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5 Reasons Why Coast FIRE is Better than Early Retirement

Updated: Jan 13've decided to become financially independent and you now hear of this thing called Coast Fire. And now you're looking up, what is Coast FIRE. Deriving from and another variation of Financial Independence Retire Early (FIRE), Coast FIRE is a milestone for someone just like you, who is on their Financial Independence journey. It's when you've invested enough money, most times in your tax deferred retirement accounts (ie 401 K, IRAs), and the growth and estimated compound interest will cover your expenses for when you reach traditional retirement age (65-67). So in simple terms, you've invested enough money, that your funds will grow to enough to cover you when you typically would retire. The awesome thing about Coast FIRE is that it's something that's flexible and easily measurable. Reaching Coast FIRE can provide you with more opportunities to explore hobbies or less demanding careers without the need to rely on a full-time job.

What Coast FIRE Can Mean For You

In January 2022, I realized that my husband and I had reached Coast FIRE because with the current value of our retirement accounts, and assuming a 7% annual return, we would be able to cover our monthly expenses when we reached 65. Now, if we choose to, we can “coast” to retirement without saving/investing another dollar. This is important and amazing news, because if we were to go the traditional path of working until retirement age, we’re technically all set for our retirement. In this post, I’ll define what exactly Coast FIRE is, how it’s calculated, and what it can mean for your FIRE journey.

What Exactly is Coast FIRE?

Coast FIRE means you have enough assets saved or invested, where the anticipated growth of those assets will be able to cover all your estimated expenses during retirement. This differs from regular FIRE because with regular FIRE, you no longer need income for retirement, but with Coast FIRE, you no longer need to save for retirement.

Reasons why Coast FIRE is better than early retirement:

1. Coast Fire is an Early Milestone you can Measure

Coast FIRE is a great milestone for those who are interested in the FIRE movement, but aren’t completely sure that they want to commit to retiring early and extreme saving. It's not only a very big commitment to choose to retire early, but the typical frugal lifestyle is not for everyone. Sure, some are able to live luxurious lifestyles with Financial Independence, but not all. Many who’ve reached Financial Independence, but haven't technically retired, because they may still be working on their business, are bringing in consistent income and don’t need to worry about living off of their assets alone. Reaching Coast FIRE is also really important because it’s a great indicator that your financial strategy is working for you and you're already ahead of the game.

2. Coast Fire gives you peace of mind

Earlier, I'd noted that we hit Coast FIRE. The great thing about Coast FIRE though, is that it gives us more flexibility if we ever decided that we weren't going to pursue Financial Independence and retire early we were going to work until 65. Technically, we no longer have to save for retirement, so our disposable income can be used for other investments or we could even take less demanding jobs and reduce our income (as long as we can live off of our earned income)!

A 2020 report by the PWC Market Research Center found that most Americans had insufficient retirement savings, and 1 in 6 didn’t have any retirement savings.

My husband and I are young (30ish) Black professionals, and this gives us a peace of mind to know that even if we stopped saving so aggressively, at least we would be comfortable in our retirement and not have to rely solely on social security, have to work past retirement age, or depend on our child or future children to support us.

I’ve seen so many hard working adults get to retirement age, only to realize that they have to continue working or they are now in one of the worst financial situations of their lives. Though reaching Coast FIRE was never the goal, it still feels good.

3. Coast FIRE provides more flexibility on your Financial Independence journey

Reaching Coast Fire allows you to continue to work and earn an income, while still enjoying the flexibility of a flexible schedule. When you "hit" Coast Fire, you already know that your annual expenses during traditional retirement will be covered. With the unknown future state of social security benefits, it's imperative that millennials save enough money to secure their future, by building up their retirement.

4. With Coast FIRE, retiring early isn't necessary

What if, after learning about what it takes to reach FIRE, you've decided it isn't for you or your family. This is personal finance afterall, so you get to decide how you want to live your life. You like your job and plan on growing in your career. You want to have enough savings to be comfortable, and you're already an investor. You might have a side hustle (or two), but you're not interested in only living off of your assets. Coast FIRE is a great alternative goal as you should still have enough money saved to support your retirement plans.

5. Coast FIRE can align with your current lifestyle

There are many ways to be financially independent. You can reach financial freedom by being an aggressive saver and investor. You can try and make as much money as you can at your current job or get a different job. You can create another or several streams of income (i.e. side hustle) or you can live on an extremely lean budget. One size doesn't fit all, and Coast FIRE allows you to set a SMART (specific, measurable, achievable, relevant, and time-bound) goal that may be within reach without drastically changing your current lifestyle. Yes, you'll have to build new habits because you are financially literate and may need to be more frugal, but you should still be able to enjoy that latte or drink, guilt free.

How to calculate Coast FIRE:

To calculate Coast FIRE, there are several factors to consider: rate of growth, rate of withdrawal, estimated annual spend during retirement, and how many years you have to grow your money.

Annual Growth Rate:

Considering inflation and to be a bit conservative, we’ll use an estimated growth rate of 6%.

Rate of withdrawal:

The FIRE community uses 4% as the agreed upon withdrawal rate for retirement. However, that rate was created with the belief that the intended life expectancy would only be about 30 more years, not that of an early retiree. Though I personally think you can choose whatever rate works for you and your assets and situation, we’ll stick with this for purposes of the exercise. (In the calculation you’ll see this reflected as 25)

Estimated annual retirement spend:

This number will be different for everyone, and while it may be hard to think of how much you’re going to spend YEARS from now, take a look at how much you spend now, and “guestimate” how things will change and/or stay the same.

Years of growth:

How many years you have until retirement (ie how many years to grow your money)


Amber is a 32 year old marketing manager. She anticipates that she’ll retire at 67 (the current age of retirement to receive full SS benefits). She currently has an annual income of $94,000. She has 401K and Roth IRA investments and wants to see what her Coast FIRE number is and if she’s reached it yet. Amber anticipates that she’ll spend $50,000 a year during retirement.

Annual Retirement Spend: 50,000

Annual Growth Rate: 6%

Rate of Withdrawal: 4%

Years of growth: 35

Coast Fire Formula:

25 x Annual Retirement Spend / (1 + annual growth rate)^Years of growth = Coast FIRE amount

25 x 50,000 / (1+.06)^35 = Coast FIRE amount

1,250,000 / (1+.06)^35 = 162,631

This means if Amber has at least $162,631 in her account today, she wouldn’t need to invest (contribute) another dollar in her retirement accounts to have enough for when she retires at 67. If she doesn’t have that amount yet, she’ll adjust her years of growth until she gets to her Coast FIRE amount.

I DID NOT include inflation in this calculation. I used a growth rate of 6% to take into consideration the effects of inflation on a portfolio.

Does this apply to you and can you Coast FIRE?

Remember, everyone’s FIRE number differs and thus everyone’s Coast FIRE number will differ. Coast FIRE really is a great option for those that may want to be aggressive savers in their early years, and then not have to worry about making additional contributions to their retirement fund. It can also be another option for those that want to change careers and take less demanding jobs, but still plan to work until they retire. If considering Coast FIRE, just remember, just like in retirement, you'll have to consider future expenses.

Expenses to consider during retirement:

  • Living expenses

  • Health Insurance

  • ex: medicare premiums

  • Healthcare - in your older age, expect to have higher needs of healthcare

  • Prescriptions

  • Eyecare

  • Hearing aids

  • Emergencies

  • Travel

  • Entertainment

  • Pay taxes

For more information on what steps I took to reach Coast FIRE or how I calculated it backwards, sign up for Rare Bird Money’s weekly newsletter!

As always, stay extraordinary!


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