The idea in one sentence
Coast FI means you already have enough invested that, if you stopped contributing today and simply let compounding do its work, your portfolio is projected to reach your retirement target by the age you plan to retire.
Coast FI is not the same as being "done"
It is easy to conflate Coast FI with full financial independence (often called FI or FIRE), but they answer different questions. Full FI means you could stop earning right now and your invested money alone would sustainably cover your living expenses, indefinitely, starting today. Coast FI is a much earlier and softer milestone: it only means the retirement piece of the puzzle is handled by growth alone. You are still expected to cover today's living costs some other way — typically by continuing to work — until you actually reach retirement age.
In other words, Coast FI shifts the pressure. Before Coast FI, every year you don't save meaningfully pushes your retirement further away. After Coast FI, your retirement number is on track regardless of whether you save another dollar — what you do with your income between now and retirement becomes a separate, more flexible decision.
A worked example
Say you are 30 years old, plan to retire at 65 (35 years away), and want $40,000 a year in retirement with no other guaranteed income.
The familiar shortcut here is to divide by a 4% withdrawal rate and call it $1,000,000. But that quietly assumes you spend exactly $40,000, in today's money, every year from 65 until you die. Real retiree spending tends not to hold flat: it runs high through the active early years, eases through the seventies, then lifts again later as care costs arrive — the spending smile. Averaged across a retirement from 65 to 95, that works out to about 86% of the base figure, so the target is closer to $860,000 than $1,000,000.
Assume a 7% nominal annual return and 3% inflation. The real (inflation-adjusted) rate of return works out to roughly 3.9%, not the 4% you'd get from simply subtracting (7% − 3%) — more on why that distinction matters below.
Growing $860,000 backward 35 years at a 3.9% real return gives a coast number today of roughly $227,000. (Under the flat assumption it would have been about $264,000 — the same 14% difference, carried all the way back.) If your current portfolio is already at or above that, you are Coast FI: your money is projected to reach the target in today's purchasing power by 65, purely through growth, even if you never contribute another dollar. If your portfolio is below it, the gap is what more contributions — or more time, or a stronger return — would need to close.
Every one of those figures is conditional on the assumptions behind it holding, which is exactly why it is worth running your own. Try the Coast FI calculator with your own numbers to see where you stand.
Why the real rate of return matters
Because your retirement target and spending goal are usually expressed in today's dollars — what $40,000 buys you right now, not some larger, inflated future figure — the growth rate used to project forward (or discount backward) needs to be in the same terms. That is the real rate of return: your investment return after subtracting the effect of inflation.
The correct way to combine a nominal return and an inflation rate is the Fisher equation: real = (1 + nominal) ÷ (1 + inflation) − 1. A common shortcut is to just subtract — nominal − inflation — and for a single year the two are close. But that shortcut compounds the wrong number for every year of your projection, and the gap grows the longer the time horizon. Over several decades, the shortcut can overstate your projected coast number by several percent, and it is always in the flattering direction: it never happens to make your situation look worse than it is.
What the number does not account for
A Coast FI estimate is a simplification, not a guarantee. It typically does not account for:
- Sequence-of-returns risk — the actual order returns arrive in, which matters more than the average once you are withdrawing.
- Taxes on withdrawals, which vary by account type and jurisdiction.
- Long-term care, which is expensive, unevenly distributed, and poorly served by an average.
- Healthcare costs, which often rise faster than general inflation and can be a large share of retirement spending — the spending curve above adjusts for the broad shape of retirement spending, not for this specifically.
- Changes to your desired spending, guaranteed income, or retirement age between now and then.
- The fact that actual future returns and inflation are unknown — the calculator uses your assumptions, not a forecast.
Treat any Coast FI number as a rough compass, not a fixed destination — and revisit it as your numbers and plans change.
Disclaimer
This guide is for informational and educational purposes only and is not financial advice, a recommendation, or a substitute for professional guidance. Individual circumstances, returns, and inflation vary. Consult a qualified financial professional before making decisions about your retirement plan.
How OptiAI helps
OptiAI keeps your Coast FI number connected to your real net worth and the rest of your financial picture, so you can revisit the assumptions and ask an AI assistant how you are tracking, instead of redoing the math from scratch.