Coast FIRE Strategy: Let Compound Interest Do the Work

How Coast FIRE Works

Coast FIRE is based on a simple mathematical truth: money invested early has decades to compound. If a 25-year-old invests $150,000 and earns an average 7% real return, that money grows to roughly $1.6 million by age 65 without any additional contributions. That $1.6 million supports $64,000 per year at a 4% withdrawal rate.

The coast number depends on your age and target retirement spending. The younger you are, the less you need because your money has more time to grow. A 25-year-old targeting $50,000 in annual retirement spending needs about $115,000. A 30-year-old needs about $165,000. A 35-year-old needs around $230,000.

Once you hit your coast number, the pressure is off. You no longer need to save for retirement, only cover your current living expenses. This opens doors to part-time work, career changes, sabbaticals, or any lower-paying work that brings more fulfillment. You get the benefits of FIRE flexibility without the extreme savings rates.

Building Your Coast FIRE Portfolio

Since Coast FIRE money will compound for 20-40 years untouched, a 100% equity allocation is appropriate during the coasting phase. Bonds and conservative assets make sense closer to traditional retirement, but while you are coasting, maximum growth allocation is optimal.

A simple two-fund portfolio of VTI and VXUS in a 70/30 split provides total global equity exposure at negligible cost. Since you will not be contributing during the coast phase, there is no need for complex rebalancing. Check your allocation once per year and rebalance if either fund drifts more than 10% from its target.

Tax efficiency matters because you want to avoid any unnecessary drag on your compounding. If your coast money is in taxable accounts, VTI and VXUS are ideal because they generate minimal taxable distributions. If it is in a Roth IRA, even better, as all growth will be completely tax-free.

The Coast FIRE Lifestyle

The biggest benefit of Coast FIRE is optionality. Once your retirement is funded by existing investments, every dollar you earn covers today, not tomorrow. This fundamentally changes your relationship with work. You can take a pay cut for a more enjoyable job, work part-time, or take extended time off without jeopardizing your future.

Many Coast FIRE practitioners find that removing the pressure to save aggressively actually makes them happier and more productive. Burnout is a real risk in the FIRE community, and Coast FIRE provides a sustainable middle path. You still achieve financial independence at retirement age, but you get to enjoy the journey.

The key risk is inflation. Your coast number assumes a specific real return, but inflation can vary. Building a 10-20% buffer above your calculated coast number provides insurance against periods of lower-than-expected real returns. Checking your coast number annually and making small additional investments if you are behind schedule keeps your plan on track.

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