A reader says, “I am 26 years old and recently started working. My monthly expenses are about Rs. 60,000. I aim to aggressively invest for retirement, aiming to achieve coast FIRE in 10 years and retire by 55. Coast FIRE then allow me to freelance, spend more and invest significantly less (I will continue to invest), but not as much. How much should I invest?”
Coast fire means you have reached a point when you no longer need to invest any more for retirement. Your current investments will grow to reach your target corpus by the time you retire (normally). Naturally, the price to pay for this luxury is a significantly higher investment in the initial years.
We generally do not recommend coast fire. I think it is better to balance investing and spending. At 26, the future is not clear. When you get married, how many kids will you have? So any calculation done means little. You will have to rework this at least every 2-3 years; it is not every year (recommended).
Anyway, for what it is worth, as an illustration to the readers, we will use the coast fire option in the freefincal robo advisor.
The reader will need about Rs. 12.48 Crores at the age of 55. Not to worry, plenty of time to accumulate this. For continuous investing, increasing 10% a year (which is not easy, but we recommend), Rs. 32,000 a month is needed.
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This is the asset allocation schedule recommended by the freefincal robo advisor. This is valid for both normal/continuous investing and coast fire.
- To achieve the coasting point in 10 years, Rs 1.15 Lakhs a month is needed, increasing 10% a year.
- To achieve the coasting point in 15 years, Rs 72,400 a month is needed, increasing 10% a year.
We want to reiterate that such aggressive investing is unnecessary. We suggest that the reader enjoy her youth while she can and embrace experiences such as travel. Regular investing right up to retirement will get the job done.
If coast fire is still desired, the plan should be renewed as frequently as possible with fresh inputs and assumptions. Even if you are successful in reaching the coasting point, we recommend continuing investments for as long as possible.