The Coast FIRE Backward Plan
Build a retirement base early, then let compounding carry the remaining target
- Difficulty
- Advanced
- Time to result
- ~ongoing to results
- Steps
- 7
- Confidence
- 97%
Coast FIRE works backward from the amount expected to be needed at retirement. Estimate annual retirement expenses, choose a retirement age, and calculate a target portfolio using explicit assumptions. Then discount that future target by the assumed investment growth over the years remaining. The resulting present value is the Coast number: once that amount is invested, the model suggests it could grow to the retirement target without further contributions. The person still works to cover current living costs, but may gain freedom to choose a lower-paid or more enjoyable role because retirement saving is no longer the immediate burden. Humphrey Yang gives an illustrative age-35 figure of $150,000 growing for 30 years at 8% to about $1.5 million. He and the host acknowledge that inflation affects what that future sum will buy.
Origin
Extracted from The Diary of a CEO
Core principles
- 01Retirement needs should be estimated from future expenses
- 02An early invested base has more time to compound
- 03Coasting means stopping retirement contributions, not necessarily stopping work
- 04The return assumption and inflation materially affect the result
- 05A target creates career options before full retirement
How to run it
- 1
Estimate retirement spending
Project annual expenses in retirement using today's spending as a starting point. Separate essential needs from optional lifestyle costs.
Pro tip Use a range rather than pretending one distant estimate is precise.
Watch out Future health, housing, tax, and family costs can change materially.
- 2
Set the destination date
Choose the age when the invested pot should support the retirement plan. Calculate the number of compounding years available.
- 3
Declare the assumptions
Choose transparent return, inflation, fee, and contribution assumptions. Use conservative alternatives to test sensitivity.
Pro tip Run more than one return scenario.
Watch out The episode's 8% example is an assumption, not a guaranteed return.
- 4
Calculate the Coast number
Work backward from the required retirement pot to the amount that would need to be invested today under those assumptions. Verify the calculation independently.
Watch out Nominal future values can look larger while buying less because of inflation.
- 5
Fund and protect the base
Invest consistently until the Coast number is reached, while keeping near-term liquidity separate. Avoid interrupting the long-term base for discretionary spending.
- 6
Use flexibility deliberately
After reaching the target, decide whether to keep contributing or use the reduced burden to change work. Continue covering current expenses rather than confusing Coast FIRE with immediate retirement.
Pro tip Treat optional continued contributions as a margin of safety.
- 7
Recalculate periodically
Update the plan when spending, retirement age, portfolio value, fees, or assumptions change. A Coast number is a model output, not a permanent fact.
In the wild
Humphrey Yang says that, under an 8% annual-return assumption, $150,000 invested at age 35 could become roughly $1.5 million by age 65 without further retirement contributions. The host immediately asks what that future amount would be worth after inflation.
→ The example shows both the appeal of an early base and the importance of testing assumptions.
Common mistakes
Confusing coasting with retiring
The framework removes the modeled need for further retirement contributions; it does not remove the need to fund current life.
Ignoring inflation
A future nominal portfolio figure does not state what goods and services it will purchase.
Using one optimistic return
The Coast number can change sharply when return, fees, or retirement timing change, so sensitivity checks are essential.
Is it for you?
Best for
It is best for people with a long investment horizon who want a measurable point after which retirement contributions may become optional.
Not ideal for
It is not ideal for anyone treating a fixed return assumption as guaranteed or ignoring taxes, fees, inflation, and changing expenses.
From the transcript
“You get your nest egg to a point where you don't have to invest any dollar into it after that.”
“You can project out your expenses of what you think your expenses are going to be on an annual basis.”
From the episode
No.1 Money Saving Experts: Do Not Buy A House! Putting Money In A Bank Makes You Poorer!