Coast FIRE
Coast FIRE is a milestone within the financial independence framework at which an individual has accumulated enough invested assets that, even without any further contributions, the portfolio will compound to the full FI number by conventional retirement age — allowing the person to 'coast' without the pressure of aggressive savings.
The FIRE movement spawned several variants that addressed the reality that full financial independence — the accumulation of 25x annual expenses — was a long and demanding journey not achievable at the same point for everyone. Coast FIRE was among the most practically useful of these variants because it reframed the problem: instead of asking 'when can I accumulate enough to retire?', it asked 'when can I accumulate enough that compounding takes care of the rest?'.
The Coast FIRE calculation required two inputs: the target FI number (25x annual expenses) and the number of years until the individual's intended conventional retirement age, typically 58 to 60 in India when NPS and EPF benefits became accessible without penalty. The question was how large a corpus invested today would grow to equal the FI number by that retirement date, assuming a real rate of return on investments.
For example, if a person's FI number was Rs 3 crore, and they were 35 years old with a retirement target of 60, they had 25 years of compounding ahead. At an assumed real return of 7 percent per annum on equities, Rs 3 crore in 25 years required approximately Rs 56 lakh today (using the present value formula). If this person had already accumulated Rs 56 lakh in equity mutual funds at age 35, they had technically reached Coast FIRE: they no longer needed to save another rupee for retirement, and compounding would complete the journey.
The implications of reaching Coast FIRE were meaningful. The individual could choose to reduce or stop aggressive retirement savings, redirect income toward more immediate life goals — travel, education, starting a business — or take a lower-paying but more fulfilling job without the financial anxiety of knowing that retirement savings were insufficient. They could 'coast' to retirement without the career trap of high-income employment driven purely by the need to save faster.
In India, the Coast FIRE calculation was influenced by the tax treatment of instruments. EPF and PPF accumulated on a tax-advantaged basis and contributed to the corpus without triggering annual tax events. Equity mutual fund SIPs, if held for over a year, attracted only long-term capital gains tax at 12.5 percent (post Budget 2024 revision) on gains exceeding Rs 1.25 lakh annually. NPS offered upfront deductions under Sections 80C and 80CCD(1B) but imposed mandatory annuity purchase at retirement. These instrument-specific characteristics required that Coast FIRE calculations incorporate post-tax projections rather than gross returns.
Critics of the Coast FIRE concept noted that market returns were not linear — a decade of below-average returns during the coasting phase could delay or prevent the corpus from reaching the FI number by the assumed date. Conservative practitioners applied a margin of safety by targeting a Coast FIRE corpus 20 to 30 percent larger than the minimum calculation suggested.