Coast FIRE explained: when you can stop saving for retirement

What Coast FIRE means

Coast FIRE is a point on the way to financial independence. You reach it when the money you have already invested is enough to grow, with no new contributions, into your full retirement target by a chosen age.

From that point, you still work. Your salary still pays for rent, food and bills. But you no longer need to put money aside for retirement. Your investments "coast" to the target on growth alone.

The idea is a variant of FIRE (financial independence, retire early), which our practical guide to the FIRE movement covers. Coast FIRE asks a narrower question: how much do I need invested today so that time can do the rest?

The word that matters is "expected". The calculation depends on an assumed return, and returns are never certain. We come back to that below.

The Coast FIRE formula

You need three inputs: how much you plan to spend each year in retirement, a withdrawal rate, and the number of years until your target age.

Step 1: work out your FIRE number

Your FIRE number is the amount you need invested on the day you stop working:

FIRE number = annual spending in retirement / withdrawal rate

At a 4% withdrawal rate, that is 25 times your annual spending. The 4% figure comes from US research in the 1990s, often called the Trinity study, which looked at how much a retiree could take each year from a mix of stocks and bonds over 30-year retirements. It is a starting point, not a promise. Some people use 3.5% (about 28.6 times spending) for a longer or more cautious plan.

Say you expect to spend 40,000 a year in retirement, in today's money. At 4%, your FIRE number is 40,000 / 0.04 = 1,000,000.

Step 2: discount it back to today

The Coast FIRE number is the FIRE number divided by the growth you expect between now and your target age:

Coast FIRE number = FIRE number / (1 + r)^n

Here r is the expected real annual return (after inflation) and n is the number of years until your target age.

This is compound growth run backwards. If you know what the money must become, you divide by the growth factor to find what it must be today. Our compound interest guide shows the same effect from the other direction.

Worked examples

Say you are 35 and want to be financially independent at 65, so n = 30. Your FIRE number is 1,000,000, and you assume a 5% real return. The growth factor is 1.05^30, which is about 4.322.

Coast FIRE number = 1,000,000 / 4.322 = about 231,000

Now change only the return assumption. At 4% real, the Coast FIRE number is about 308,000. At 6% real, it is about 174,000. One percentage point either side moves the answer by tens of thousands. The 4% case needs about 77% more money today than the 6% case.

The number of years matters just as much. The table shows the Coast FIRE number for a 1,000,000 target at three return assumptions and four time horizons. Each figure is rounded to the nearest thousand.

Two lessons stand out. First, time does much of the work. With 40 years to go at 5%, you need about 14% of the target today. With 10 years to go, you need about 61%. Second, the return is an assumption you choose, so choose it with care. A cautious assumption gives a higher Coast FIRE number, and that gives you a margin if markets disappoint.

To try your own inputs, use the free Coast FIRE calculator.

Use real returns, not nominal

A nominal return is what your account statement shows. A real return is what is left after inflation. For Coast FIRE, use the real return, because your spending figure is in today's money.

Here is the trap. Say you expect a 7% nominal return and 2% inflation. The real return is about 4.9% (1.07 / 1.02 - 1). With the real figure, the Coast FIRE number for a 1,000,000 target over 30 years is about 238,000. If you put the 7% nominal return into the same formula, you get about 131,000. That is about 45% less, and it is wrong: 1,000,000 in 30 years will not buy what 1,000,000 buys today.

You have two consistent options:

• A real return, with the target in today's money.
• A nominal return, with the target inflated to future money.

The first is simpler, because you think about spending in prices you know. To see what a sum in today's money becomes in future money, use the inflation calculator.

Coast, Barista, Lean and full FIRE

These labels describe versions of the same idea. They differ in how much you have invested and how much you still need to earn.

• Full FIRE: you have your full FIRE number invested (25 times spending at a 4% withdrawal rate). Work is optional from today.
• Lean FIRE: full FIRE at a lower level of spending. The target is smaller, but you must keep spending low for good.
• Barista FIRE: your portfolio pays part of your costs now, and part-time work pays the rest. You already draw on your investments.
• Coast FIRE: you neither add to your investments nor draw on them. Work pays your current costs, and the portfolio grows until the target age.

What Coast FIRE lets you do, and the risks

Reaching Coast FIRE does not mean you can stop working. It means your earnings only need to cover today's costs, not today's costs plus retirement saving. If you save 25% of your take-home pay today, after Coast FIRE you could in principle live on 75% of your current income.

Return assumptions that are too optimistic. The worked examples show how much the answer depends on r. If you invest 174,000 because you assumed 6%, but you get 4% every year for 30 years, you reach your target age with about 565,000 instead of 1,000,000.

Sequence of returns. While no money goes in or out, the order of returns does not change where you end up; only the average does. But you learn the average slowly, and a weak decade near the end leaves little time to catch up. Once withdrawals start, order matters a lot: a fall in the first years does more damage than the same fall later.

Rising spending. If retirement spending rises from 40,000 to 48,000 a year, the FIRE number rises to 1,200,000 and the Coast FIRE number (30 years at 5%) to about 278,000.

Pension, tax and health rules vary by country. Some money may sit in accounts you cannot touch until a set age. A state pension may cover part of your spending later. Health costs may be tied to a job, and they tend to rise with age. Check how these rules work where you live.

Check your progress each year

Re-run the number once a year, on a fixed date, with the same assumptions unless you have a reason to change them.

Expect the Coast FIRE number to rise each year. With one year less for growth to work, you need a little more today. At 5% real, a 1,000,000 target needs about 231,000 with 30 years to go, about 243,000 with 29 and about 255,000 with 28. If your portfolio earns exactly your assumed return and you add nothing, you stay the same distance from Coast FIRE in percentage terms. New contributions, and returns above your assumption, close the gap.

Say you are 35 with 200,000 invested and the same 1,000,000 target at 65. Your Coast FIRE number is about 231,000, so you are about 31,000 short. Left alone at 5% real, 200,000 grows to about 864,000 by 65. If you add 12,000 at the end of each year, after three years you have about 269,000 against a Coast FIRE number of about 268,000. On these assumptions, you reach Coast FIRE at 38.

A yearly check takes four steps:

1. Update the value of everything you own and owe.
2. Check your expected retirement spending, in today's money.
3. Re-run the Coast FIRE number with one year less to go.
4. Compare it with the investments you hold for retirement. Leave out your home (unless you plan to sell it) and your emergency fund.

Once you pass Coast FIRE, the FIRE calculator shows how much sooner full independence comes if you keep investing.

Track it in worthtracker

Coast FIRE is a comparison between two numbers: your invested assets and a target. worthtracker gives you one place to keep the first number up to date. You type in what you own and owe; there are no bank connections. It records a snapshot of your net worth on your first visit each month, so the yearly check starts from a clear history.

The free plan includes unlimited assets, goals, milestones and CSV export. Pro adds FIRE projections, unlimited snapshots and write access for the API and AI assistants. Start free and add your investments today.