What Is Coast FIRE [The Easiest Retirement Plan?]

Everyone will retire someday. 

The question is, do you want that retirement to be easy, or hard?

Coast FIRE is one of those options.

The more that you plan now for your retirement, the easier it will be (especially with Coast FIRE).

When it comes to retirement planning, there are a lot of different options to choose from.

You can go the traditional route and contribute 10-15% of every paycheck into your retirement account.

Or you can go the more creative route and pursue different types of FIRE (Financial Independence, Retire Early).

One popular FIRE option is called Coast FIRE. Many people have questions about it though like:

• What is Coast FIRE? 
• How does it work? 
• How do you calculate your Coast FIRE number?
• And when should you start on your road to coast FIRE?

In this blog post, we will answer all of those questions and more! 

We’ll go over the basics of what coast FIRE is, how compound interest works powerfully to create it, and some practical steps on how to achieve your own coast FIRE number.

So what are you waiting for? Start reading!

What is Coast FIRE?

Coast FIRE is simply this: when you have saved up and invested enough money early on in your life so that you no longer have to invest anything more to achieve financial independence by retirement (whatever age you choose that to be).

This allows you to cover only current expenses with your job (and often frees people up to take a less stressful, but lower paying job they enjoy as opposed to a higher paying job they hate).

Basically you save enough early on in life that you allow the magic of compound interest to take effect, that you can then “coast” on your retirement savings for the rest of your life.

You are freed up to just earn enough money to care for your living expenses because you know that your retirement savings are already taken care of.

If for example you had $150,000 saved up by age 30 and you had it invested in an asset that earns you on average 8% per year, using a compound interest calculator it shows us that you would have right around $1,509,000 saved up by the time you are 60.

Now once you’re 60, if you assume a 4% withdrawal rate (or even better if you have it invested in real estate or dividend stock that pays 4%, allowing you to keep the principal intact), that means you’ll be earning around $60,000 per year just off the interest alone.

This would replace your annual income need and allow you to never have to work again!

So, once you hit $150,000 invested by age 30, you can just “coast” your way into retirement, focus on earning enough income to live and play, and be set for life.

Coast FIRE: A Young Person’s Game

Now Coast FIRE is something that you need to have planned for early on in life, otherwise, that figure that you have to save keeps getting larger and larger.

Say for example that instead of having the $150,000 saved by age 30, you have it saved by age 40.

It’s only 10 years difference. Not that bad right?

Well because of compound interest, those 10 years mean a LOT.

Instead of $1,509,000 saved by age 60, you would now only have $699,000.

Assuming a 4% withdrawal rate of that $699,000, now you’re only making around $28,000 every year.

It’s going to be pretty tough to live on $28,000 per year assuming inflation keeps eating away at your buying power.

So, that’s why I say that Coast FIRE is a young person’s game.

If this is the retirement route you want to take, you NEED to start it EARLY.

The longer you wait to get started, the more that you have to save to make up for the years lost because compound interest does its best work over a long period.

Just look at this graph here and notice how the growth becomes exponential the longer the dollar is invested.

And look at this graphic below to see how much money is lost by waiting just 10 years to begin investing the same amount.

How to Calculate Your Coast FIRE Number

So how do you calculate what your personal coast FIRE number is?

What figure do YOU need to have saved up for this plan to work for you?

Well, it’s actually pretty simple.

The main question you need to ask yourself is how much money do you reasonably expect to be able to live on each year when you’re wanting to retire?

Once you have that number, simply multiply it by 25 to get the amount of money you need to be saved up for retirement (since we assume that you’ll receive about 4% in income from your investment, 4% x 25= 100%).

So if you think you’ll need $100,000/year at retirement, then you simply multiply it times 25 to get $2,500,000. Thus you’ll need $2,500,000 saved to reasonably retire.

Then, using something like a compound interest calculator, you can figure out exactly what you would need to invest in order to get that final retirement number you need.

If you want to place yourself on the path to financial independence, you must take the time to plan this all out properly.

The last thing you want to do is retire without enough money to support yourself, forcing you to go back into the workforce.

With a little bit of planning and effort, you can make Coast FIRE a reality for yourself and enjoy a worry-free retirement.

Is Coast FIRE Right For Me?

Coast FIRE might not be for everyone.

