What Is Coast FIRE And Is It The Right Retirement Path For You?

As someone who helped ignite the modern day FIRE movement back in 2009 when Financial Samurai began, I'm amazed at how popular the movement has come! There are so many different types of FIRE to fit different people's lifestyles. Today, we'll discuss what is Coast FIRE and whether it's the right type of FIRE for you.

I've been “fake retired” since 2012 and my wife, who is three years younger, joined me in early retirement in 2015. We both retired right before our 35th birthdays. Not a day goes by where we are not thankful for saving and investing aggressively to get out of the rat race.

Since retiring from corporate America, we've traveled to 20 new countries, wrote a severance negotiation book, wrote a WSJ bestseller, Buy This Not That, and had two children! One could say that post-retirement, we've been busier than ever.

In fact, I haven’t told anybody I’ve been retired since 2013. These posts and books don’t write themselves!

In this post, I want to share with you the definition of Coast FIRE. I also want to explain why you probably don't want to embrace this type of FIRE. Finally, I'll share how to calculate your Coast FIRE number.

Coast FIRE is really just a mental trick to try to make you feel better about your progress. Coast FIRE is really no different from a working individual who is regularly saving and investing their paycheck to retire at age 60 or later.

The Main Different Types Of FIRE

Back in my day, there was only one version of the FIRE movement. That version is having your retirement portfolio(s) generate enough passive income to fund your desire early retirement lifestyle. If your passive investment income can cover your living expenses, you are financially independent.

If your spouse needs to work, then you are probably not financially independent. That's called Wife FIRE. Finally, if you have to make money online as an influencer to support your family, you're not financially independent either!

Over time, FIRE evolved into three main types of FIRE:

1) Fat FIRE

2) Lean FIRE

3) Barista FIRE.

These three main types of FIRE serve as the foundation for the different FIRE lifestyles. But what about this new type of fire called Coast FIRE? Coast FIRE can be considered a subset of Lean FIRE or Barista FIRE.

Let's look at some various definitions of Coast FIRE according to some FIRE enthusiasts on the Reddit FIRE sub-board. I'll also share my official definition of Coast FIRE.

The Definition of Coast FIRE

My official definition of Coast FIRE is this. A person who is on the slow path to financial independence and still needs a job to eventually live the FIRE lifestyle. The job tends to be a low-stress job that doesn't pay a lot.

Someone who is Coast FIRE can “coast” through his or her job. They will eventually obtain financial independence through the potential growth of their investment portfolio.

To be Coast FIRE, an individual also needs to have enough saved up and invested so it can grow into a large enough nest egg to live off by age 60+ (traditional retirement age).

In a way Coast FIRE and Slow FI are similar. Slow FI is to help those who are very far away from traditional FIRE, but who still want to feel included and feel good about their FIRE journey. When it comes to money, so much is psychological!

How Coast FIRE Works

1) Save and invest enough where saving and investing more becomes optional.

Instead of waiting until you accumulate your entire FIRE net worth target to claim financial independence, save enough that will grow into the amount you need for future retirement.

2) Change your life to a better one.

Once you are Coast FIRE, you have more flexibility to live the life that you want. Instead of working at a job just for the money and benefits, you can more easily pursue your passions. You can also freelance or spend more time with family.

3) Earn enough to cover your basic living expenses.

Given you have enough saved and invested to grow into a full FIRE number, you don't have to earn a lot of money any more. Although you still have to work, you only need to earn enough to cover your basic living expenses. As a result, your working options are much greater.

For example, I'm thinking of going back to work and trying my hand as a video coordinator for the Golden State Warriors. The pay is only about $40,000, which is low in San Francisco. But if I was Coast FIRE, I could happily do the job and experience something new. I love the NBA!

4) Be intentional with your life once you are Coast FIRE.

Coast FIRE provides you the safety net to be more intentional with your lifestyle. If you just had a baby and want to spend more time with her, do it! If you want to work in an entirely different industry, go ahead. Always dreamed of getting a PhD in philosophy? Perhaps now you can!

