CoastFire is a financial independence strategy that allows you to stop saving aggressively for retirement once you’ve reached a certain savings milestone. In simple terms, it means you’ve saved enough early on that your investments will grow on their own and support you when you retire, without needing to add more contributions. Essentially, CoastFire is all about setting yourself up early so you can relax later. Once you hit your CoastFire number, you can focus on other financial goals without stressing about retirement savings.
1. Start Saving Early
The first step to achieving CoastFire is to start saving as soon as possible. The earlier you start, the less you’ll need to contribute over time. Aim to save at least 20-25% of your income, or more if you can. The power of compound interest means that early contributions will have a big impact in the long run.
2. Determine Your CoastFire Number
To know when you’ve reached CoastFire, you’ll need to calculate your CoastFire number. This is the amount of money you need to have saved by a certain age so that it grows enough to fund your retirement without additional contributions. There are online calculators that can help you figure out how much you’ll need based on your target retirement age and lifestyle.
3. Invest Wisely
Once you have a solid savings foundation, make sure you’re investing it wisely. Stock market investments, index funds, and other growth-focused assets are key. The goal is to let your money work for you, growing over time so you don’t need to add more to it later.
4. Adjust Your Lifestyle
CoastFire isn’t about being reckless with your spending—it’s about balance. While you won’t need to save as aggressively, you should still prioritize living below your means. Avoid lifestyle inflation, and continue to save and invest when possible to build a buffer for unexpected costs.
5. Stay Flexible
The beauty of CoastFire is its flexibility. Once you hit your target, you can pivot your financial focus. Maybe you’ll pursue passion projects, travel more, or switch careers. The key is to reach your goal and let your investments grow on their own. If you’re not quite there yet, that’s okay. Stay consistent and review your progress regularly.
let’s take an example of someone named John. He is 30 years old and currently has invested assets of $30,000. John wants to spend $80,000 annually in retirement. To achieve this, he decides to invest $3,000 each month into the S&P 500, which has historically had an average annual growth rate of 10%. However, for this example, we’ll assume a more conservative 7% annual return on his investments. Additionally, the average inflation rate is around 3.5%(for example-sake), which will increase his future spending needs.
With these numbers in mind, John’s goal is to reach a point where his investments will grow enough to cover his desired annual spending of $80,000, without needing to contribute more once he hits a certain savings milestone. Based on his current investments, monthly contributions, and expected returns, John will reach his CoastFire number at the age of 51. This means by age 51, his investments will be growing enough on their own to fund his retirement, allowing him to stop contributing additional money and simply let his assets work for him.
The earlier you start, the faster you get to CoastFire!
