The Coast FIRE Strategy offers a balanced approach to financial independence and retirement planning, emphasizing early, substantial savings followed by a more relaxed phase where the invested money compounds over time. This strategy is part of the broader FIRE (Financial Independence, Retire Early) movement but focuses on long-term growth rather than continuous, aggressive saving.
Understanding Coast FIRE
Coast FIRE means you’ve saved enough money early on so that, even without adding more funds, your retirement savings will grow—coast, as the name suggests—until you reach your target retirement age, usually around 65. At that point, you can retire with confidence that your investments have accumulated adequately.
How Coast FIRE Works
The core of Coast FIRE is harnessing the power of compound interest, which allows your investments to grow exponentially over decades. This requires calculating your retirement needs, then aggressively saving early:
- Determine how much money you will need at retirement, accounting for inflation and lifestyle.
- Save a significant amount in the initial years of your career.
- Allow your investments to grow at an assumed annual return rate, typically around 6–7%, compounding over time.
- After reaching your “coast point,” you reduce or stop contributions and cover current expenses with your income.
This approach reduces the pressure to save large percentages later in life and lets your earlier efforts and the market’s growth work for you.
Who Should Consider Coast FIRE?
This strategy suits:
- Young professionals able to save a substantial portion of their income early.
- Those who want financial independence without the continuous high savings rates required by classic FIRE.
- Individuals with stable incomes who can comfortably pay living expenses without withdrawing retirement funds prematurely.
Real-Life Example
Consider Sarah, who saves $15,000 annually in her 20s with an investment return averaging 7% per year. By age 35, she accumulates $200,000, enough to let her investments grow to over $1 million by 65 without additional contributions. She then ‘coasts,’ focusing on her career and lifestyle while her retirement savings compound quietly.
Advantages and Challenges
Advantages:
- Lower financial stress after reaching the coast point.
- More flexibility in spending and saving later in life.
- Leverages compound interest effectively.
Challenges:
- Requires disciplined, aggressive saving early on.
- Must carefully plan for inflation, taxes, and unexpected expenses.
- Relies on consistent market performance; diversification and conservative assumptions are key.
Tips for Success
- Use conservative return rates in your calculations to set realistic goals.
- Invest primarily in low-cost, diversified index funds to maximize growth and reduce risk.
- Regularly review your portfolio and retirement plans.
- Avoid withdrawing from your retirement accounts to maintain compounding growth.
Common Misconceptions
- Coast FIRE is not a ‘set it and forget it’ plan; ongoing monitoring is essential.
- It does not mean you don’t have to save at all; significant early contributions are critical.
- It’s not suitable for those looking to retire very early (before traditional retirement age).
Comparison: Coast FIRE vs Classic FIRE
| Feature | Coast FIRE | Classic FIRE |
|---|---|---|
| Savings Pattern | Aggressive early saving, then coast | High savings continuously |
| Retirement Age Goal | Traditional (around 65) | Early (often before 50) |
| Lifestyle Impact | Moderate adjustments early | Larger lifestyle sacrifices |
| Stress Level | Lower after coast point | Higher throughout saving years |
| Income Reliance | Stable income needed | Depends heavily on savings rate |
Additional Resources
Learn more about the Financial Independence, Retire Early (FIRE) Movement and Early Retirement to understand where Coast FIRE fits within these strategies.
Conclusion
Coast FIRE provides a practical and less stressful path to retirement by prioritizing early, substantial savings and then allowing your investments to mature naturally over time. This strategy helps maintain a balanced lifestyle without the pressure of continual high savings, making it a compelling choice for many seeking financial independence.