Once you are Coast FIRE, please do more of what you want. doing what you want feels greater than having a lot of money and being directionless.

Examples Of Coast FIRE

Let's say you need $100,000 in gross income to live off of at a 2% withdrawal rate. Therefore, you would eventually need $5 million before you can completely retire. Someone who is Coast FIRE would have enough invested at this moment to grow their portfolio to $5 million by the time he or she wants to retire.

A 30-year-old can be considered Coast FIRE if he has $500,000 invested and experiences a 8% compound annual growth rate for 30 years. He wouldn't have to contribute another dollar to his investment portfolio to achieve a $5 million portfolio by the time he is 60+. The risk is that he does not grow his portfolio at a 8% compound annual growth rate for 30 years.

Since investment returns are not guaranteed, Coast FIRE is the weakest type of FIRE of them all. Many argue it is not even close to real FIRE.

Coast FIRE was created to help working individuals on the FIRE journey feel better about their progress. Given every personal finance enthusiast is saving and investing, literally everybody who cares about their finances can be considered Coast FIRE.

More Definitions of Coast FIRE

Here are more definitions of Coast FIRE from other FIRE enthusiasts on Reddit.

Coast FIRE means you have enough in your retirement accounts that without any further contributions, it will grow into enough to cover your “traditional” retirement.

With Coast FIRE, you only need to earn enough to cover your current expenses. For example, if you were making $80k and saving 50% for retirement, now you only need to earn $40k to cover your expenses pre-traditional retirement.

Coast FIRE sounds like Barista FIRE. Barista FIRE is a type of FIRE where someone works a fun job to help pay the bills. Getting healthcare benefits is one reasons for Barista FIRE. However, the Barista FIRE person essentially has enough in his or her retirement accounts to retire if need be.

The Differences Between Barista FIRE And Coast FIRE

Barista FIRE = You are Barista FIRE if you follow the 4% rule on your investments and it kicks off enough income to pay for your basic necessities. You can work a part time “barista” job to cover the remainding expenses. .

Coast FIRE = means you have enough saved (with the power of compounding) to cover traditional retirement. This is a fairly low number to hit when you are in your 20s or 30s since time is on your side.

Barista FIRE = means you have enough saved to only need to make the amount of money each year that would be doable from a part time, lower paid job. Then you could supplement that income by drawing down from your investments.

Barista FIRE = means you are withdrawing money from your portfolio, but supplementing it with income.

Coast FIRE = means you don't touch your portfolio but you dial your employment back to cover your expenses only. Once the portfolio grows to cover your full expenses, you are FI.

This seems like the most rational definition of Coast FIRE.

More Differences Between Barista and Coast FIRE To Consider

Coast FIRE = For us, it means working low-stress jobs just to pay the bills while leaving our savings untouched. Currently, that means we each earn $15,000 per year to cover our household expenses of approx. $30,000 per year. So my quota is $41 per day, 365 days per year.

So I guess my definition of Coast-FI would have two parts. 1) You get a job that's either low stress, part time, or both. 2) You have enough saved that you can eventually legit FIRE with your current portfolio.

Sounds like Barista FIRE to me!

More Definitions of Coast FIRE And Barista FIRE

Barista FIRE = It represents the ability to pick your job based on how much you enjoy it rather than how much it pays. It may be coupled with a limitation on hours. When we are describing Barista FIRE, it's a life choice that people pick rather than something forced on you by circumstances. If you aren't interested, then you know, don't do it?

A person that needs to work *just any* job for 20 hours a week is in a significantly more flexible position than a person that has to work a job that pays at least $X per hour full time. It's a kind of freedom and I'm really over any kind of gatekeeping – if that's your goal and you want to call it Barista FI then we all understand what you mean.

Sounds like Coast FIRE to me!

