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How coast FIRE works

By Jude Wallis

Coast FIRE is the moment saving becomes optional. Take today's pot, grow it at your assumed return to the retirement date, and compare it with the FIRE number. $200,000 at 7 percent for 20 years reaches $773,936.89, against a $1,000,000 target, so this saver is $226,063.11 short.

Grown nest egg

$773,936.89

FIRE number $1,000,000.00. Gap $226,063.11.

FIRE number
$1,000,000.00
Grown nest egg
$773,936.89
Gap to FIRE
$226,063.11
$
%
yr
$
%

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In short

  • The target is spending divided by the withdrawal rate: $40,000 at 4 percent is $1,000,000.
  • The coast test grows today's pot forward with no new money: $200,000 at 7 percent for 20 years is $773,936.89.
  • The gap between the two, $226,063.11 here, is what contributions still have to cover.
  • Coasting means contributions stop, not spending. Wages still pay the bills until the retirement date.
  • The answer is extremely sensitive to the assumed return, because it is compounded over decades.

Two numbers, and the gap between them

Every coast FIRE calculation is a comparison of two figures. The first is the destination: annual spending divided by a safe withdrawal rate, so $40,000 at 4 percent gives $1,000,000. The second is what today's pot becomes if left completely alone until the retirement date.

Here that is $200,000 compounding at 7 percent for 20 years, which reaches $773,936.89. The gap, $226,063.11, is the part of the job that contributions still have to do. When the gap reaches zero, the saver has hit coast FIRE.

Coasting is a change to saving, not to working

The name misleads people into thinking it is early retirement. It is not. A coasting saver still works and still pays for their life from earnings; what stops is adding new money to the invested pot. That is what makes it a decision-support number rather than a fantasy: it prices whether a lower-paid, shorter-hours or more interesting job is survivable.

It also arrives much earlier than the FIRE number itself, because compounding is doing the remaining work. The earlier in a career the pot is built, the more of the destination the market provides and the less the saver has to.

The assumed return does most of the talking

Twenty years of compounding turns a small difference in assumption into a large difference in answer. At 7 percent this $200,000 reaches $773,936.89; a point lower would land materially short of that, and the gap would widen accordingly. Nothing about the saver changed, only the number typed into the box.

So run the calculation at more than one rate and treat the pessimistic version as the plan. It is also worth remembering that the target itself carries an assumption: 4 percent is a convention, not a guarantee, and safe withdrawal rates sets out what it is based on.

Reading the result honestly

Coast FIRE assumes the money is never touched before the target date, that returns average out to the rate you chose, and that spending in retirement matches what you entered. Each of those is a real assumption to test rather than a footnote to skip. Read the result next to the FIRE number calculator, which sets the target, and coast FIRE against regular FIRE, which sets the two milestones side by side. This is educational material, not financial advice.

Worked examples

\$200,000 invested with 20 years left

A saver has $200,000 invested, assumes 7 percent a year, retires in 20 years on $40,000 a year, and plans a 4 percent withdrawal rate. Are they coasting?

  1. The FIRE number is 40,000 divided by 0.04, which is $1,000,000.
  2. Compounding 200,000 at 7 percent for 20 years gives $773,936.89.
  3. The shortfall is 1,000,000 minus 773,936.89, which is $226,063.11.

Not yet. Growth alone reaches $773,936.89, leaving a $226,063.11 gap for contributions to close.

A cautious return with a bigger target

A saver has $150,000 invested, assumes 6 percent, has 25 years to go, expects to spend $50,000 a year and uses 4 percent.

  1. The target rises to $1,250,000, because spending is higher.
  2. $150,000 at 6 percent for 25 years reaches $643,780.61.

The gap is $606,219.39. More years did not compensate for a lower return and a larger target at the same time.

Common questions

Does coast FIRE mean I can stop working?

No. It means new contributions are no longer needed. Wages still cover living costs until the retirement date.

What return should I assume?

One you would defend in a bad decade as well as a good one. Run a low case, because the result compounds the assumption.

What happens if I withdraw early?

The projection breaks. Coast FIRE only holds if the pot is left to compound untouched to the target date.

Is this financial advice?

No. It is educational material about a retirement milestone and its arithmetic.

Keep reading

This page is educational material, not financial advice. The figures come from the formula shown and assume the inputs you enter hold for the whole term. Your own rate, fees, taxes and timing will differ, so treat the output as arithmetic to check a decision against, not as a recommendation.