When it comes to financial independence and early retirement, there is no one-size-fits-all. For some people, their income simply isn’t high enough for traditional FIRE to be practical. For others, they enjoy working and don’t feel the need to scrimp and save in order to retire early.
If you’re someone who feels traditional FIRE is too draconian or if you don’t mind retiring in your 60’s, coastFIRE may just be the ideal path to retirement for you.
What is CoastFIRE?
CoastFIRE treats saving for retirement as a task on a financial to-do list. Once you’ve reached your coastFIRE number, you no longer need to save for retirement; you just need to earn enough to cover your monthly living expenses. You can trust your nest egg to grow on its own so you have enough to retire just as you hit your desired retirement age. Your coast FIRE nest egg allows you to put all your focus into living well as you “coast” to retirement.
CoastFIRE in Practice
Just as with traditional FIRE, your coastFIRE number depends on your retirement age and your expected retirement income. Where it differs is in how your savings rate and current age impacts your coastFIRE number. The more aggressive and the younger you are when you start saving, the lower your coastFIRE number will be.
Why is this?
Since its inception, the US stock market has returned an annual average of 10%, or a real return of 7% adjusted for inflation. By investing in a broad-based index fund like Vanguard’s S&P 500, investors can capture the average return of the stock market without the risk of stock picking.
Coast FIRE leverages compounding to make retirement not just achievable, but downright easy.
As we can see from the chart from Walletburst, the sooner you start, the less you need to save.
These numbers are very conservative. This chart assumes…
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- 8% growth rate — the average annual return you’ll get if you began at the height of the 1920’s stock bubble
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- 3% inflation, which gives us 5% real investment return
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- 3.5% safe withdrawal rate — 4% withdrawal rate is considered safe by finance professionals
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- 67 desired retirement age.
Let’s have a look at what you’ll need to save to retire with $50k in annual income, given these conservative values. In that case we’re looking at…
$159k at 22
$193k at 26
$235k at 30
$383k at 40
Something to Note…
As you near retirement, it’s advisable to gradually shift your investment portfolio from 100% stocks, which the chart assumes, to a more conservative stock and bond split of perhaps 70% stocks 30% bonds. This protects your investment from short term market fluctuation, as your time horizon shortens.
Aside from this element, there is also the matter of homeownership. In today’s housing market, many young coastFIRE enthusiasts may be forced to choose between a 20% downpayment on a home or their coastFIRE nestegg. Due to the benefit of compounding, we advise young people in this position to prioritize coastFIRE over homeownership.
Your Personal CoastFIRE Number
As mentioned, your CoastFIRE number depends on the following factors:
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- Your Current Age
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- Your Desired Retirement Age
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- Monthly Contributions
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- Annual Investment Growth Rate (5%-7% conservative market returns after accounting for inflation)
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- Annual Post-Retirement Spending
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- Safe Withdrawal Rate (set to 4% according to The Trinity Study and Bengen’s 1994 Paper)
There are a slew of coastFIRE calculators/calculation methods available online. We encourage you to explore and compare the ones from Walletburst, Marriage Kids and Money, and the compound interest calculator from Investor.gov (to find the “length of time in years” subtract your current age from your desired retirement age).
Your coastFIRE number is dynamic and personal so we also encourage you to revisit these calculators as you near retirement and your career progresses.
Who is CoastFIRE Suitable For?
By all accounts, coastFIRE is suitable for everyone. No matter your age or profession, coastFIRE is always a worthy goal to pursue. However, if you fall in one or more of the following categories, coastFIRE may just be your ideal path to retirement:
You are in your 20’s — As the chart makes very clear, CoastFIRE favors the young. If you’re willing to spend your 20’s (and perhaps 30’s) renting with roommates, driving second-hand, not eating out, and working full-time, you could very well have your retirement won and done before you find a spouse and have children.
You have frugal fatigue — CoastFIRE is also excellent for FIRE enthusiasts who are going through frugal fatigue. It’s oft repeated that the FIRE lifestyle isn’t for everyone. There’s no shame in realizing that five years into counting pennies and relying solely on public transportation that you don’t want another fifteen years of the same. People in this position are likely to find that while FIRE is still a while away, coastFIRE is much closer at hand (or even has already been achieved!).
