How to Reach Coast FI Faster

Coast FI is the point where your savings are enough for growth alone to carry you to your full retirement target by the age you choose. Reaching it faster is about moving the two sides of that idea: saving more now, or lowering the number you need to reach. Both work, and the best plans use both.

First, know your number

Before you try to speed up, work out your Coast FI number. It is your retirement target divided by the growth factor for the years until retirement. Read How Much Do You Need to Reach Coast FI for the steps, or use the Coast FI Calculator worksheet.

The example used through this post is a round hypothetical case. Your retirement target is $1,000,000. You are 35. You plan to retire at 65. You start with $0 saved. Under a 7 percent real return, your Coast FI number is $131,400. The math is $1,000,000 divided by 7.61, which equals $131,367. An earlier draft used $130,000 here. That amount grows to about $989,600 in 30 years at 7 percent, which is about $10,400 short. The corrected number is $131,400.

The assumption used in this post

Every number in this post uses one stated assumption: a 7 percent real return each year. Real means after inflation. That is an assumption, not a forecast. It is close to the long run real return often cited for a broad stock market index, about 10 percent a year before inflation and about 7 percent after inflation. The examples leave out taxes and fees, and they assume savings are added at the end of each year.

Worked example: how fast saving gets you to $131,400

Use round hypothetical numbers only. Start with $0 saved at 35. Save the same amount at the end of each year. How long does it take to reach $131,400 at a 7 percent real return?

Save $10,000 a year: after 9 years you have about $119,800. After 10 years you have about $138,200. So it takes about 10 years.

Save $20,000 a year, step by step: after 5 years you have $20,000 times 5.75, which equals about $115,000. After 6 years you have $20,000 times 7.15, which equals about $143,100. So $131,400 is reached during year 6, in about 6 years.

Save $30,000 a year: after 3 years you have about $96,400. After 4 years you have about $133,200. So it takes about 4 years.

Doubling your yearly savings from $10,000 to $20,000 cuts the time from about 10 years to about 6 years. It does not cut it in half, because growth does more of the work in the later years. Raising savings to $30,000 a year cuts it to about 4 years. Each extra dollar saved early helps, but the gain from each extra dollar shrinks as the time gets shorter.

Five ways to reach Coast FI faster

Raise your savings rate. The worked example shows the effect. A higher savings rate is the fastest lever you control. It works in any market.

Cut the cost that repeats. A lower rent, a paid off car, or a smaller fixed bill frees the same amount every month. One cut that lasts for years beats a one off windfall of the same size, because it keeps saving for you.

Raise your income. A raise, a second skill, or a move to a better paying role can add more than a spending cut, because it does not ask you to give up as much now. Keep the extra pay aimed at savings, or it will vanish into spending.

Lower your target. If you can live on less in retirement, your target falls by 25 times the yearly saving. A $10,000 cut in yearly spending cuts your target by $250,000. That cuts your Coast FI number too. Check the spending plan with care before you count on it.

Use tax advantaged accounts. A 401k, a 403b, and an IRA let your money grow without a yearly tax bill on gains in most cases, and a match from an employer is free money toward your number. A match alone can cut years off the plan. Check the rules for your plan and the limits for the year.

The tradeoff: front load, but do not over save early

Front loading works because money saved early has the most years to grow. A dollar saved at 35 is worth about $7.61 at 65 under the 7 percent assumption. A dollar saved at 55 is worth about $1.97 at 65. That is a strong case for saving hard early.

But there is a cost on the other side. Saving too much too early can mean giving up health, time with family, or a chance to learn a skill that would raise your income later. It can also mean saving for a retirement you may not live to enjoy in full. The Social Security Administration period life table puts remaining life at 65 at about 18 years for men and about 21 years for women, so most people who reach 65 have many years ahead, but no one can count on the average for themselves.

Over saving early also has a plain math cost. Once you pass your Coast FI number, each extra dollar saved early still grows, but it buys a smaller gain in freedom. It moves your full retirement date earlier by a little, while it takes a dollar from your life now. The first dollars toward Coast FI buy the most freedom. The dollars after it buy less.

A workable rule is to front load until you reach Coast FI, then stop and review. At that point, ask three questions. First, is my spending plan still right? Second, is my retirement age still right? Third, what would I give up to save more now, and is that trade worth it? If the answers are clear, save more. If they are not, keep a steady rate and let time do the work.

The bottom line

To reach Coast FI faster, save more, cut a cost that repeats, raise your income, lower your target, or use a tax advantaged account with a match. Starting from $0 at 35, saving $20,000 a year reaches $131,400 in about 6 years at a 7 percent real return, while saving $10,000 a year takes about 10 years. Front load while the dollars buy the most freedom, then stop and review once you reach Coast FI. Speed helps, but a plan you can keep for years beats a plan that burns you out in one.

This post is for education only. It is not financial advice. Your numbers will differ based on your spending, your retirement age, your taxes, and your investments.

Sources

Investopedia, Coast FIRE: https://www.investopedia.com/terms/c/coast-fire.asp

Investopedia, The 4 percent Rule: https://www.investopedia.com/terms/f/four-percent-rule.asp

Social Security Administration, Period Life Table: https://www.ssa.gov/oact/STATS/table4c6.html

Internal Revenue Service, 401k plans and individual retirement arrangements: https://www.irs.gov/retirement-plans