Coast FIRE explained: when can you stop saving?

Here the FIRE number stands for the wealth you wish to have reached by retirement. The r is an assumed real return per year, that is, after inflation, and n the number of years until conventional retirement. Coast FIRE is reached when your present portfolio, projected forward with the same assumption, at least hits the FIRE number: current wealth × (1 + r)^n >= FIRE number.

The sore point of this formula is the r. It is not a measured quantity but an assumption spanning decades, and the formula reacts extremely sensitively to it, because r sits in the exponent. Over long horizons even a single percentage point changes the result dramatically. Whoever reckons with 5 percent real return over 30 years arrives at a quite different, much smaller Coast number than someone who assumes a cautious 4 percent. Both assumptions are defensible, and neither is a forecast.

One consequence of this sensitivity is that Coast FIRE is less a fixed point than a corridor. Rather than a single Coast number, it is more honest to work with a range: an optimistic and a cautious scenario, between which your actual path runs. The truth is known only in hindsight, once the years have passed.

Calculating your Coast FIRE number

The formula is easiest to grasp when you put concrete numbers into it. The calculator below estimates, from your monthly spending and your present portfolio, the after-tax FIRE number and the years until then.

A note on reading the results: the calculator marks its return assumption of 7 percent p.a. expressly as an assumption without any return forecast. It is a nominal figure, that is, before inflation. If you compute the Coast FIRE formula with a real return, say 4 to 5 percent, that is no contradiction, only a different lens: the real view already subtracts the erosion of money and answers the question in today's purchasing power. Both numbers are assumptions, not promises. Treat the result as orientation, not as a pledge, and deliberately run it through with a more pessimistic return as well.

Coast FIRE in Germany: factoring in taxes

The international Coast FIRE literature mostly reckons gross, that is, without taxes. In Germany a closer look pays off, because already during the accumulation phase the taxman reaches into the growth on which the whole calculation lives. This holds especially for accumulating ETFs, which do not distribute their income but reinvest it, because here the Vorabpauschale (Germany advance lump-sum tax on accumulating funds) comes into play.

The Vorabpauschale (§18 InvStG) is an annual, flat-rate advance taxation of accumulating funds. It is meant to prevent the tax on reinvested income being deferred indefinitely. What is assessed is a so-called Basisertrag (notional base yield): the fund value at the start of the year, multiplied by the Basiszins (statutory base rate) and by a factor of 70 percent, less any distributions. The cap matters: the Vorabpauschale is limited to the fund's actual price gain for the year and is zero if the fund has fallen. The Basiszins is set each year by the Bundesfinanzministerium (Federal Ministry of Finance); it stood at 2.29 percent in 2024, 2.53 percent in 2025 and 3.20 percent in 2026 (BMF, 13.01.2026).

Three mechanisms soften the burden in practice, and all three play into Coast FIRE's hands:

1. Teilfreistellung (partial exemption). For equity funds with more than 50 percent equity content, 30 percent of the income stays tax-free for private investors (§20 InvStG). This applies to the Vorabpauschale too, whose taxable portion is thereby reduced.
2. Sparerpauschbetrag (saver's lump-sum allowance). Each year, EUR 1,000 (single filers) or EUR 2,000 (jointly assessed couples) of capital income stays tax-free (§20 Abs. 9 EStG). At small and mid-sized portfolio balances this allowance is often enough to cover the Vorabpauschale entirely, so that in effect no tax falls due.
3. Crediting on sale. The Vorabpauschale paid in prior years is offset against the later sale. No double taxation occurs; in the end the tax is only partly brought forward, not additionally levied.

For practice this means: in the early years of a Coast FIRE build-up, when the portfolio balance is still moderate, compounding mostly stays largely undisturbed, because the allowance and the Teilfreistellung absorb the Vorabpauschale. Only at larger balances does the annual advance taxation become noticeable, and even then it remains capped and creditable. This order suits Coast FIRE well, because the most effective growth years are precisely the early ones.

A final point of orientation on the later withdrawal phase, which lies beyond the Coast point: should the portfolio one day actually be drawn down, the Abgeltungsteuer (flat capital-gains tax) of 26.375 percent (25 percent Kapitalertragsteuer plus 5.5 percent Solidaritätszuschlag on top, slightly higher with Kirchensteuer) falls only on the embedded gain of the units sold, never on the returned capital (§20 Abs. 4 EStG). Here too the Teilfreistellung applies. That is secondary for the Coast calculation itself, but it explains why German tax weighs on wealth-building less heavily than the nominal headline rate would suggest.

