‘Coast FIRE’ Can Give You Peace of Mind About Retirement. This Formula Shows How Much Money You’ll Need

An image to accompany a story about Coast FIRE Getty Images
“Coast FIRE” is an early-stage milestone for Financial Independence, Retire Early (FIRE) enthusiasts. By saving more aggressively in your early years, you’ll hit your Coast FIRE number, the amount of invested assets you’ll need for compound interest to carry you the rest of the way to retirement.
We want to help you make more informed decisions. Some links on this page — clearly marked — may take you to a partner website and may result in us earning a referral commission. For more information, see How We Make Money.

Financial peace of mind might be closer than you think.

The Financial Independence, Retire Early (FIRE) movement has inspired millions of people to rethink their goals and both make and save more money along the way. But for many, the amount of money you’ll need to actually retire — often north of $1 million — can feel intimidating at first. That’s why you need to know about Coast FIRE.

Coast FIRE varies from traditional retirement strategy in that you strive to contribute heavily to your retirement and investment accounts early on in your career. Then, thanks to compounding interest and dividend reinvestment, these annual gains will take you the rest of the way to becoming financially independent without ever having to save another dollar. Once you reach your Coast FIRE number, you can shift to a different job that pays less, or use your newly excess income to pursue other passions in life, and know that you’ll have enough money when you reach traditional retirement age.

“I do not have to work, and I enjoy that flexibility,” says Carol Christie, certified financial planner and founder of Free to be Finance, a financial coaching services company. Christie was a technical sales manager who aspired to reach Coast FIRE. By maximizing her savings and investing in assets that generated revenue, she now “coasts” toward financial independence, and supports others on how they can achieve the same. Carol took an additional step to reach her Coast FIRE lifestyle goal by relocating to a more affordable area of the country, where she needs less money to live on.

You might be able to take a similar approach with your savings strategy. Here’s what to know about Coast FIRE and how to calculate your Coast FIRE number.

What Is Coast FIRE?

Coast FIRE is a variation of traditional FIRE that focuses on front-loading your retirement savings. The approach leverages compounding interest and dividend reinvestment to reach your retirement number. Since actual retirement is still years away when you first reach your Coast FIRE number, the “retire early” part of the acronym, it’s sometimes referred to as Coast FI.

The sooner you achieve Coast FI, the earlier you can remove retirement contributions from your monthly budget, which will lower your expenses without having to adjust your lifestyle. You might want to bring in supplemental revenue streams like a side hustle or rental income to fast-track your Coast FI goals.

The Coast FIRE Lifestyle

Coast FIRE is a way to adopt the FIRE movement lifestyle without living on an uncomfortably low budget for decades to achieve financial independence. However, it does require aggressive savings and expenses management at the start.

“I was living off of ramen noodles and bananas,” says Zack Swad, founder of Swad Wealth Management, a financial consulting company. Swad saved as much in his retirement accounts as he could while working as a Charles Schwab financial advisor to frontload his retirement portfolio and reduce financial pressure. “I was able to save a significant amount of money very quickly, which has given me the opportunity to really explore what I want to do with my life over the next five years, ten years, thirty years,” he says. “I wanted more autonomy and control.” 

After Swad hit Coast FIRE, he switched to opening his own advisory business. He says he wanted more time to be with his family, play music, and do other things that he enjoyed. Coast FIRE creates flexibility to achieve your retirement goal over time because compound interest is on your side. 

How to Calculate your Coast FIRE Number

As an estimate, you determine your FIRE number by taking your annual expenses and multiplying them by 25.

FIRE number = Annual Expenses x 25 

From here, a Coast FIRE formula is to divide your FIRE number by (1 + annual rate of Return)^(Time). “Annual rate of return” is the average percentage you expect your investments to grow each year, and time is the number of years you want this interest to compound before you retire. This simple compound interest formula can function as your Coast FIRE calculator.

Coast FIRE number = FIRE number / (1 + Annual Rate of Return)(time in years)

Here’s an example: Say you’re currently 35, want to retire by 60, and expect $4,000 in monthly expenses in retirement ($48,000/year). Your invested assets return 6% each year, and dividends are reinvested. Your FIRE number — the invested assets you need to be able to live off of a 4% withdrawal each year — would be $1.2 million.

FIRE number = $48,000 x 25 = $1.2 Million

Your Coast FIRE number, however, would be much lower: $279,590.