Some questions to ask yourself if you’re considering Coast FIRE retirement:

1. Do I like working my job?
2. Would I prefer a lower-paying job that comes with less stress?
3. Am I willing to sacrifice extra spending power now in order to save enough for Coast FIRE?
4. Do I have high-income potential?
5. Can I handle volatility in the stock market?
6. Am I comfortable with potentially not being able to retire until my investments have grown to my target number?

If you enjoy your job and don’t mind continuing to work, then there’s no need to retire early and Coast FIRE may be the perfect option for you to free up your disposable income as quickly as possible.

But if you’re someone who is sick of the daily grind and is looking for a way to achieve financial independence (and not have to work at all), then Coast FIRE may not be for you.

In that case, you might want to consider looking at other ways to retire early like traditional FIRE. If that’s more your style, then you’ll want to start building a side business that can accelerate your savings potential dramatically.

It’s important to do your research and figure out what retirement plan is best for your individual situation.

If you think Coast FIRE is right for you, then start planning and saving as soon as possible so that you can enjoy a worry-free retirement down the road.

Pros & Cons of Coast FIRE

It’s important when trying to make an important decision like this to weigh the pros and cons of the decision.

So before you go much further, sit down and think through these different aspects and if Coast FIRE is right for your situation.

Pros:

• Allows you to relax your savings after you’ve saved your initial investment amount
• Frees up your disposable income from your job
• Gives you the freedom to leave a job you hate for a less stressful one

Cons:

• If the market takes a significant downturn after you’re fully invested, you miss out on lowering your cost-basis buy not continuing to invest
• Requires you to continue to work a job to meet your daily income needs (as opposed to traditional FIRE)

Overall, Coast FIRE is an excellent retirement plan for those who want to achieve financial independence without having to put their life on hold.

It’s important to do your research and make sure that Coast FIRE is the right choice for you, but if it is, then start saving and investing as soon as possible so that you can enjoy a worry-free retirement down the road.

F.A.Q.’s

What is FIRE?

Financial Independence/Retire Early (FIRE) is a movement that is gaining popularity among millennials. The goal is to save and invest as much money as possible, as soon as possible, so that you can eventually quit your job and live off of your investment earnings.

Does Coast FIRE really work?

Yes, Coast FIRE really does work. If you save and invest enough money, you can eventually reach a point where your investment earnings are enough to cover your living expenses, allowing you to quit your job and retire early.

What is considered Fat FIRE?

There are different levels of FIRE – Financial Independence/Retire Early.

Some people are happy with what is considered “lean FIRE”, which is having enough money saved to cover your basic living expenses so that you could theoretically quit your job if you wanted to.

Fat FIRE goes a step further and refers to having enough saved so that you could live a comfortable lifestyle – think vacations, new cars, and expensive dinners out.

So if somebody could reasonably retire early on “Lean FIRE” with $2-5 million invested, somebody wanting to “Fat FIRE” would want more like $5-10 million invested to fund a more lavish lifestyle.

What is Coast Barista FIRE?

Coast Barista FIRE is a new path of FIRE that is becoming popularized by people in the personal finance community.

Barista FIRE basically means that you have enough invested to retire early, but taking on a part-time job somewhere that you can supplement your income and receive health insurance to reduce your expenses and fill your time.

How do I find my Coast FIRE number?

You find your Coast FIRE number by figuring out your annual expenses that you expect to have during retirement and then multiplying that number by 25.

So if you expect you’ll need $100,000/year to retire, you’ll want $2,500,000 invested so you could live off of about a 4% annual withdrawal.

Coast FIRE Formula:

• E x 25 = I
• E = expected annual expenses at reitrement
• I = total $ amount needed in investments upon retiring

What is Flamingo FIRE?

Flamingo FIRE combines Semi-Retirement, FIRE (early retirement), as well as Traditional Retirement.

The plan is to save as much money as possible in the beginning, until you have saved up half of your FIRE number.

Then, you either reduce how much you are working or stop adding to your savings account altogether and just work enough to cover your current expenses.

Over time, if all goes according to plan, your investments will grow and double in size so that it equals your full FIRE number.

This is a more hybrid path to financial independence and allows the best of both worlds.

Conclusion

I hope this article helped to explain what Coast FIRE is and how it works! Coast FIRE can provide an incredible amount of security as you continue in the workforce by setting yourself up for retirement early on in your professional journey.

If you want the freedom of getting your retirement savings “out of the way” early on, Coast FIRE is an incredible way to plan retirement.

If you have any questions or would like help calculating your Coast FIRE number, feel free to reach out to me.

In the meantime, happy FIRE-ing!