinvestments.
Since you don’t need to contribute towards retirement, you could switch to a part-time job to cover your current expenses.
At that point, you would be “coasting” towards financial independence.
This type of FIRE appeals to many people because you don’t have to save as much money.
CoastFIRE allows you to switch to a part-time job much earlier and not wait until you have accumulated 25x your yearly expenses like traditional FIRE.
How Is Coast FIRE Calculated?
The easiest way to calculate Coast FIRE is to find your FIRE number first.
If you anticipate having yearly expenses of $40,000/year in retirement, you would have to save $1 million.
This is based on a traditional route to FIRE.
FIRE Number = 25 x (Yearly Expenses)
However, for CoastFIRE, you don’t have to wait until you reach $1 million.
You can invest $90,000 at an early age and let it grow to $1 million using compound interest.
The money will be there for you once you retire, even without additional contributions.
Here is what it would look like if you had $90,000 invested by the age of 30 and you wanted to retire at 65 years old: (assuming a 7% return)
Letting $90,000 compound over 35 years at a 7% average yearly return would give you $1 million! This is why compound interest is the 8th wonder of the world.
So in this example, you could stop making contributions at 30 and only worry about your current expenses.
This allows you to design a lifestyle where you work less or spend more now.
You could have more money and time for family, friends, and adventures.
That is the appeal of CoastFIRE.
Coast FIRE Calculator
Your Coast FIRE number or the amount will depend on two factors:
- Yearly Expenses
- Time Until Retirement
Knowing how much you spend in a typical year is the first step to calculating your Coast FIRE Number.
I use Personal Capital to track my expenses. (Get a $20 Amazon Gift Card with this link when you add at least one investment account containing a balance of more than $1,000 within 30 days)
The next step is figuring out how much time you have until you want to retire.
If you are 30 and want to retire at 65, you would have 35 years until retirement.
Now we can calculate our Coast FIRE Number:
Coast FIRE Number = (Yearly Expenses x 25) ÷ (X)
X Depends On Your Time Until Retirement
Here Is An Example:
- Yearly Expenses ($40,000)
- Time Until Retirement (35 Years)
- X = 11.5
CoastFI Number = ($40,000 x 25) ÷ (11.5)
CoastFI Number = $87,000
The Coast FIRE Formula gives us our Coast FIRE Number of $87,000.
Now we use the Coast FIRE Calculator to determine when we will reach this amount.
It will be much faster than regular FIRE.
Calculate Your Coast FI Number With My Free Coast FIRE Calculator
Using my Coast FIRE Calculator helps you determine how long it will take to reach your Coast FIRE number.
The CoastFIRE Calculator accounts for how much you’ve saved and the amount you currently contribute.
It shows your progress year by year, so you can quickly identify when you will arrive at Coast FIRE.
In this example, it would take 16 years to accumulate $1 million and achieve Traditional FIRE.
However, that same person would reach CoastFIRE in only 2 to 3 years!
That is a full 13 years before Traditional FIRE.
Benefits of Coast FIRE
Freedom To Design Your Lifestyle
Coast FIRE allows you to switch jobs or achieve part-time work much faster than traditional FIRE.
If you are miserable at work, pursuing Coast FIRE can help you live a happier lifestyle sooner.
Easiest Path To Financial Independence
Coast FIRE is also the easiest path to financial independence.
As the example above showed, it took less than 3 years to reach CoastFIRE.
The majority of the $1 million was compound interest working for you.
The advantage of CoastFIRE is allowing compound interest to do the heavy lifting.
When using this type of FIRE, time works in your favor.
The earlier you start, the easier it is to achieve Coast FIRE!
Keeps You Engaged
Lastly, by continuing to work, this type of financial independence appeals to those not looking for a fully retired lifestyle.
Perhaps, you enjoy work, just not working for 40 hours a week.
It’s also possible you envision getting bored with early retirement.
If switching to part-time work appeals more than completely retiring, CoastFIRE might be the right FIRE path for you.
The good news is that you can always change your mind later and pursue traditional FIRE.
Regardless, it’s essential to consider this early on in your journey and adjust as needed.
Different Types Of FIRE
The Financial Independence Retire Early (FIRE) movement is growing and has many FIRE types.
Here are the different types of FIRE in order from easiest to hardest to achieve:
- CoastFIRE (Coast FIRE)
- BaristaFIRE (Barista FIRE)
- LeanFIRE (Lean FIRE)
- FatFIRE (Fat FIRE)
Each type of FIRE has pros and cons and comes down to balancing money and work.
- Coast FIRE is accumulating enough money to stop contributing and still reach FIRE in the future.
- Barista FIRE is having enough money to retire early while still working a part-time job for additional income and health insurance.
- Lean FIRE is the minimalist way of reaching FIRE and means retiring with a “lean” budget.
- Traditional FIRE is accumulating 25 times your annual expenses and retiring early using the 4% rule.
- Fat FIRE is early retirement without embracing frugality and choosing to accumulate a bigger nest egg.
These options for FIRE allow us to pursue the type that best matches our lifestyle goals.
Here Is An Illustration I Made To Help You Remember The Different Types Of FIRE:
Negatives of CoastFIRE
A clear negative of Coast FIRE is the need to continue working and depending on an employer for income.
CoastFIRE is not for those who want F-You Money or to design a self-reliant lifestyle.
CoastFIRE also relies on sticking to a budget and embracing some form of frugality.
If you prefer to live budget-free or anticipate increased expenses in the future, CoastFIRE might not be the best option.
Coast FIRE Financial Independence
As you can see, you can reach FIRE in various ways. CoastFIRE is by far the easiest path to financial independence.
This can be used as a motivational milestone to motivate you to continue towards more challenging types of FIRE.
Alternatively, achieving CoastFIRE by switching from full-time to part-time might be the best option if you enjoy your job.
You can still enjoy the same lifestyle and declare you’ve reached CoastFIRE in only a few years.
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This information is my opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.