Coast FIRE vs. Barista FIRE

Coast FIRE and Barista FIRE are often confused, because both describe a middle path between full-time work and a complete exit. The difference lies in the role of work and, particularly important in Germany, in health insurance.

Under Coast FIRE you usually keep working as before, often even full-time, but no longer save for old age. The income covers today's life, the portfolio grows untouched. Under Barista FIRE you reduce work to part-time and may already draw partly on the portfolio to close the income gap. The name comes from the USA, where a part-time job (as a barista, say) secured access to employer health insurance.

In Germany this advantage shifts but is just as real. Whoever remains a compulsorily insured employee in a genuine job subject to social-insurance contributions (above the Minijob threshold) pays their contributions to statutory health and long-term-care insurance only on the wage (§226 SGB V). Capital income and rental income stay contribution-free. That is the decisive lever of Barista FIRE in this country.

It looks different for the voluntarily insured, that is, for people without employment subject to social insurance. For them §240 SGB V applies: contributions are levied on the entire income, including capital and rental income, up to the contribution assessment ceiling. As a result capital income is burdened, on top of the Abgeltungsteuer, by roughly 20.5 to 21.1 percent (health, supplementary and long-term-care insurance). A mere Minijob establishes no compulsory membership and offers no protection here.

Put simply: Coast FIRE is a question of saving, Barista FIRE a question of working. Whoever combines the two, having invested early enough while also remaining covered by social insurance through part-time work, can join the strengths of both paths.

When have you reached Coast FIRE?

Coast FIRE is reached when the projection of your present portfolio meets or exceeds your FIRE number: current wealth × (1 + r)^n >= FIRE number. In practice, though, this moment is less sharp than the equation suggests, and it is worth treating with caution.

First, the result hangs entirely on the assumed return r. Because r sits in the exponent, the same portfolio balance can land above or below the threshold depending on the assumption. It is therefore advisable to see the Coast point not as a single line but as a corridor between a cautious and an optimistic scenario. Only once you sit above the threshold even with a conservative return does the plan stand on firm ground.

Second, the order of returns is not guaranteed. The so-called sequence-of-returns risk describes how the timing of returns alters the outcome. In the pure accumulation phase of Coast FIRE this risk is smaller than in the later withdrawal phase, because you need sell nothing and can sit out weak years. Once you begin to draw down the portfolio, however, weak years at the start hit disproportionately hard, because units are sold in a downturn and are then missing for the later recovery. Common countermeasures are a liquidity buffer of about two to three years' spending, flexible spending, and a cautious transition into withdrawal.

Third, it is worth looking at the withdrawal rate you plan to reckon with later, because it indirectly determines your FIRE number. The well-known 4 percent rule goes back to Bengen (1994) and the Trinity Study (1998), both US backtests over historical data from 1926. Over 30 years an equity-heavy portfolio at a 4 percent withdrawal was historically almost always successful (around 95 percent). These studies, however, model neither taxes nor fund costs, and they are no globally valid law but a historical look back. For the long horizons of early independence (40 to 50 years rather than the Trinity Study's 30) and given the German tax and health-insurance burden, planning in Germany is more conservative: nearer a 3.0 to 3.5 percent withdrawal, which corresponds to roughly 29 to 33 times annual spending, rather than the 4 percent and 25 times of the US rule. That is a planning anchor, calibrated to the past, not a pledge.

The spread in this example calculation is no idle play but the heart of the message: between an optimistic and a cautious return assumption lies, over three decades, an end wealth that differs by a good third. The numbers are projected by way of example, not a forecast. That is exactly why Coast FIRE is an assumption, not an appointment. You do not recognise the point on the day it arrives, but only years later in hindsight.

In practice this means: treat the first moment at which the projection meets your FIRE number as the start of a transition, not as a finish line. It can make sense not to cut the savings rate abruptly to zero, but to lower it step by step, to build a buffer for the assumption, and to re-run the plan regularly against updated numbers. That way the decision stays reversible, should reality fall short of the assumption.