Coast FIRE number = $1,200,000 / (1 + 0.06)25

Here’s the year-by-year breakdown of how $279,590 at a 6% annual return would grow into $1.2 million over a period of 25 years and give you a path to financial independence without any further contributions.

AgeInvested Assets — Start Of Year6% Annual ReturnInvested Assets – End Of Year
Example of how a Coast FI number of $279,590 would grow into $1.2 million over a 25-year period, assuming a 6% average annual rate of return.

This Coast FIRE formula gives you a ballpark amount you need to save to reach Coast FI and get on track to becoming financially independent. You don’t need to save any more money once you’ve hit this number, but additional contributions will get you to early retirement sooner if you want to speed up your timetable. Keep in mind that the FIRE example given above is based on a 4% annual withdrawal rate. You can also use the free compound interest calculator at investor.gov to generate your own numbers, using different periods of times or average annual returns.

Certified financial planners caution against relying on the simplicity of this formula in future projections. Depending on your time to retirement, higher or lower expenditure fluctuations, and inflation, any of these factors can change your real rate of return. If you are relying on compound interest alone to get you to early retirement, be sure to watch your retirement investments carefully.

“What if we have a bear market? What if we have higher than expected inflation? What if we have a recession? You can build in those scenarios, what income [is] going to look like in these time periods, [and] how this will affect your portfolio and ability to withdraw,” advises Katharine Earhart, partner at Fairlight Advisors, a financial planning and investment management firm working with non-profit organizations and their employees. Being mindful of how much you can spend and save, tied to changing conditions, ensures that you reach what you’ll need for financial independence. 

Many people use their current expenses to determine their FIRE number. It makes more sense to decide what kind of lifestyle you will live during retirement — do you see yourself spending more money to travel, or less money with a planned move to a cheaper area of the country or world? The goal is to save for the lifestyle you plan to live when you retire, which may be different from your current lifestyle.

Types of FIRE to Suit Your Needs

Your Coast FIRE number will be the first number you reach in your FIRE journey. From there, you have options on how to proceed with your savings efforts. Here are some variations of the FIRE movement that you can apply for the rest of the way to achieve financial independence

Coast FIRE vs FIRE 

Traditional FIRE aims to save over 50 percent of income with minimal spending. It is an aggressive path of mega-savings and a stark lifestyle to reach an early retirement goal. With Coast FIRE, you have the flexibility to invest in larger but less extreme contributions early (not as much as FIRE) and allow the compounding interest and reinvested dividends to help you reach your retirement goal by the time you are 60 years old or the age that you set for retirement. 

Coast FIRE vs Barista FIRE

Barista FIRE is when you plan to keep a part-time job in retirement to have residual income and health insurance. Since you’ll still be making some money every month, you don’t need to draw as much from your retirement accounts, which means you need less money in invested assets. As a result, your Barista FIRE number will be lower than your FIRE number. The name “Barista FIRE” was coined in response to Starbucks offering health insurance to employees who average a 20-hour work week.

Related: Is Your Starbucks Barista Secretly a Millionaire? Why Early Retirees Are Embracing ‘Barista FIRE’ To Still Have Health Insurance

Coast FIRE vs Lean FIRE

Lean FIRE is when your retirement goal is set on funding only the bare necessities in life. Basically, you plan to live a frugal lifestyle when you retire and therefore, require a smaller retirement number. You will have to work to pay for any additional expenditure or splurge. Coast FIRE focuses on creating a nest egg that fulfills the lifestyle you want to live during retirement and coasting through a lower-paying or part-time job once you reach your investment goal.

Related: ‘Lean FIRE’ Can Help Middle-Class Americans Become Financially Free. Calculate This One Number to Get Started

Coast FIRE vs Fat FIRE

Fat FIRE is when you want to retire early without having to skimp or live on a lean budget. It is considered the more luxury path to achieving financial independence. Typically, you anticipate $100,000 or more in annual living expenses and at a 4% withdrawal rate, necessitating at least a $2.5 million investment portfolio.

Related: If You Want to Retire Early but Don’t Want to Scrimp, ‘Fat FIRE’ Might Be for You

If you’re seeking peace of mind, consider calculating your Coast FIRE number today so you can set goals that move you toward a higher quality of life and eventual financial freedom.