You enjoy work — No matter how much we long to lounge by the beach without work or responsibility, keeping occupied and busy is vital for general health and wellbeing. Early retirees often report staying in their jobs with better hours, downsizing to a low paying but more enjoyable job, or leaving their position to start a business. There’s no reason why you can’t do the same after costFIRE.
CoastFIRE vs Traditional FIRE
Broadly speaking, the different degrees of financial freedom can be laid out accordingly:
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- Debt Free:
The average American has $104,215 worth of debt across student loans, car loans, credit cards, and mortgages (business insider). However, not all debt is created equal.
Generally speaking, if you have debt with an interest rate of >7%, you should pay it off ASAP. This is because the US stock market has an average real return of 7%. If your debt interest is higher than that, then investing is at best HIGHLY risky and at worst getting yourself deeper in debt.
Once you’ve paid off all high interest rates and all non-productive debt (debt like your mortgage that increases your net worth), you can move on to the next tier.
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- Normal Retirement:
According to data from the Federal Reserve, in 2024 only 67% of Americans have retirement savings and of that number, 34% report feeling that they are “on track” for retirement. Getting on track for normal retirement can require a lot of work and sacrifice, especially as you near retirement age.
Being “on track” also means meeting a certain minimum in financial health, for instance having an emergency fund.
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- CoastFIRE:
This is the next rung up from “normal retirement,” that being, having enough savings to retire in your 60’s, given average stock market returns. While coastFIRE is achievable for the average American, it is more time sensitive than normal retirement and requires greater effort earlier on.
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- Traditional FIRE:
To achieve FIRE, you must be able to fully cover all your living expenses through passive income streams. This means stock investments, real estate income, bond yield, and more. Whatever the means, reaching FIRE means reaching a point where you no longer need to work to live.
Most people get a rough estimate of their FIRE number (how much money they need to be financially independent) using the 4% rule. If your annual expenses make up only 4% of your total investment (aka you’ve invested 25x your annual expense), you’ve achieved FIRE.
As you move up the scale, you become more financially free, but the effort and time it takes to reach the higher tiers also increase. CoastFIRE sits at the compromise between normal retirement and full FIRE.
Once you have reached coastFIRE, there’s no need to put more money aside for retirement any longer (but you definitely still can!), you have the good savings and financial habits of a FIRE enthusiast, and you overall have more flexibility and choice in how you spend your money. Saving for coastFIRE is better than saving for normal retirement in this way; you’ve spent so long putting so much of your money away for investment, once you no longer need to it’s like getting a massive raise!
Aside from CoastFIRE, other approaches to FIRE can also fall on the ladder.
Debt Free → Normal Retirement → CoastFIRE → BaristaFIRE → LeanFIRE → Traditional FIRE → FatFIRE
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- BaristaFIRE — By supplementing the span of time between achieving baristaFIRE and full retirement with lower-stress part-time work, you can lower your FIRE number. This allows you to significantly reduce the amount you need to save and offer you greater flexibility in your work. Very similar to coastFIRE.
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- LeanFIRE — This approach to FIRE is for those who enjoy saving money more than spending money. LeanFIRE is all about adopting lifestyles and spending habits that keeps post-retirement costs down so you won’t need to save so much to meet the FIRE benchmark. LeanFIRE also pairs well with baristaFIRE as having all your basic life necessities already covered means any disposal income you earn can go directly to hobby and entertainment.
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- FatFIRE — This approach to FIRE is primarily for those who are both big savers and big earners. FatFIRE is for anyone with the means to save millions of dollars so they can retire in their 40’s or 50’s on a six figure retirement income. If this is the tier of FIRE you aspire to, we salute your ambition! Good luck and good speed!
CoastFIRE and Tax Shelters?
As coastFIRE followers don’t intend to retire early, they don’t need to worry about early withdrawal penalties the way traditional FIRE enthusiasts have to. This means there’s no need for a complicated Roth IRA Conversion Ladder and no need to wait around for pension and social security.
