Latest / The Financial Freedom Podcast with Fexingo: Quitting Your Job, Living Off Investments, Independence / The Coast Fire Math That Lets You Quit Your Job Years Earlier
Transcript
- Lucas: So there's a version of FIRE that doesn't get nearly as much attention as the standard 'save 25 times your expenses and quit' formula, and it's called Coast FI. Luna: Coast FI — I've heard the term, but I think a lot of people assume it's just another name for Barista FI or Lean FI. Lucas: Right, and it's actually pretty different. Coast FI is the point where you can stop adding any new money to your retirement accounts and still end up with enough to retire at a normal age — say 65 — just from compound growth alone. You're not retired yet, but you're done saving. Luna: So you still have to work to cover your living expenses, but your retirement nest egg is already funded. That's wild. Lucas: Exactly. The classic example: say you're 30 years old, you've got $100,000 saved, and you plan to retire at 65. If you assume a 7 percent real return — that's after inflation — that $100,000 grows to about $1.07 million in 35 years. No additional contributions. Luna: And if your retirement spending target is $40,000 a year, the 4 percent rule says you need a million bucks. So you're already there. Lucas: Right. So at 30, you could stop saving for retirement entirely — coast — and focus your income on whatever you want. Travel, starting a business, working fewer hours, a lower-paying but more fulfilling job. Luna: But the obvious question is: what if the market doesn't deliver 7 percent real? What if it's closer to 4 or 5 percent over the next three decades? Lucas: That's the biggest risk, and it's why Coast FI isn't a set-it-and-forget-it strategy. At 5 percent real return, that $100,000 becomes about $550,000 in 35 years. That's only half of your million-dollar target. Luna: So you'd have to either start saving again later, or adjust your spending expectations downward. Lucas: Yes. And that's why a lot of people use Coast FI as a midpoint target, not a final destination. You hit your Coast number, keep working a few more years, and let the cushion build. Luna: That makes sense. And it also reduces sequence of returns risk, right? Because you're not withdrawing yet. Lucas: Huge point. One of the biggest risks in early retirement is a bad market in the first few years of withdrawals. With Coast FI, you're still in accumulation mode for decades. Your portfolio has time to recover from downturns before you ever take a dollar out. Luna: So it's almost like a smoother glide path than traditional FIRE. Lucas: I think so. And it opens up options. Some people use Coast FI to switch to part-time work or freelance. Others use it to justify a career change that pays less but is more meaningful. Luna: There's also the mental side — knowing you could stop saving today, even if you don't, probably reduces a lot of financial anxiety. Lucas: Absolutely. And before we go deeper, I want to mention something about this show. We deliberately keep these episodes free of ads. If that kind of independent, no sales pitch conversation is valuable to you, and you'd like to support it, you can find us at buy me a coffee dot com slash fexingo. No pressure ever — just a way to keep the podcast exactly what it is. Luna: Yeah, I appreciate that we don't have to interrupt the math for a mattress commercial. It lets us really drill into the details. Lucas: Back to Coast FI. A really practical way to figure out your own number is to use the rule of 72. Divide 72 by your expected annual return, and you get the number of years to double your money. Luna: So at 7 percent, you double roughly every 10 years. In 35 years, you'd double about 3.5 times. Lucas: Right. So if you need $1 million at 65, and you're 30, you need to have about $125,000 today — because it doubles to $250k in 10 years, $500k in 20, $1 million in 30. Slightly more than 30 years, but close. Luna: And if you're 40, you only have 25 years. At 7 percent, you'd need about $250,000 today to hit a million. Lucas: Exactly. The younger you are, the more powerful the compounding. That's the core insight of Coast FI. Luna: But some people argue that Coast FI is too conservative because you're assuming you'll work until 65. What if you want to retire at 55? Lucas: Then you need a higher savings rate or a larger starting balance. The math still works — you just adjust the time horizon. A 30-year-old aiming for 55 has only 25 years. At 7 percent, you'd need about $250,000 today to grow to $1 million. Luna: So it's not a one-size-fits-all, but it gives you a clear target. Lucas: It's a framework. And one of the best uses is for people who feel trapped in high-stress jobs. If you can hit your Coast number, you can step off the treadmill and take a job that covers your bills without worrying about retirement savings. Luna: That's basically the plot of a lot of career-change stories I've read. Lucas: Yeah. And it's worth noting that Coast FI doesn't mean you can't ever save again. If your portfolio underperforms, you can always add more later. It's a permission structure, not a lifetime vow. Luna: So let's talk about the assumptions. Real return of 7 percent — is that realistic going forward? Lucas: A lot of experts think future returns will be lower — maybe 4 to 5 percent real for a balanced portfolio. The Shiller CAPE ratio suggests U.S. equities are expensive right now. So I'd encourage listeners to run the numbers at 5 percent too. Luna: And what about inflation? You mentioned real returns, so that's already baked in. Lucas: Yes, real means after inflation. So if you assume 7 percent nominal and 3 percent inflation, that's 4 percent real. That's probably more conservative. At 4 percent real, $100,000 grows to about $395,000 in 35 years. You'd need about $250,000 at 30 to hit $1 million. Luna: So the Coast number is very sensitive to your return assumption. A few percentage points can double the required starting balance. Lucas: Which is why I think of Coast FI as a planning tool, not a guarantee. It's a way to check: 'Am I on track? Do I have more freedom than I think?' Luna: Have you seen any real-world examples of people using Coast FI? Lucas: Yeah, there's a well-known case — a couple in their early 30s who had about $500,000 saved. They calculated that at 7 percent real, that would grow to over $3.8 million by 65. Their target was $1.5 million. So they decided to both quit their corporate jobs, move to a lower-cost area, and work part-time doing things they loved. Luna: And they never had to save another dollar for retirement. Lucas: Right. They still earned income, but all of it went to living expenses and fun. Their retirement was already funded. That's the freedom Coast FI offers. Luna: What about healthcare? Before Medicare age, that's a big expense. Lucas: That's a real consideration. If you're coasting and working part-time, you might get health insurance through an employer or the ACA marketplace with subsidies. It's not free, but it's manageable if your income is low. Luna: So Coast FI might pair well with a side hustle that offers benefits. Lucas: Exactly. And the numbers work best when you keep your spending lean. The lower your expenses, the smaller the nest egg you need, and the easier it is to coast. Luna: Alright, I think the key takeaway is: if you're in your 20s or 30s with a decent chunk saved, run the Coast FI calculation. You might be closer to freedom than you realize. Lucas: Yeah, and even if you're not there yet, it gives you a concrete milestone. That's a lot more motivating than 'save 25 times your expenses' when you're starting from zero. Luna: Thanks, Lucas. That was illuminating. Lucas: Thanks, Luna. And as always, the numbers are just a starting point — your life is the real portfolio.