Barista FIRE = where you get a more relaxing (in theory), low-paying job to get out of the house and cover most or all of your day-to-day expenses, once you no longer need to save anymore for retirement.

Coast FIRE = where you don’t necessarily change jobs, but you no longer need to save for retirement so you “coast”, either working less or increasing your spending instead of saving more.

Coast FIRE and Barista FIRE Are Very Similar

If someone can find an enjoyable job and coast through life and enjoy it, then great. I personally find it hard to find any job that is more enjoyable than having absolute freedom. I don't care how much someone pays me. If there is a schedule I have to adhere to, it's not as nice as being free.

Using Coast FIRE is a way to keep motivation alive for FIRE enthusiasts who aren't quite there yet. To get to true FIRE, you need to first get to Coast FIRE. Most people probably don't even realize they've gotten there until they start crunching the numbers.

More FIRE acronyms will pop up as more people aspire to FIRE. We tend to adjust terms to fit our stage in life rather than take the harder route. Bottom line: FIRE is having enough passive investment income to cover one's desired lifestyle.

It's human nature to describe and justify our financial state, even if we're so far away from true financial independence. It makes us feel better and happier to keep on going!

How to Calculate Your Coast FIRE Number

To discover your baseline FIRE number, take your annual expenses and multiply them by 25. This is based on the 4% rule, which is frankly outdated since it was introduced in the mid-1990s.

FIRE number = Annual Expenses x 25

To calculate your Coast FIRE number, 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.

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

Here’s an example. Say you’re currently 30, want to retire by 55, and expect $5,000 in monthly expenses in retirement ($60,000/year). Your invested assets return 7% each year, and dividends are reinvested. Your FIRE number is $1.5 million. With $1.5 million, you can withdraw at a 4% rate equal to $60,000 a year.

You could also claim Coast FIRE if you have $100,000 in your 401(k) at age 30. Without contributing another penny, if your $100,000 compounds at 8% a year, you’ll end up with $1 million by age 60. If you’re happy living off a 4% withdrawal rate, then you’re good to go!

FIRE number = $60,000 x 25 = $1.5 Million

Your Coast FIRE number, however, would be lower: $277,000.

Coast FIRE number = $1,500,000 / (1 + 0.07)²⁵

Mentally, saving up $277,000 to be considered Coast FIRE is a much easier than trying to reach your regular FIRE number of $1,500,000. Coast FIRE can help motivate you to save and invest more and take things easier once your number is reached.

Given these assumptions, Coast FIRE is one of the most dangerous types of early retirement strategies to follow. Too much is being left up to chance. Anything can happen between the time you are Coast FIRE and the time you want to retire at a traditional retirement age.

The Minimum Investment Portfolio Amount To Be Coast FIRE

It's worth putting a dollar value on when you can declare yourself Coast FIRE. At the end of the day, hard numbers matter for financial independence.

After doing a deep-dive review of my 14 investment portfolios, I’ve determined a $300,000 portfolio is the minimum investment portfolio amount necessary to consider yourself Coast FIRE.

Once your investment portfolio gets to $300,000, you can feel more at ease. You can easily take a lower-paying and more fun job after reaching $300,000. You could even practice quiet quitting by doing the minimum to not get fired.

Let’s say you have $300,000 at age 40 and traditional retirement is considered age 65. At a 8% compound annual return, in 25 years, your portfolio will have grown to $2,000,000 without any contributions. Despite inflation, $2,305,000 along with inflation-adjusted social security should be enough to provide for a reasonable lifestyle.

Good luck everyone on your journey to financial freedom. I've been writing about FIRE since I first started Financial Samurai in 2009. It's been a great journey and well worth it. Once you reach FIRE, you can always strive for Fat FIRE if you wish!

Video Interview On Coast FIRE And Early Retirement Life

For more of my perspective on Coast FIRE, you can watch this video I did with Andy Hill from Marriage, Kids, & Money on the dangers of staying with a Coast FIRE mentality.

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