With coastFIRE, you’re able to enjoy the freedom and peace of mind of FIRE while keeping your finances simple by following the path of normal retirement. This means:
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- Maxing out your 401(k) for employee match
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- Potentially opening a Traditional IRA or Roth IRA, as dependent on your present and expected future income
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- Broad-based index funds and bonds
All FIRE Techniques Apply!
Of course, all the techniques FIRE enthusiasts use to accelerate their path to FIRE still definitely apply. These ideas include, but definitely aren’t limited to:
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- Picking up a side-hustle — If you’re someone with the drive and energy to do a little extra on the weekends, side hustles are the perfect opportunity for you to get ahead on your retirement savings. Consider dog walking for your neighbors, being a tutor grade schoolers, or heck, starting a YouTube channel. For more ideas, check out our article Side Hustles to Accelerate Your FIRE Journey — the possibilities are truly endless!
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- Negotiating for higher wages — As the saying goes, if you never try then you’ll never know. The process of hiring and finding new employees can be expensive for a company, not to mention the work that’s not getting done while the position goes unfilled. If you make yourself valuable to the company you work for, then it’s only right to ask for proper compensation.
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- Adopting a minimalist mindset — In order for frugality to be sustainable, it can’t feel like deprivation. Instead, think about how nice it is to live in a clean uncluttered home, how fulfilling it would be to cook food you grew in your own garden, and how much better it is for the environment to buy second-hand. For a more comprehensive breakdown on how you can save for FIRE, check out our article on Best Ways to Save Money for Early Retirement.
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- Save on your car and home — Oftentimes the advice is to save money on small things like turning off the AC or switching to a more affordable mobile plan. However the truth is that the lionshare of your paycheck goes towards your mortgage or rent first, your car loan second, and then everything else. The real way to up your savings rate is to keep housing costs down and stay away from expensive cars.
To read more about FIRE and how to get there quickly, check out our articles, How to Retire on a Low Income, and How to Plan for Retirement in Your 20’s.
If you’re newer to FIRE or want a refresher to the FIRE basics, our articles on FIRE Tax Strategies, FIRE Budgeting 101, and FIRE Personal Finance Tips are also excellent resources.
The Pros and Cons of CoastFIRE
With all things, there are two sides to every coin.
Pros:
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- CoastFIRE allows a lot of the freedoms and benefits of FIRE at only a fraction of the savings, people who have coastFIRE’d can chose to seek part-time work, take more vacations, or prioritize their hobbies, all in the knowledge that their retirement is secure
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- CoastFIRE is a much more achievable goal than traditional FIRE, allowing people more options for family building, career paths, and living locations
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- CoastFIRE is a natural by-product of pursuing traditional FIRE, therefore it’s easy to shift gears between the two as your career develops
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- Similar to above — your coastFIRE number is dynamic and flexible, once you’ve achieved coastFIRE for a $20k retirement, you can continue on and “upgrade” to higher tiers, safe in the knowledge that your basic necessities are covered
Cons:
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- CoastFIRE is a method of saving for retirement, it does not imply early retirement. For that reason, coastFIREdoesn’t offer the same degree of freedom and security as traditional FIRE — you will still need to work to cover your living expenses
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- Although not to the extent of traditional FIRE, you need to adopt frugal habits to achieve coastFIRE. Depending on your income and cost of living, coastFIRE may demand a degree of sacrifice that traditional retirement does not.
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- CoastFIRE is heavily skewed in favor of younger people in the way that traditional FIRE is not
Conclusion
When FIRE enthusiasts say that FIRE is for everyone, it can be difficult to believe. How can it be possible for everyone, even the average to low income earner under a mound of debt, to achieve financial independence and retire early? However, with coastFIRE on the table, it’s much easier to envision how the average person might reach a sort of FIRE without resorting to living out of a car.
CoastFIRE may not be as flashy as FIRE, not quite as impressive as a headline like Josh retired at 38, here’s how he did it! but many of us don’t need to be flashy. Security and comfort is the name of the game and if that’s what you value, coastFIRE is just the retirement plan for you.
