What Is CoastFIRE and How Does It Work?

The Concept of CoastFIRE

CoastFIRE is a financial independence strategy focused on front-loading retirement savings. It involves accumulating a specific amount of money early in one’s career, after which no further contributions are needed. The accumulated sum then grows through compound interest, aiming to reach a desired full retirement amount by a traditional retirement age. This approach allows individuals to “coast” through their later working years, as the financial pressure of aggressive saving is significantly reduced.

Compound interest is the core mechanism of CoastFIRE, where earnings on an investment are reinvested, generating further earnings. This creates a “snowball effect” where money grows exponentially over time, with gains in later years often substantially larger than in earlier years. Starting early, even modest consistent contributions can lead to significant wealth accumulation.

CoastFIRE differs from traditional Financial Independence, Retire Early (FIRE) in its immediate objective. While traditional FIRE aims for an early exit from the workforce, CoastFIRE focuses on retiring early from aggressive saving, not necessarily from work. Once the CoastFIRE target is met, individuals can pursue less demanding jobs, work part-time, or engage in passion projects, as their existing investments are projected to fund their future retirement. This strategy provides flexibility and reduced financial stress, making it a more accessible path to financial independence for many.

Determining Your CoastFIRE Target

Calculating your CoastFIRE target involves projecting your financial needs far into the future, considering several key variables. The initial step is estimating your desired annual spending in retirement, which forms the basis for your overall nest egg. This figure should reflect the lifestyle you envision, factoring in potential changes in expenses.

A common guideline for estimating the total retirement sum needed is the “4% rule,” which suggests a portfolio can sustain withdrawals of 4% of its initial value annually. To determine your target retirement sum, multiply your estimated annual retirement expenses by 25. For example, if you anticipate needing $50,000 per year in retirement, your target retirement sum would be $1,250,000.

Once your full retirement sum is established, work backward to determine the amount required at your CoastFIRE attainment age. This calculation integrates factors such as your assumed investment growth rate and the projected inflation rate. A realistic long-term average investment return for a diversified portfolio ranges from 5% to 8% after inflation, with historical average U.S. inflation around 3%. The time horizon between your CoastFIRE age and your full retirement age is crucial, as it dictates how long your invested funds have to grow without additional contributions.

Building Your CoastFIRE Foundation

Establishing the financial foundation for CoastFIRE requires strategic use of investment vehicles and consistent saving practices. Retirement accounts such as 401(k)s and Individual Retirement Accounts (IRAs) are common choices for long-term growth due to their tax advantages. For 2025, the employee 401(k) contribution limit is $23,500, with a $7,500 catch-up contribution for those aged 50 and over. Total contributions from both employee and employer to a 401(k) can reach up to $70,000 for individuals under 50.

IRAs also offer avenues for saving, with a contribution limit of $7,000, or $8,000 for those aged 50 and older. Roth IRAs, while having the same contribution limits, have income restrictions; single filers with a modified adjusted gross income (MAGI) below $150,000 and joint filers below $236,000 can make full contributions. Beyond these, taxable brokerage accounts can be utilized once annual contribution limits are met, providing additional investment capacity.

Maximizing savings early in one’s career is fundamental to achieving the CoastFIRE target. This often involves aggressive saving rates, potentially allocating 30% to 50% or more of income towards investments. Strategies for increasing savings include optimizing expenses to reduce discretionary spending and actively seeking ways to increase income, such as through career advancement or side ventures. A diversified investment portfolio, typically comprising a mix of stocks and bonds, is also important for long-term growth while managing risk.

The CoastFIRE Lifestyle

Once the CoastFIRE target is reached, a significant shift in financial approach occurs, offering increased personal and professional flexibility. Individuals no longer need to make additional contributions to their retirement accounts, allowing their existing investments to grow passively until traditional retirement age. This frees up a portion of their income previously allocated to aggressive saving, providing more budgetary leeway.

This newfound financial freedom enables a range of lifestyle choices. Many CoastFIRE adherents choose to transition to less demanding careers, reduce their working hours to part-time, or pursue passion projects that may not offer high compensation. The ability to prioritize fulfillment over maximum income becomes a tangible benefit, as the primary objective of current work becomes covering present-day living expenses rather than accumulating more retirement savings.

While the aggressive saving phase concludes, income is still necessary to cover ongoing expenses until the accumulated nest egg is ready for full withdrawal in retirement. The CoastFIRE strategy provides a path to reduced financial stress and greater work-life balance years or decades before traditional retirement. This approach allows individuals to enjoy their lives more fully in the present, knowing their future financial security is already established.