Coast FIRE
Have you ever thought about: saving enough money so you don’t have to work hard to save anymore, doing whatever you like, yet having sufficient funds to secure your retirement? This is the core logic of Coast FIRE: using the power of compound interest to reach financial freedom.
Simply put, Coast FIRE means saving more money during your prime working years while making reasonable investments, then stopping work at a certain age and letting the compound interest from your existing assets continue to grow your wealth!
How to achieve Coast FIRE?
- 1️⃣ Calculate your “magic number.” Formula: Required principal = Target annual retirement expenses × 25 / (1+return%)^remaining years.
- 2️⃣ Work and save money. Besides your job income, develop side hustles! Meanwhile, embrace minimalism, reduce consumption, and spend every penny wisely.
- 3️⃣ Invest regularly to grow your finances steadily.
- 4️⃣ Switch to a low-energy lifestyle. Once you reach your “magic number,” change your life mode! Do part-time/freelance/low-stress work, just enough to cover basic living expenses.
Who is Coast FIRE suitable for?
- ✔️ People who hate the rat race but don’t dare to completely give up
- ✔️ Those who can endure an ascetic lifestyle for the first 5-10 years
- ✔️ Those who believe in long-termism and aren’t looking for overnight wealth
About the calculator
I created an online Coast FIRE calculator that can estimate several Coast FIRE results based on your situation.
The calculator considers your current age and retirement age, calculating whether your current principal has enough time to grow your wealth to meet early retirement conditions before you reach retirement age. Assuming post-retirement annual expenses of $40,000, with a Withdrawal Rate typically set at 4%, the assets needed for early retirement would be $1M. Existing assets are invested for continued wealth growth, while you work some gigs to maintain monthly contributions to your investments. Then, over time, based on typical 7% growth rate and 3% inflation rates, this calculator can determine how much longer until you no longer need to save money (i.e., no need for gig work), and you can rely solely on your existing assets to gradually appreciate to reach the early retirement amount of $1M.
For example, in the chart above, Coast FIRE conditions are met at age 51, after which you no longer need to save money. You can still continue working, but your entire income can be used for spending, allowing you to enjoy a higher quality of life.
In the physical world, the situation is more complicated but at least you can understand the concept of Coast FIRE at some point with this tool.
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