Coast FIRE: Save Aggressively Now, Relax Later
The traditional path to retirement usually involves working full-time for decades, steadily saving and investing to accumulate a large sum of money. For most people, this means devoting a significant portion of their lives to long hours, strict budgets, and delayed gratification, all while managing rising living costs and unexpected financial setbacks.
This approach can feel exhausting, as it often leaves little room for flexibility or enjoyment during one’s prime working years. The constant pressure to save enough for retirement, paired with the uncertainties of economic fluctuations, can make the journey seem overwhelming and never-ending.
For those who want more balance and flexibility in life, Coast FIRE has become an appealing alternative. Let’s explore its essential components and practical strategies.
What Is “Coast FIRE?”
Coast FIRE is a concept within the broader FIRE (Financial Independence Retire Early) movement. Unlike traditional FIRE, where individuals aggressively save and invest to fully retire early, Coast FIRE focuses on reaching a point where your existing savings grow on their own.
It comes from the idea of “coasting” through the rest of your working years, hence the name. It suggests a gradual and effortless progression towards retirement, powered by the growth of your investments rather than constant, heavy savings. This term reflects the ease that comes after building a solid financial base.
In other words, the primary goal of Coast FIRE is to save aggressively early on, building up a sufficient nest egg in a savings account or investment portfolio. Once this amount is reached, the compounding interest from these funds continues to grow without requiring substantial ongoing contributions.
Why Save “Aggressively”?
As mentioned, saving aggressively during the early stages of your career allows you to take full advantage of compounding interest, where your savings generate returns that grow exponentially over time. This approach also provides financial security, helping you build a cushion for unexpected expenses or economic downturns. The discipline required for aggressive saving fosters healthy money habits, making it easier to manage finances effectively in the long term.
Another benefit is the flexibility and freedom it creates. Establishing a strong financial base early enables you to explore opportunities like career changes, pursuing passion projects, or reducing work hours without financial stress. Aggressive saving also provides peace of mind, knowing that you are ahead in meeting your retirement goals, which can significantly reduce financial anxiety and improve overall well-being.
How to Start Coast FIRE?
Starting Coast FIRE requires clear steps to establish a financial foundation that allows your savings to grow independently. These steps are designed to help you transition from aggressive saving to a more relaxed and balanced financial approach.
Assess your financial situation: Calculate your current savings, income, expenses, and any debts to understand where you stand.
Set your Coast FIRE number: Estimate your future retirement needs and calculate how much you need to save now to achieve that goal.
Create a budget: Identify areas where you can cut unnecessary expenses and redirect funds towards saving and investing.
Build an emergency fund: Save at least three to six months’ worth of living expenses in a high-interest savings account to cover unexpected costs.
Invest strategically: Choose low-cost index funds, exchange-traded funds (ETFs), or other growth-oriented investments that align with your financial goals.
Automate your savings: Set up automatic transfers to your savings account or investment portfolio to stay consistent.
Track your progress: Regularly review your savings, investments, and spending to ensure you’re on track to meet your Coast FIRE goal.
Understanding “Coast FIRE Number”
The Coast FIRE number is the amount of savings needed for your investments to grow independently and fully fund your retirement. Ideally, this number should be calculated early in your financial planning journey to maximise the benefits of compounding interest. Reaching this figure means you can reduce or stop making significant contributions to your savings, knowing your money will continue to grow and support your future lifestyle.
To calculate your Coast FIRE number, start by estimating your future annual living expenses. Multiply this figure by the number of years you expect to spend in retirement and adjust for inflation. Then, factor in the average annual return of your investments. Using these inputs, you can determine how much you need to save today for your portfolio to grow to your desired retirement amount. Financial calculators or a consultation with a professional can help refine this calculation.
For example, if you estimate needing AUD 60,000 per year in retirement and plan for a 25-year retirement, your total required amount is AUD 1.5 million. Assuming an average annual return of 7%, you would need approximately AUD 300,000 saved today to allow compounding interest to grow your portfolio to AUD 1.5 million over time. This figure becomes your Coast FIRE number and serves as a clear financial target to focus on achieving.
Final Thoughts
Coast FIRE offers a practical and flexible approach to achieving financial independence without the intense sacrifices of traditional early retirement plans. Saving aggressively early on allows individuals to build a solid financial foundation, enabling their investments to grow independently over time. This strategy provides the freedom to pursue a balanced and fulfilling lifestyle, reducing financial stress and offering peace of mind for the future.
While Coast FIRE can be a rewarding journey, it’s essential to tailor the approach to your unique financial situation and goals. Seeking professional advice can help you calculate your Coast FIRE number and develop a personalised plan to stay on track. With the right strategy, Coast FIRE can bring you closer to a financially secure and flexible future.
