What is Coast FIRE? A plain guide with one worked example

Coast FIRE is the point where the money you already have invested will grow into your full retirement pot on its own, without you adding anything more. You keep working to pay for your life today, but you can stop saving for retirement.

Want your own number first? Use the Coast FIRE calculator. It takes a minute and nothing is sent anywhere.

Where the name comes from

FIRE stands for Financial Independence, Retire Early. The classic version means saving a large share of your income until your investments can pay for your whole life, and then stopping work.

That is a big goal. Most people are not going to save 50% of their income for fifteen years. Coast FIRE is a smaller, earlier milestone on the same road. Instead of asking “when can I stop working?”, it asks “when can I stop saving for retirement?”

The word “coast” is the key. Picture riding a bike to the top of a hill. Once you are over the top, you can stop pedalling and still reach the bottom. Your early savings are the pedalling. Compound growth is the hill.

The idea in one sentence

If you have enough invested today that growth alone will turn it into the pot you need by retirement, you have reached Coast FIRE.

You still work after Coast FIRE. The difference is that your pay only has to cover today.

What you need to know to work it out

Four numbers decide your Coast FIRE number:

1. What you will spend each year in retirement, in today’s money.
2. How much a pension will pay you, if anything. Your investments only need to cover the gap.
3. Your withdrawal rate. This is the share of your pot you plan to take out each year. A common choice is 4%.
4. Your real growth rate. This is how fast your investments grow after inflation.

The real growth rate is worth a moment. If investments grow 7% a year and prices rise 3% a year, your money is not really growing by 7%. It is growing by:

(1 + 0.07) ÷ (1 + 0.03) − 1 = 3.88% a year

You might expect 7% − 3% = 4%. That shortcut is close, but it is a little too generous every single year, and over thirty-five years that small error grows into a big one.

A worked example

Meet Sam. Sam is 30, wants to retire at 65, and expects to spend $40,000 a year in retirement in today’s money. Sam has no pension to count on. Sam has $100,000 invested and adds $800 a month.

Step 1: How much does Sam’s pot need to pay each year? $40,000, because there is no pension.

Step 2: How big does the pot need to be at 65? At a 4% withdrawal rate: $40,000 ÷ 0.04 = $1,000,000.

Step 3: What is the real growth rate? With 7% growth and 3% inflation, it is 3.88% a year.

Step 4: How much does Sam need today to grow into $1,000,000 by 65? That is 35 years of growth: $1,000,000 ÷ 1.0388^35 = $263,555.

So Sam’s Coast FIRE number today is $263,555. With $100,000 invested, Sam is 38% of the way there.

When can Sam stop saving?

The Coast FIRE number moves every year. The closer Sam gets to 65, the less time growth has to work, so the number rises. At 40, Sam would need $385,777 invested to coast to the same $1,000,000.

Sam’s balance rises faster, because Sam is adding $800 a month on top of growth. The calculator steps through each year and finds the first age where Sam’s balance has caught up with that year’s Coast FIRE number.

For Sam, that is age 59. From then on, Sam could stop saving for retirement and still reach about $1,000,000 by 65.

Here is the part that surprises most people. If Sam saves $1,000 a month instead of $800, an extra $200, the stop-saving age moves from 59 to 50. Nine years of saving freedom for $200 a month. Early money has the most years to grow, so small increases now make a big difference later.

What Coast FIRE does not mean

• It does not mean you stop working. You still need to earn enough to pay for your life until you retire.
• It is not a guarantee. Markets do not grow by a smooth 7% every year. Some decades are much worse.
• It is not the end of saving for everything. You still need an emergency fund and savings for things like a home.

How cautious should you be?

Two settings matter most.

Growth. At 5% growth instead of 7%, Coast FIRE numbers rise sharply. Check how your plan looks under a cautious rate too. The calculator shows 5%, 7% and 9% side by side in the Plan section.

Withdrawal rate. The 4% figure comes from US research on past market returns. Many people choose 3.5% to be safer. For Sam, that raises the pot needed at 65 to $1,142,857, and at $800 a month Sam would no longer reach Coast FIRE before 65 at all. Sam would need to save more or retire later.

Neither setting is right or wrong. The point is to know how much your answer depends on them.

Why Coast FIRE is a useful milestone

Full FIRE can feel too far away to be real. Coast FIRE is often only a decade away, and once you reach it you have real choices. You could take a lower-paid job you enjoy more, work part-time, take a career break, or simply spend more today without feeling guilty.

It also gives you a clear thing to track. Every month you can ask one question: am I getting closer to my number?

Work out your own number

The example above is Sam’s. Yours will be different, especially if you are in a couple, expect a pension, or live outside the US.

Find your Coast FIRE number. It works for singles and couples, includes pensions, and shows every step of the maths with your own figures.

This article is for education, not financial advice. All figures are in today’s money and do not include taxes or fees.